Déjà vu All Over Again: Liberal PM Determined to Squander $10 Billion on Pumped Hydro White Elephant

Ghost PM pumping up enormous white elephant.

 

Australia’s obsession with hopelessly intermittent wind and solar has rendered its power supply both unreliable and unaffordable: it’s time to stop digging.

Except, on both sides of the political divide, it seems the obsession is one without reason or respite.

Labor’s opposition leader, Bill Shorten is determined to destroy Australia’s economic prosperity – literally overnight – with a 50% National Renewable Energy Target (matching the grand achievement that is South Australia – again destroyed by Labor lunatics). The lunacy extends the shutting down Australia’s coal exports, the country’s single largest export earner and a major employer in regional NSW and Queensland.

At a time when the Liberal/National Coalition was starting to talk a little common sense, with reference to the construction of new High Efficiency Low Emissions coal-fired plant and underwriting the refurbishment of existing baseload generating capacity, last week’s announcement by PM, Scott Morrison that he’s determined to reboot the Snowy 2.0 pumped hydro wheeze is a case of déjà vu, all over again.

The proposal for a giant pumped hydro scheme – tacked onto the original (primarily stored) Snowy Hydro Scheme – was one of the former PM, Malcolm Turnbull’s classic brain farts. Turnbull and his hapless sidekick, Josh Frydenberg (then Energy and Environment Minister) started touting what he called ‘Snowy 2.0’ in March 2017 as the Nation’s mega-battery. An earlier version of the scheme was canned in the 1970s because it was uneconomic then. Among RE zealots Snowy 2.0 has been heralded as the saviour for the Australian wind industry.

The line goes something like this: if we use 3 MWh of wind power to pump water through 27 km of tunnels, over an elevation of 900m, later, when power consumers actually need it, Snowy Hydro could return 2 MWh to the grid.

Never mind squandering 1/3 of the electricity originally generated; never mind that with the inclusion of the $85 per MWh REC the cost of the wind power involved exceeds $110 per MWh; never mind that the owners of Snowy 2.0 will charge a further $150-300 per MWh to re-deliver power to the grid; never mind that, in reality, the power used to pump the water uphill will largely come from coal-fired power plants, delivered overnight when it’s cheapest. For a break down of the costs and engineering of what’s proposed see our post: Turnbull Plays ‘The Man from Snowy River’ in Uncosted Pumped Hydro Plan

Turnbull’s obsession with the Snowy 2.0 proposal is probably explained best by its progeny’s relationship to the embattled wind power outfit, Infigen: Born Lucky: Stars Align Perfectly for PM’s Son with Mammoth Bet on Wind Power Outfit Infigen

STT hears that Turnbull & Son went to great lengths to secure a power purchase agreement with Snowy Hydro for a wind power outfit (Singapore based Nexif) for its Lincoln Gap wind farm at Pt Augusta in SA, as well as a pile of cash from the Federal government’s Clean Energy Finance Corporation.

However, we doubt there is any sensible explanation for Scott Morrison signing up to what may well be the biggest white elephant in Australian history.

We don’t need Morrison’s money, Snowy Hydro CEO declares
The Australian
Ben Packham
27 February 2019

Snowy Hydro has declared it did not require a $1.4 billion equity top-up delivered by the Morrison government to get the Snowy 2.0 project off the ground, as energy ­experts said they were “highly sceptical” the 2000MW pumped-hydro plant would deliver a promised 8-9 per cent return to taxpayers.

Scott Morrison yesterday unveiled the fresh injection of taxpayers’ funds “into making this project a reality”, declaring Snowy 2.0 — which will only generate power 17 per cent of the time — was critical to the nation’s energy future.

“What we are talking about here is reliable, renewable energy,” the Prime Minister said. “It’s absolutely fair-dinkum power. It doesn’t get more fair dinkum than this.”

The total cost of the project is now estimated at about $12bn, including a build cost of $3.8bn-$4.5bn, a $6bn investment by the federal government to buy NSW and Victoria’s shares in Snowy Hydro, and an estimated $1.5bn to $2bn for transmission upgrades to get the power into the grid.

Finance Minister Mathias Cormann said the new $1.38bn equity injection would “make this project happen”, while allowing Snowy Hydro to continue making dividend payments to the government during the construction phase.

