Prime minister Malcolm Turnbull has announced his desire to spend $2 billion on a 2GW pumped hydro scheme in the Snowy Mountains, in a move that will potentially drive a stake through the heart of the fossil fuel generation industry in Australia.
The move – which is subject to a feasibility study by the Australian Renewable Energy Agency, and funding agreements from Snowy Hydro’s three government owners (Federal, NSW, and Victoria) – could be the most significant intervention in Australia’s energy markets in half a century.
By promoting pumped hydro, Turnbull is effectively signing the death knell for any new coal or gas fired generation built by the private sector, and is paving the way for a 100 per cent renewable energy grid, driven mostly by wind and solar.
It also makes a reported and belated push for nuclear energy from members of his Coalition entirely redundant, because it would remove the need to rely on “baseload” generation over the medium to long term.
Assuming this does go ahead at the scale advertised, the conversation around energy delivery will now shift from “baseload” to flexibility, and gas and coal will no longer be able to compete, on either cost or utility, over the medium to long term.
Indeed, the biggest beneficiary of this push into pumped hydro could well be solar PV and wind energy, which are now the clear leaders in energy costs, with further sharp falls ahead.
And new generation is needed to replace ageing coal and gas generators, and meet new demand from growing population and electric vehicles.
By adding pumped hydro, and distributed battery storage (in homes, buildings and in EVs), Australia can reach a 100% renewable energy target, possibly within a few decades.
The ANU’s Andrew Blakers, who last month released an analysis that showed Australia could reach 100 per cent renewable energy with solar, wind and pumped hydro, at a cost of around $75/MWh – cheaper than current wholesale prices – describes the move as a game changer.
He estimates that once this scheme is completed, Australia will be nearly half way to having enough pumped hydro and other storage to support a wind and solar grid.
“A 100 per cent renewable energy grid will require around 450GWh of storage,” Blakers told RenewEconomy.
“Pumped hydro is by far the cheapest in the wholesale market,” he says. But around half the storage needed will come in the form of battery storage ‘behind the meter’, paid for by homes, businesses and electric car owners, and through demand management.
“It’s game over for gas, it’s game over for nuclear. Solar PV and wind have won the race,” Blakers said. It also makes life difficult for proposed solar thermal and storage technologies, unless they can compete in areas unsuitable for pumped hydro.
Australia already has around 2.5GW of pumped hydro, mostly in the Snowy Mountains, but also at Wivenhoe and Shoalhaven. This new initiative is to be formally announced by Turnbull in the Snowy Mountains on Thursday, but was widely distributed to the main papers overnight.
The idea is to pair the huge Tantangara and the Talbingo reservoirs. Because the dams already exist, the cost of the pumped hydro is much reduced. The $2 billion will be spent on tunnels, power stations and poles and wires to connect it.
Indeed, there is nearly enough water in these reservoirs to provide enough dispatchable power to meet a 100 per cent renewable grid.
But no grid can put all its eggs in one basket, or in one location. So more storage capacity needs to be built in different places, such as the proposed pumped hydro plant at the Kidston gold mine in Queensland, to be paired with a solar power plant to push the water uphill.
Blakers says around 6GW more of pumped hydro will be needed, assuming that battery storage and demand management accounts for the rest.
Blakers says that pumped hydro is by far the cheapest form of storage, although it does rely on price volatility – the cost of pumping water uphill, minus 20 per cent losses, needs to be overcome by the cost received. In that sense, the building of such a scheme almost assumes, or at least relies on, more wind and solar being built.
Pumped hydro, however, cannot compete in smaller arrays, which leaves battery storage and other technologies to compete at the “distributed” level – say around 10MW to 20MW.
This will be important because storage needs to be distributed around the grid, lest a problem occur with the huge interconnectors.
That means that new locations will need to be found for other pumped hydro across the grid, along with storage.
But much of this storage required will be installed in homes and businesses, and if the EV revolution takes of, that could potentially provide 400GWh on its own – 20 million cars by 45kWh – as long as that capacity can be harnessed and controlled.
But it probably means that the scale of battery storage will be limited, and distributed – its focus will be on super-fast response services, distributed grid and peaking response, grid augmentation, and behind-the-meter storage. It will still be a huge market.
Turnbull, who reportedly spent an hour on the phone to Tesla founder and CEO Elon Musk on Sunday, has been talking the storage game for a few months, although his attacks on wind and solar appear to be entirely political rather than constructive.
But in rolling out this scheme, at a cost of $2 billion, and with possibly 2GW of storage, he appears to be saying to Musk and his Tesla Powerpack: You call that an energy storage device? This is an energy storage device.
Another side benefit of the pumped hydro scheme is that it means that over the medium-term at least, once this is built after 4 or 5 years, it takes the pressure off any gas shortfall.
It was notable that the most immediate negative responses came from two commentators with strong ties to the gas industry.
Ex-Origin man Tony Wood, now at the Grattan Institute, said it was “no panacea”, while Danny Price, from Frontier Economics, and the architect of the Emissions Intensity Scheme, dismissed it as a “thought bubble”.
Wood said pumped hydro was “vulnerable to drought”, but this ignores the fact that pumped hydro circulates a closed-loop water supply. The bulk of the remaining Snowy Hydro, which is not pumped hydro and relies on run of river, is exposed to drought, because it depends on rainfall, allocation to irrigation and environmental support.
The Clean Energy Council welcomed the move, saying it would boost the flexibility of Australia’s energy system and could “open the floodgates” to the greater use of renewable energy such as wind and solar in the future.
“Pumped hydro is a perfect complement to renewable energy like wind and solar and other forms of storage that are becoming much cheaper with each passing year,” CEO Kane Thornton said.
“The prime minister’s announcement of Snowy 2.0 appears to focus on increasing the ability of hydro power to meet peak demand, a role gas has traditionally played in the market.
“But with gas becoming increasingly expensive, it’s important to explore other technologies and solutions – such as batteries and pumped hydro – as viable alternatives.”
Still there are obstacles. One might come within the Coalition itself, once the fossil fuel lobbyists realise what’s the implications will be. Even energy minister Josh Frydenberg talked of storage “dare I say it, with renewables” without appearing to understand what it meant.
Not everyone was impressed, however. Labor spokesman Mark Butler dismissed it as a stunt for a “feasibility study into an unfunded project” designed to fund up to “2,000MW of new storage, not new generation,” as though that were a really bad thing.
He also pointed out that funding for the project is to come from ARENA, the “Labor established agency the Abbott-Turnbull government has repeatedly tried to abolish. In fact, Malcolm Turnbull himself voted twice to abolish ARENA.”