Snowy 2.0 hit by another blow out in costs, and consumers will foot the bill

“Snowy Hydro and the Australian Government chose to proceed with the construction of Snowy 2.0 before the full cost and ramifications of the transmission connection were determined,” the analysis say.

“There was no urgency to proceed with Snowy 2.0 prior to finalising its transmission connection. We and others warned at the time that the likely total costs would far exceed the benefits.

“It is now clear – using TransGrid’s own analysis – that HumeLink and Snowy 2.0 will be a massive impost on taxpayers and consumers.

“The logical (and appropriate) course of action for Snowy Hydro and the Government now, would be to cut their losses.” They say this would result in billions of dollars of money spent with nothing to show for it, but it would be better than throwing “yet more good money after bad.”

They say that, at the very least, the NSW government should require Snowy Hydro to pay its fair share of the cost of HumeLink, so that the economic losses of HumeLink do not fall so squarely on the shoulders of the NSW electricity consumer.

Snowy 2.0 will have a rated capacity of 2,000MW and storage of 175 hours, of 350,000MWh. The company, and its enthusiastic backers in the Coalition government, from Turnbull to current prime minister Scott Morrison and energy minister Angus Taylor, say it is essential for a grid transitioning to renewables.

But there have been questions about whether it’s the best value for money. Sure, analysts say, it will be useful if and when it is built. But many have argued it would have been smarter, more useful, and cheaper to build alternatives such as battery storage and smaller pumped hydro projects elsewhere.

The VEPC analysis says the costs of Snowy 2.0 were strangely excluded from the EY analysis, but the claimed benefits were not. And it questions whether these claimed benefits are valid given the emergence of competing storage technologies such as batteries and hydrogen and the “implausible” assumptions about the amount of time the project would be pumping and discharging to meet the claimed benefits.

“EY does not appear to pay sufficient attention to the additional advantages that batteries and EV’s have compared to Snowy 2.0,” they write.

“Also, there is no apparent consideration of flexible demand, including emerging options such as hydrogen production.”

Part of the reason for the big increase in costs in the Hume transmission link is a near $1 billion for “biodiversity offsets’, reflecting its impact on the national park. But the costs of the transmission link itself have jumped from $1.3 billion to $2.3 billion, reflecting a big increase in costs that has hit other proposed projects.

The VEPC analysis says if the project must go ahead, then alternatives should be considered. It suggests different routes could be considered to either save costs, or increase benefits, including a new connection point that will reduce the environment impact on the national park.

It also suggests that part, if not all, the new transmission link should be put underground. That will increase the initial cost, but it could deliver much biggest benefits, including to improved reliability, less exposure to weather events and bushfires, lower operating costs, less environmental impact and much less local opposition.