Snowy 2.0 will reduce greenhouse gas emissions in Australia: truth or lie?

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Snowy Hydro has claimed that its massive “Snowy 2.0” pumped hydro scheme will reduce emissions by storing renewable electricity. Is this correct?

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Water pipelines to Hydro-Electric power station in Australia's Snowy Mountains
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Snowy Hydro has claimed that its massive “Snowy 2.0” pumped hydro scheme will reduce emissions by storing renewable electricity. Truth or lie?

In short, lie. But the issue is complex.

The notion that many people have in their minds – and that Snowy Hydro has promoted – is that Snowy 2.0 will pump electricity when there is lots of renewable production (when market prices are likely to be lower) and will then generate using that stored water when prices are high (when renewable production is not plentiful).

The inference is that Snowy 2.0 stores renewable electricity.

This is a false inference. On a shared power grid, where there are many different producers and consumers in the market at the same time, it is impossible to objectively match individual consumers with individual producers.

Some customers might wish to claim that their electricity is being sourced from a particular power station – “I am buying wind or solar power” – but this is impossible to prove. Unless the renewable generator is behind your electrical meter (and not connected to the grid), you can not say for sure which generator is supplying your electricity.

So this must mean, that we can not identify which generator is being used to pump electricity when Snowy 2.0 is pumping?

Well, no actually, we can know for every trading interval which generator was setting the price. In other words, which was the marginal generator.

The Australian Energy Market Operator keeps a record of this. We can know with reasonable certainty, leaving all other things the same, which specific generator(s) would not be producing electricity if Snowy 2.0 was not using that electricity to pump water.

These generators are the “marginal”, price-setting, generators. It is the emissions from these generators that would be avoided if Snowy 2.0 was not pumping.

The same logic applies to any other demand on the grid, it is not unique to Snowy 2.0 or storage more generally. (To be precise there can from time to time be technical limitations associated with the minimum stable generation of thermal plant which mean that the system operator constrains down cheaper renewable production even if this more expensive.)

So, which generators are typically likely to be marginal?

They will be the most expensive generators that are likely to be dispatched on the power system at the low priced times that Snowy 2.0 is most likely to be pumping. For the next two decades, we can be confident that they will not be variable renewable generators, i.e. generators that use (variable) renewable resources and that have zero avoidable costs.

Instead the marginal generators at the time that Snowy 2.0 is pumping will be those fossil fuel generators that have relatively low avoidable cost and so are most likely to be setting prices when market prices are low. In fact, to be specific, at these times it will most likely be brown coal generators that are at the margin – they have by far the lowest avoidable costs (and the highest emissions) of all the fossil fuel generators.

So, for the next two decades during which we are still likely to have a large stock of coal generators, it will be coal generation and specifically brown coal generation that Snowy 2.0 stores.

In fact a well operated storage business that buys low and sells high could not be making matters worse, from a greenhouse gas perspective, since they will buying electricity when the cheapest (and most emission intensive) fossil fuel generator is at the margin and will be selling it when prices are the highest (when the least emission intensive generator is likely to be at the margin).

Ah, but I imagine you protest, surely the average emission intensity will be low when Snowy 2.0 pumps since this will be at the times that there will most likely be plentiful renewable electricity.

Yes, the average emission intensity is likely to be lower at these times. But that misses the point. Leaving all other factors unchanged, it is the marginal change in emissions that determines the emissions when Snowy 2.0 pumps.

The question to ask yourself is this: which generator would be turned down if Snowy 2.0 did not buy electricity to pump water uphill?

But surely this argument then applies to all storage, including batteries?

Sadly the answer is generally yes. But there is a big “but”: if a renewable generator is constrained from producing (because of transmission constraints) and at those times is able to store the renewable production that would otherwise be spilled then such storage will in fact increase the supply of renewables when that stored electricity is later used or fed back in to the grid (assuming the grid is able to ship it to other users).

