AAP Image/Lukas Coch
There may be method to the Coalition government’s madness after all. Prime minister Scott Morrison scooted off to Tasmania on Wednesday to promote the “battery of the nation” project he is promising to fast-track.
But the project may not be quite as green as its promoters want to make out. The modelling prepared by Tas Networks – which wants to build the new link to the mainland – warns of vast impacts on generation and storage investments in Tasmania and elsewhere. And the biggest winner, according to the modelling, is likely to be black coal in NSW.
That may seem at odds with another conclusion of the modelling for the so-called Marinus Link – that its economic value depends on a rapid transition to renewables, and a rapid exit of coal power.
But it’s not: Government-owned entities are less concerned about making money, and Morrison has made clear that this investment is not about emissions, and not about making money either.
Just to demonstrate that, he has thrown $1.4 billion at Snowy Hydro that the company says it didn’t ask for, and is offering the “battery of the nation” project an underwriting contract for a pumped hydro project it has not even identified.
No, this is about politics and particularly the “politics of keeping the lights on”, and making government look like it is Doing Something. The result is a spending spree and a fishing expedition of extraordinary proportions.
And it’s working. The ABC is reporting with great enthusiasm on the “renewable” Snowy 2.0 pumped hydro scheme and how they are designed to pump massive amounts of excess wind and solar up the hill and then generate power when the “sun don’t shine and the wind don’t blow.”
Great! But where is the excess of wind and solar? There isn’t any, and without a government commitment to a rapid transition beyond Labor’s 50 per cent renewables target by 2030, there won’t be – not for a very, very long time. Even in South Australia, where the share of renewables is more than 50 per cent, curtailment is minimal.
The business case for projects like Tasmania’s battery of the nation pumped hydro scheme and a new link to Tasmania may look better if the transition to renewables were to be accelerated, that much the modelling makes clear.
But what happens if the two big projects – the Marinus Link and Snowy 2.0 – went ahead anyway and the emission reductions and renewable targets were un-moved, as the government promises.
The results make sobering reading for those under the belief that just the mere presence of the massive, centralised multi-billion dollar pumped hydro schemes will encourage more wind and solar. It might be nice to believe, but there is actually no modelling to support it. None.
Indeed, the modelling for the projects – those conducted for and on behalf of the developers of the federal government-owned Snowy Hydro and the Tasmania government utilities – shows the very opposite, as does the modelling conducted by the Australian Energy Market Operator in its Integrated System Plan.
The overwhelming conclusion of all three? In the absence of a mighty quick transition to renewables, they are both great for coal generation of some sort, the very same that have underpinned the extraordinary price jump in the wholesale market in the last two years, and which are still belching out emissions.
Take this graph below from detailed modelling conducted for Tas Networks, the government-owned proponents of the Marinus Link, which could be a single 600MW link from Tasmania to the Latrobe Valley, or two links of 600MW. It shows that black coal in NSW is the big winner from the investment.
The “base scenario” shows little difference in much at all – some wind delayed, and some solar accelerated in the 2030s – but the quantities are so small they could be a modelling error.
The big change comes in its high emissions reduction scenario – illustrated in the graph above and which in this case is a 90 per cent cut in emissions by 2050 – and it doesn’t accelerate the exit of black coal at all. It does the reverse.
It delivers a huge boost for black coal (over the base case) in the late 2020s, when it displaces a mix of brown coal and gas, and some solar, and another boost for black coal again in the early 2040s. Solar doesn’t get any benefit until the mid-2030s, and even then it is small. Wind energy has to wait until the mid-2040s until the negative impacts on those developments are reversed.
Remember, this is the scenario with the high emissions reductions target. And as the modelling notes, this will be reached with or without Marinus.
The only difference that Marinus makes is that it tilts the favour to Tasmanian projects, at the expense of those in Victoria and South Australia, and towards black coal in NSW. And unless this rapid transition is front loaded, it does not deliver overall economic benefits, it subtracts from them.
Even in this high emissions reduction scenario, the addition of Snowy 2.0 “causes a delay in the development of pumped hydro across the NEM from the late 2020s to the early 2040s”, “causes less solar PV to be developed in the NEM by the study end (2050).”
Snowy 2.0 may result in a slight increase in wind, but battery storage is relegated to distributed resources and delivers 8TWh less than it might otherwise have done.
This concurs with the modelling done by AEMO last year, which found that Snowy results in: “Greater utilisation of existing coal-fired capacity (with reduced utilisation of GPG) and deferring some investments in additional solar generation in the 2020s.”
Snowy sought to downplay that conclusion in a briefing with RenewEconomy last year, but it has not produced any modelling to back it up.
True, notes David Leitch, Snowy would struggle to make money without wind and solar, because if all it’s doing is using coal power, it might be able to compete with gas, but not with coal. And while Snowy CEO Paul Broad says that negative pricing will help deliver the arbitrage needed, over the past year that has not happened, as AEMO data has shown.
The Morrison government’s $1.4 billion equity injection into Snowy, which Broad reportedly says they didn’t ask for and didn’t need (we would wonder about that) invites the thought that the government is not concerned about business models or maximising profits and dividends, but just the politics of the move.
And that’s where we need to be very careful and think about what is being done here. This is a market share grab by two government-owned entities. The impact on other players is inescapable – it means less pumped hydro plans elsewhere and less battery storage. It results – without a highly ambitious government target – in less wind and solar. It results in more coal generation.
So, just to sum up: At the start of the informal election campaign, the federal government decides it wants to be seen to do something, so it re-badges Tony Abbott’s Direct Action policy, gives $1.4 billion to Snowy Hydro that Snowy Hydro says it didn’t ask for, and offers a contract to Hydro Tasmania for a pumped hydro project it has not yet identified.
The financial case for both projects – at least as far as the transmission lines go – are predicated on emissions reduction targets and renewable energy targets that the Coalition refuses to countenance.
All the modelling – including from the proponents themselves and the market operator – says they will benefit only the government-owned entities and coal-fired generation.
Dozens of other wind, solar and storage plants will be impacted, and won’t likely go ahead, even if their business models make more sense. Talk to most solar and storage developers out there, and they are gob-smacked by the whole process, and fear the extraordinary market power that will be invested in Snowy Hydro, the government entity.
And the promise of “keeping the lights on” is predicated on additional inter-state links that “might” be built in the 2030s. But no-one talks about the cost.
The reality is they will have to, because they must pass strict investment and public benefit tests from the regulator. Snowy appears to understand this and wants to by-pass the regulator, and has applied for an “exemption” to get that through.
Quite how Transgrid would get its money back is anyone’s guess. Renewable energy developers wonder why, if Snowy Hydro doesn’t have to be paid for its transmission link, should they have to pay for theirs?
The government says, we don’t care, that’s someone else’s problem.
Everyone cheers “hooray” and cries “let’s do it.”
Really? I’m for a transition to 100 per cent renewables as quick as we can. And storage we will need, and lots of it. But this, I don’t get.
It looks, feels and smells like pork barreling at its worst. Even the AFR is calling out this “naked pork barreling” and egregious lack of process.
Indeed, if these ideas are so good, let’s have some modelling, and some vision about the future, so it can be shown that these projects beat others on economics and environmental grounds, and are more than just PR and BS.
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