The Federal Government has inked a $6bn deal to purchase NSW and Victoria’s shares in Snowy Hydro, now making it the sole owner. But it’s very much ‘business as usual’ for the project operators as they gear up for the planned 2000MW expansion.
This month, the Government announced it will spend $6 billion to buy out NSW’S and Victoria's shares in Snowy Hydro to become the sole owner. On the back of this news and the release of a feasibility study and independent economic analysis for the project, Snowy Hydro managing director and chief executive Paul Broad spoke to Elizabeth Fabri. Can you explain Snowy Hydro 2.0 in brief?
The Snowy 2.0 project will supercharge the existing Snowy Scheme by adding an additional 2000 megawatts (MW) of dispatchable generation and 350 gigawatt hours (GWH) of large-scale storage.
The project scope includes linking the two existing reservoirs of Tantangara and Talbingo through approximately 27km of power waterway and a new underground power station. The pumped hydro capability means the water utilised for electricity generation can be ‘recycled’ in a closed system between the two reservoirs and used again to generate energy supply when it’s needed most.
Q. Why is this such a significant project?
Snowy 2.0 is a critical project for the NEM and will serve the market and consumers by providing dispatchable generation to address supply volatility, as well as fast-start capability and large-scale storage to address intermittency issues.
We believe that the NEM is at the tipping point of renewables becoming the dominant source of power with coal on its way out.
This transition to renewables cannot be achieved in an orderly fashion without massive storage. Snowy is the supplier of storage on scale and is strategically located between the two major load centres of Sydney and Melbourne.
Intermittent renewable generation, underpinned by dispatchable generation such as hydro-power to ensure reliability of the energy supply, is a combination that could replace thermal base load energy.
The high degree of urgency with which Snowy Hydro is progressing the project reflects the rate of change being experienced across the NEM.
Q. You recently released your feasibility for the project – how would you sum up the findings?
In a nutshell the feasibility study confirms the project is technically feasible, identifies a base-case project design, and that the project will be a solid investment for Snowy Hydro who will fund the capital costs.
The independent expert market analysis done as part of the study confirms that, if Snowy 2.0 was not built, the need for storage would be met by open cycle gas plants (that require associated infrastructure such as gas pipelines and storage), supplemented by batteries. This would be at least double the cost of Snowy 2.0.
Q. The feasibility report estimates a capital cost of between $3.8 billion and $4.5 billion for Snowy Hydro 2.0. Why is this more expensive than the initial $2 billion price tag?
The purpose of the feasibility study was to determine the costs of the project. The estimates of between $3.8 billion and $4.5 billion are the first time we’ve had project costs.
Early numbers that were discussed were based on very rough estimates from plans that we had from when we last looked at this project in 1991 (that plan was also only half the size of the Snowy 2.0 project).
Furthermore, the geotechnical drilling program uncovered some very challenging rock types which will require extensive reinforcement of the project’s structures.