As this blog sets out, storage can help or hinder emission reductions depending on whether it is able to store electricity from renewable resources that would otherwise spill their production.

This is not the case for Snowy 2.0 at the very least for the next two decades. Snowy Hydro’s claim that Snowy 2.0 will store variable renewable electricity does not hold water.

The Australian Energy Market Operator’s latest Quarterly Energy Dynamics report shows that for the third quarter of 2019, 4.5% of variable renewable energy was spilled. Suitably located storage – whether pumped hydro or battery or whatever else that stores renewable generation that would otherwise be spilled – will increase renewable production and consumption and in this way storage can reduce emissions.

The role of storage in increasing or decreasing greenhouse gas emissions has not yet received the attention it deserves in Australia although there is now a substantial body of research on this in other countries. Producers, consumers, storage service providers and policy makers need to start to take this into account.

Bruce Mountain is director of the Victoria Energy Policy Centre. This article was first published on their website.

 

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16 Comments
  1. Glenn 1 week ago

    hmm, author has an agenda i suspect…
    It is certainly true that we need dispatchable sources, storage can serve as a dispatchable source, it time-shifts generation (with losses) from earlier times when there is excess, which is more likely to happen when there is lots of wind and/or solar.

    Batteries can be viable if they time-shift generation daily, but pumped hydro can be viable when time-shift generation for weeks.
    Storage supports renewable by reducing extremes in prices, allowing renewable to keep produces operating rather than turning off as some do now, and reducing the need for Gas peakers which only turn on when prices are high.
    Story doesn’t mention that Snowy is actually buying renewable generation directly rather than only from the market.

    • Chris Drongers 1 week ago

      Yes, horses for courses, and solutions according to agendae. Coal plants will run even when losing money, S2 will reduce the curtailment of renewables, S2 will sell electricity and contribute to the ‘electrification of everything’. Overall a win for the environment especially as it sets up a market that will undercut any new coal or gas as current plants die off.

  2. trackdaze 1 week ago

    The announcement of 2.0 itself designed to stall or delay new generation which is most notably renewable.

  3. Aidan Stanger 1 week ago

    As this blog sets out, storage can help or hinder emission reductions depending on whether it is able to store electricity from renewable resources that would otherwise spill their production.

    Or if it’s from renewable generators that would otherwise not be built at all.

    This is not the case for Snowy 2.0 at the very least for the next two decades.

    Your conjecture is based on unreliable assumptions. Two decades is a long time – two decades ago the NEM wasn’t sourcing any of its power from wind or solar. And with the price of renewables continuing to fall, who’s to say what things will be like twenty years from now?

  4. Ken Dyer 1 week ago

    It won’t matter. By the time it is built, it will be too late.

  5. Glynn Palmer 1 week ago

    The 2030 Emissions Projections Report forecasts coal and gas generation will reduce from about 170GWh in 2020 down to about 130Gwh in 2030.

    • Glynn Palmer 1 week ago

      Rooftop solar increases from about 15GWh in 2020 to about 30GWh in 2030. Rooftop + utility solar increased from about 25GWh in 2020 to 50GWh in 2030. This will set the lowest cost wholesale price between 10:30 and 13:30 daily.
      Figure 8: Fuel generation mix, 2020 to 2030 (GWh)

  6. AndrewRenew 1 week ago

    According to AEMO, SH2 is necessary if Australia moves quickly to transition the grid to renewables. Page 37.
    “Large volumes of VRE are forecast to be required to achieve the aggressive carbon budgets to address climate risks, additionally Snowy 2.0, is forecast to be needed, with deeper pumped hydro to complement the increased VPP in this scenario.”
    https://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/ISP/2019/Draft-2020-ISP-Appendices.pdf

  7. Anthony 1 week ago

    The biggest problem here is that, in 2040, we will need storage – it’s that simple. Most renewable energy (by GWh) will be coming from intermittent sources – wind and solar – but we will need ways to deal with the gaps. We can’t have comprehensive renewable energy without storage.

