Costs jump for controversial new gas plant, with no update on green hydrogen in the mix

The cost of building a government-backed new gas fired power station in Kurri Kurri in the New South Wales Hunter region has jumped to almost $1 billion, a new report has revealed, adding hundreds of millions of dollars more to the tax-payer funded bill.

Snowy Hydro says the 750MW Hunter Power Project project, originally costed at about $610 million, will now cost $950 million, with the federal government-owned utility set to foot the bill.

“The Hunter Power Project has experienced similar challenges to Snowy 2.0 and following a comprehensive review the expected cost is now $950 million,” a statement from Snowy Hydro said on Thursday.

“Despite the increased cost the Hunter Power Project remains economic. Construction continues to progress on schedule, with about 460 people working on the project, which remains on track to be delivered by December 2024.”

The controversial open cycle gas plant, with a diesel back-up system, got its start under the Morrison Coalition government as part of its equally controversial “gas-led recovery” policy. It was kept alive under federal Labor on the condition it is built “hydrogen ready.”

Originally, Labor’s conditions were that the gas plant must run on 30 per cent green hydrogen from the get-go, and work its way up to 100 per cent renewable supply by 2030, in line with the party’s renewable energy targets.

To achieve this, the Albanese government pledged to tip a further $700 million into the project and the plant was expected to achieve first power generation at the end of 2023.

In November last year, however, Snowy Hydro advised that the plant would start out using fossil gas only, and that moving to just 15 per cent green hydrogen would be subject to construction delays – due to flooding – and to lack of availability of the zero emissions fuel.

In February, the start date for HPP was pushed out to December 2024, and federal Labor requested a business case from Snowy on what would be required – in addition to the $700 million already committed – to meet its election commitment of 30% hydrogen on commencement.

Snowy Hydro has now completed that review, which found the Hunter Power Project afflicted by similar challenges to the Snowy 2.0 pumped hydro project – the costs for which have ballooned out to a massive $12 billion.

And while there is some detail on the problems facing Snowy 2.0 – and on the proposed way forward – the detail on the review of the HPP project is, so far, scant.

A statement released by Snowy Hydro on Thursday says a comprehensive review has led to a revision of plant’s cost.

“The total target cost is now $950 million and will be funded by Snowy Hydro,” a statement says.

Snowy Hydro CEO Dennis Barnes said in his own comments that he is committed to ensuring the “critically important” HPP project is “transparent and placed on a robust and sustainable footing.”

“The Hunter Power Project is an important project in Australia’s energy transition, enabling the roll-out of wind and solar projects by firming these intermittent generation sources into reliable power,” Barnes said.

There is no updated detail, as yet, on how much hydrogen will be used in the plant’s fuel mix when it comes online, or what colour that hydrogen will be.

A spokesperson from Chris Bowen’s office said on Thursday that the federal government’s position on the project has not changed.