Snowy 2.0 needed today, says CEO in tense Senate estimates hearing

The management team at Snowy Hydro have defended the business and environmental case for the proposed Snowy 2.0 pumped hydro project in a tense Senate Estimate hearing on Monday following a wave of criticism in the past week.

Snowy Hydro senior executives provided what were at times terse responses to questions from Labor and Greens members of the environment and economics senate committee, insisting that the growing penetration of renewables in the electricity market made investment in new large-scale energy storage capacity increasingly urgent.

“Snowy 2.0 is required today,” Snowy Hydro CEO Paul Broad told the hearing “We’re underdone already and as [AEMO] has pointed out, with the transition that’s going on in the marketplace with our investment in renewables, you’re going to need many more 2.0’s.”

This assessment appears to be at odds with what Snowy Hydro said following the 2017 release of the feasibility study for Snowy 2.0, where it stressed the importance of not judging the project in the context of the current energy market, and instead must be evaluated in its post-2025 operating environment.

“Snowy Hydro has modelled Snowy 2.0 for the energy market we’ll face in the mid-2020s onwards, not in today’s NEM which is a mistake that many commentators have made in considering the economics for this project,” the company said in 2017.

The company’s chief operating officer Roger Whitby pointed to the output of renewables in the NEM last Friday, when it was approximately 11,500MW before declining rapidly.

“Later that evening, when the sun went down and the window down, the output of the renewables was something like 2,500MW. Hence there was a 9,000MW swing depending on what the wind was doing, what the sun was shining across that day. So that gives you a sense of the scale of the challenge that we have for balancing”

The Snowy 2.0 project has copped criticism, with questions being raised over whether the project will be able to deliver its claimed benefits within the cost and time deadlines set for the project.

Energy market analyst Bruce Mountain has questioned whether the project will be able to deliver the amount of energy storage claimed by the project proponents, and suggested that cost and project timeline blowouts may be inevitable.

Snowy Hydro used the estimates hearing to respond to recent criticism from the National Parks Authority of NSW, following the association calling for the project to be scrapped and labelling Snowy 2.0 ‘the worst possible project in the worst possible location’.

Snowy Hydro representatives said that it was wrong to conflate the area of the national park impacted during the construction phase to the long-term level of impact on the park once the Snowy 2.0 expansion was operational.

Snowy Hydro dismissed claims that an area of 2,500 square kilometres could be impacted by the project, an area that would encompass one-third of Kosciuszko National Park.

“I’m not sure where the one-third came from,” Broad said. “The impact for the construction will be 0.025%, and once operational it will be 0.01%. That’s one one-hundredths of the park”.

“During the construction phase, it’s 16 square kilometres of impact and in the operations phase it’s under one square kilometre.”

Snowy Hydro said that it has not considered any alternative plans for the Snowy 2.0 expansion and believes that any reduction in the project’s size or scope would be an overall worse outcome for the environment.

“I think that would be a poor outcome for the environment and for the economy,” Broad said in response to questions about a scaled down Snowy 2.0. “Because the amount of renewables you can get into the market would be significantly reduced.”

The environmental impact statement recently released for the Snowy 2.0 project revealed that around nine million cubic meters of dirt will be excavated and subsequently dumped into the existing Tantangara and Talbingo dams, an act the National Parks Association labelled ‘environmental vandalism’.

Snowy CEO Broad suggested that the impact on the park had been exaggerated and that the company will concentrate work in a portion of the park that has already been impacted by mining activities.

“Most of the work will be done through a place called Lob’s Hole. Lob’s Hole is not pristine national park. It’s an old copper mine, which has got heavy amounts of contaminated land about it. It is part of the park that will be rehabilitated post 2.0 and once operational, you have a 0.01% impact on the park,” Broad added.

The federal government acquired full ownership of Snowy Hydro after buying out the New South Wales and Victorian Governments of their previous shares, and has injected $1.38 billion in new capital to fund the Snowy 2.0 expansion.

The estimated cost of the project to Snowy Hydro Limited has now reached $5.1 billion, but as the company conceded during the meeting, that figure does not include the substantial investment required to upgrade the transmission network infrastructure connecting the Snowy scheme to the rest of the National Electricity Market.

Snowy Hydro pointed to the network investment needs assessment completed by the Australian Energy Market Operator as part of its Integrated System Plan, and believes that new network investment would be necessary even before Snowy 2.0 is considered.

“There is a significant amount of transmission infrastructure required to bring renewables to market and there is existing transmission infrastructure required for existing Snowy,” Broad said.

“To give you context, when the blackout occurred in Victoria last summer, we had 1,500MW sitting in New South Wales that we were unable to get to Victoria.”

Snowy 2.0 was largely the pet project of former prime minister Malcolm Turnbull, who recently took to Twitter to present his own defence for the project, saying that the economics of the project continue to be viable, and remained in the interest of those seeking to build more renewables.

Submissions responding to the proposed environmental impact statement for Snowy 2.0 are open until 6 November.