    So whilst the analysis of marginal load is useful in the short-term, it makes less and less sense the further into the future you look and the more that fossil fuels are displaced by renewables.

  8. Les Johnston 1 week ago

    There is also a need to consider if and when there is a change to the “off-peak” tariff regime. Currently this is predominantly and late night component. Shifting this to a flexible arrangement including sunny days could alter the potential pumping electricity source.

  9. Chris Baker 1 week ago

    This article completely ignores how the market actually works. Most generators contract their output with PPA’s. I’ve heard that only 15% of the generation in the NEM is actually market exposed. The bidding price that generators submit is really a process to make sure they get dispatched at a rate that will cover their contracted position.

    Look at wind and solar generators for example. Most bid at zero or less, which is not the price they need for their power. We know that the lowest prices wind and solar actually need for their power is $40 to $50 per MWh, and many in the market are running on PPAs negotiated a while back and these will be up in the 80’s and 90’s. They actaully get paid by some off market instrument. They use the bidding process to make sure they are dispatched, because they get paid according to what energy they have dispatched into the market.

    Snowy Hydro has already contracted 888 MW of wind and solar to work with its existing portfolio of hydro plant. We know Snowy intends to contract much more wind and solar when Snowy 2 is ready to come on line. By the time it comes on line it will have contracted an additional amount of renewable energy which otherwise would not be in the market.

    Its quite likely that the low price times when Snowy might be pumping would be when there is plenty of solar about. And Snowy will have contracts with solar farms, and will have to cover these contracts by making sure it has a load at that time to match its contract exposure. Otherwise it will be paying out on its swap contract to top up the solar farm prices.

    I’m sure that even with only 5% fossil fuel generation left in the NEM, the marginal generator will be those last fossil fuel generators, and so on any day, you could nominate any load, and suggest that if it was removed, it would also remove the marginal fossil fuel generator, and therefore that load is causing that greenhouse gas production.

    If Snowy 2 was not part of the market, the extra wind and and solar it contracts will also not be part of the market. To suggest that it will increase emissions is misleading.

  10. Phil NSW 1 week ago

    I have long advocated for more storage. I have been somewhat disappointed by responses on this site when I have said so much. Now that I am aware 4.5% of VRE was spilled due to over production it confirms my previous statements that PHES and other technologies need to be built in parallel to ensure this opportunity is not lost. It is the fact that it caused more fossil fuel to be burnt and therefore increased our carbon footprint is further disappointing.

  11. Alan Wilson 1 week ago

    I love pump hydro in the morning smells like victory …. l think snowy mountains is too expensive , if a pump hydro site can be started in the major states each year for the next ten years that should do it and a few big batterys 2 or 3 for each state should do it …. oh but first we have to get rid of the LNP cause there hopeless….

  12. Seriously...? 1 week ago

    ‘will be selling it when prices are the highest (when the least emission intensive generator is likely to be at the margin)’–er, but the least emission intensive generator (solar) won’t be generating at the evening peak. Wind might be. But I fail to see how wind would be at the margin on price. Wind would typically be comfortably inside the margin on price. It’s gas that would really lose out to pumped hydro, not coal or RE. It will be a case of least-flexible generation (coal) being converted to most-flexible generation (hydro) and squeezing out next-most flexible generation (gas).

  13. Honest Mike 1 week ago


    the third quarter of 2019, 4.5% of variable renewable energy was spilled.”???sounds optimistic… less than 15% of the calorific content of coal is made available at the household power socket….. and apparently only 4.5% of renewables is spilled? sounds like , hands down , renewables is the winner….. or is it?

    there is no possible way of going 100% renewable without energy storage, and most of that energy storage across the planet is pumped hydro…. which makes snowy hydro 2.0 sound like one of the most important infrastructure project currently in Australia, in the effort to reduce carbon emmissions

  14. solarguy 1 week ago

    Many PHES need to be built that are supplied by RE alone, Snowy II could never supply enough energy on it’s own anyway.

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