The promised Snowy Hydro 2.0 project will be an expensive white elephant according to a leading energy expert. “Here is a project that is likely to cost five times more than the then prime minister [Malcolm Turnbull] said it would, and whose capability is nowhere near what has been claimed of it,” the director of the Victorian Energy Policy Centre, Bruce Mountain, told 7.30.
Snowy Hydro 2.0 a costly white elephant that won’t deliver, says energy expert
“This is a project that we can confidently forecast will be a drain on the public purse and whose service in the transition to a cleaner energy future can be met far more cheaply from other sources.
“Snowy Hydro 2.0 was a political get-out-of-jail card, played at the public’s expense.”
Dr Mountain wants the project paused while an independent panel reviews the worth of the project and whether the money could be better spent.
Mr Turnbull first announced the project with much fanfare in 2017.
“The unprecedented expansion will help make renewables reliable, filling in holes caused by intermittent supply and generator outages,” he said at the time.
“It will enable greater energy efficiency and help stabilise electricity supply into the future.”
He assured the electorate it would cost $2 billion and be up and running by 2021.
Less than a year later, that estimated cost had doubled.
By April 2019, a contract for part of the project was signed for $5.1 billion — and that doesn’t include transmission costs, which will cost billions more.
Who will actually pay for transmission is still being decided.
Snowy Hydro said it shouldn’t have to bear the cost as it won’t be the only user of the infrastructure.
“Someone’s going to pay for it,” Snowy Hydro CEO Paul Broad told 7.30.
“The taxpayers will pay for it through your taxes, or you pay for it through your bills.
“What I would argue is that that allows more energy into the market, producing downward pressure on the energy component of your bill.”
Mr Mountain isn’t convinced it will lead to lower electricity prices.
“There will be public subsidy in Snowy Hydro — whether it comes from the electricity payer or the taxpayer is yet to be worked out — but it will be a loss overall,” he said.
Energy Minister Angus Taylor refused to admit there had been a major cost blowout since the project was announced.
“We made our investment decision after we had done a cost benefit and after we’ve done the feasibility work in December 2017. The cost came out at $3.8 billion to $4.5 billion,” he told 7.30.
As a wholly owned government company, Snowy Hydro has competing priorities. The government wants it to help push down prices while also making a profit on behalf of taxpayers. When pushed on which aim was more important, Mr Taylor said they can both be achieved.
“The beauty of this investment is that it can deliver an investment for shareholders, which is Snowy and ultimately the Australian taxpayers, and at the same time put downward pressure on electricity bills.”
How long will it take?
While costs have escalated, timeframes have also blown out.
Mr Turnbull initially promised the project would be up and running within four years of the announcement.
“The Snowy Hydro scheme was built over 25 years and this is a project that we can add to that scheme within four years — and that’s the company’s estimate, not mine,” he told Lateline in March 2017.
“Remember, this has all been designed — this project — all the drawings have been done, all the engineering has been done.”
The latest Snowy Hydro estimate is that the project won’t be storing and generating energy until 2025.
“I don’t recall that four years,” Mr Broad said.
“We were talking at the feasibility study as being 2025.”
The new scheme is designed to be an energy store.
For that to work, water has to be pumped from the lower reservoir, Talbingo, to the upper reservoir at Tantangara when power prices are low.
The water will be released and resultant electricity sold back into the market when demand and power prices are high.
Environmental groups are calling for an independent inquiry into the Snowy Hydro expansion, saying it could potentially scar already vulnerable eco-systems.
To be able to do that on the scale needed requires 27 kilometres of new tunnels.
Ted Woodley is a former senior energy executive who is now a member of the National Parks Association, a group of volunteers whose aim is to protect public parks.
He is alarmed by the scale of the project and what it will do to the Kosciuszko National Park.
“The project, in my mind, was always large, but I had never envisaged it would be this large or this complex or this impactful,” he told 7.30.
“I think most people in Australia, when they learn the facts, will be as concerned as I am.
“We’re talking about 100 square kilometres of this park will be permanently damaged, and in some cases destroyed.
“This to me is tragic.”
Snowy Hydro disputes Mr Woodley’s assertion that 100 square kilometres of park would be damaged. It says most of the impacted areas will be rehabilitated and that only 1 square kilometre of national park will be permanently damaged.
Will it deliver?
Snowy Hydro’s CEO thinks the project is absolutely essential as Australia moves away from coal.
“[It’s] part of a wider agenda of increasing renewables in this country,” Mr Broad said.
“There’s a massive amount of renewals coming into the market — you can’t have it without some kind of storage.
“It is cuckoo land stuff if you think you can just have renewables without storage.”
But critics wonder if Snowy Hydro 2.0 will ever deliver on the promises.
“We’ve been drip fed information for the last two-and-a-half years, since the project was announced. And as the information has come out, the costs have exploded, the impacts have exploded,” Mr Woodley said.
“And, in fact, the benefits have been clearly shown to be overstated.”
For Bruce Mountain, the economics just doesn’t stack up.
“Snowy is just, simply, too expensive for what it provides,” he said.
“We can do this cheaper though things like demand management.”
In addition, it may actually be affecting other investment.
Dr Mountain said the Government’s backing of a project the size of Snowy Hydro 2.0 means that private investors don’t think they can compete.
“We know that this is already distorting the market,” he said.
“Competitors aren’t building projects because it looks like Snowy 2.0 will definitely happen.
“But that’s not the best outcome for Australia.”
Mr Turnbull has been approached for comment.