Snowy Hunter gas project hit by more delays and blowouts, with total cost now more than $2 billion

The latest Snowy Hydro News Update released last week jubilantly announces the start of commissioning of the 660 megawatt Hunter gas Power station Project (HPP). 

However, delving beneath the corporate spin reveals a deeply flawed project with further cost blowouts, now to well over $2 billion (after all project components are included), and completion delayed another six months to mid-2025.

HPP was given the thumbs up by former prime minister Scott Morrison in May 2021, after the energy sector failed to respond to his ultimatum “to build 1000 megawatts of new dispatchable energy to replace Liddell Power Station before it closes in [April] 2023”. 

It was to cost $600 million and be completed by December 2023, according to the media release that proclaimed “the Morrison government is stepping up and building a new gas power plant [at Kurri Kurri] in the Hunter Valley, which will create jobs, keep energy prices low, keep the lights on and help reduce emissions”. 

As colleagues and I pointed out at the time, none of those claims were possible, other than creating 10 permanent jobs, with HPP having “no prospect of earning anywhere near the revenues needed to recover its outlay”.

Nevertheless, Snowy Hydro confirmed HPP’s timing and cost at Senate Estimates in October 2021, emphasising “we want to have the project completed and online by the end of 2023 … and are so far down the track that … something disastrous would have to happen for us to spend more than $600 million”. 

Two years later Snowy Hydro announced a ‘reset’ of HPP, propelling its cost to $950 million and delaying completion to December 2024.

The latest News Update extends the cost to “around $1.3 billion” and completion to the end of June 2025, two years after the supposedly critical closure of Liddell. 

The latest blowout has apparently been due to “extended periods of extreme weather and other factors that have stopped work on the project”. 

It’s not clear what extreme weather events have hit the Kurri Kurri region and stopped the project for months on end (cyclones, floods, heat waves, blizzards, earthquakes?). No doubt Snowy Hydro is hoping for fine weather in 2025.

When considering HPP’s burgeoning cost it is important to remember that the estimates only cover the main plant, and don’t include all project components such as financing, land, electricity connections, approvals and owners’ costs, likely to total more than $250 million. 

What is even more wily is that HPP’s estimates exclude the cost of the gas pipeline connection and storage, in exactly the same way as Snowy 2.0’s estimates exclude its electricity transmission connections (HumeLink, Sydney Ring South, VNI West).

Clearly, HPP is stranded without a gas connection, as is Snowy 2.0 without an electricity connection, and those costs are integral to both projects.

Snowy Hydro’s initial estimate for HPP’s connection to the Sydney-Newcastle gas trunkline was $100 million (Senate Estimates). That estimate skyrocketed to $450 million when the APA Group, the builder/owner/operator of the pipeline connection and storage, approved the final investment decision in November 2023. 

The cost to Snowy Hydro will likely be many hundreds of millions higher when APA adds in any cost overruns, its profit margin, and operating and maintenance costs over the thirty-year service agreement. 

It is now apparent that the all-up cost of HPP will be well in excess of $2 billion, possibly as much as four times the initial $600 million (partial) estimate of just 3½ years ago.

This is a staggering amount when compared with CSIRO’s GenCost Report projection for a typical 660 MW open cycle gas power station of around $900 million ($1.3 million/MW).

HPP’s fundamental flaw is its location, 21 kilometres beyond the end of what is a skinny gas trunkline from Sydney, necessitating a costly pipeline connection, compressors, and on-site storage. 

The limited gas supply also means that HPP will be incapable of providing dispatchable, on-demand energy 24/7 – the fundamental attribute of a gas power station and the core requirement of Morrison’s ultimatum.

Despite the massive storage, consisting of 24 kilometres of one-metre-diameter buried pipe in a labyrinth arrangement holding 70 terajoules at high pressure, it can only power the turbines for 10 hours at full output.

It will then take more than a day to refill the storage, provided there is gas available to purchase from the heavily committed trunkline.

HPP will be capable of running on diesel as a backup, but that is a very expensive and highly polluting fuel, and is also limited by tank volumes.

Worse still, batteries will outcompete HPP. Equivalent eight-hour batteries have a similar capital cost (prices are plummeting), have a much lower operating cost, emit zero greenhouse gases and pollutants, and respond to demand changes in milliseconds versus 30 minutes for HPP’s turbines to reach full load or shut down.

The Government and Snowy Hydro have gone quiet on the prospects of HPP being powered by hydrogen after it was revealed that Snowy instructed APA to not build the on-site storage to be capable of storing hydrogen because it “would be uneconomic”.

How can the Government justify spending well over $2 billion of taxpayer’s money on a power station that can only run on gas for 10 hours, can never run on hydrogen, will be emitting greenhouse gases potentially after 2050, will be outcompeted by batteries, and will never pay for itself?

It’s well past time for the Government to start honouring its commitment to be “transparent and honest with the Australian people about the challenges and opportunities for Snowy, unlike the previous Government”. 

For a start, what will be the total cost of the Hunter Power Project, how can it possibly be economic, and when will Snowy Hydro be held to account for its outrageous estimates and abysmal project management (both HPP and Snowy 2.0)?