But CEO Paul Broad said the project, which Snowy Hydro planned to fund by raising its own debt, would have got off the ground without a taxpayer funds top-up.

“The government decided the way it wanted to balance out the funding. It wanted to sustain dividends,” Mr Broad said. “It wanted to support the project with equity. These things are part of negotiations that go on. We never asked for it. We never asked for anything.”

Snowy was expected to ask for a “dividend holiday” if it had raised all of the funds through debt markets. However, the government’s investment ensures it will continue to receive a capital return, with Snowy paying out $265 million to government shareholders in 2017-18. Mr Broad said Snowy 2.0, designed to “firm” unreliable renewable power, would purchase power off-peak at $40/MWh, using it to generate hydro power which would be sold into the market at peak periods at about $100/MWh.

The Snowy Hydro CEO, who is yet to release the full business case for the project, said Snowy 2.0 would deliver an 8-9 per cent return for taxpayers from 2025.

But the Grattan Institute’s Tony Wood said: “The numbers don’t give you enough revenue to deliver that sort of return. I don’t know anyone outside the company who thinks this is a good idea.”

Frontier Economics director Danny Price warned Snowy 2.0 was “guaranteed to be a commercial disaster”. “If you include the full costs of Snowy, including the build cost, the $6bn cost of buying the company, and the transmission costs, you need a spread between peak and off-peak generation of about $250/MWh,” he said. “That can never happen with Snowy because it drives up the off-peak price, and drives down the peak price.”

The Coal Council of Australia said the government could “comfortably” buy three 3000MW high-efficiency, low-emissions coal-fired plants for $12bn.

Mr Morrison dismissed suggestions Snowy 2.0 was not focused enough on lower prices and immediate power. “Lower emissions, lower prices, and reliability. That’s what I’m looking for. This is what Australian people want,” he said.

Labor environment spokesman Mark Butler said the green light for the project made it clear the government was forecasting a major expansion of renewable energy.
The Australian

Taylor and Morrison: about to throw $10bn down the drain.

 

One thing is for certain, the numbers on Snowy 2.0 simply don’t stack up.

A suitably enraged Judith Sloan ripped into the lunacy of building a massive storage and energy release system – just to compensate for Australia’s ludicrous obsession with wholly weather-dependent wind power.

The point at the heart of Judith’s thesis is pretty simple: why squander $10 billion on a system that can never deliver power in its own right, when for the same money Australia could have a fleet of brand-new High-Efficiency Low-Emissions (HELE) coal-fired plants delivering thousands of MW of cheap and reliable power, all by themselves, and for generations to come?

PM’s Snowy 2.0 is a complete snow job
The Australian
Judith Sloan
27 February 2019

Prime Minister Scott Morrison is stretching the truth when he calls Snowy 2.0 fair dinkum power.

Surely pumping water up hill to then be released to generate electricity, with a net loss of energy of at least 20 per cent, is more fairy story than fair dinkum?

But evidently it’s OK because taxpayers, whether willing or not, will have to invest only $1.4 billion into the project with the rest “self-funded’’ by the Snowy corporation itself. Let’s be clear about this: we either pay for this through taxes or through electricity prices.

And bear in mind the final cost of the project remains extremely uncertain. It was going to cost $2bn and then it was $4bn. Or was that $4.5bn?

We are not sure whether this includes the cost of the additional transmission infrastructure required. We could easily add another $2bn.

Don’t forget the federal government had to buy out NSW and Victoria because there could be no guarantee those state governments would be as keen on this fairy story (sorry, fair dinkum project) as the Coalition.

Let’s be clear about the economics of this project: it rests on very high and variable wholesale electricity prices. Water can be pumped up the hill when prices are low and released when prices are high. That might be a good deal for the corporation, but it’s not a good deal for consumers.

Evidently, the Coalition has given up on the ambition of ­returning real wholesale prices to levels we enjoyed at the turn of the century, levels which made heavy industry in this country competitive and profitable.

Let’s also take a look at recent wholesale electricity prices. With the exception of Tasmania, they are as high as they have ever been, notwithstanding the avalanche of investment in new renewable ­energy installations. Note also that there has been very little growth in the demand within the National Electricity Market for well over a decade.

We keep hearing that renewable energy will lower electricity prices but the massive increase in the penetration of wind and solar in electricity generation (now above 20 per cent) has been associated with massive increases in prices — doubling in a decade.

And did you notice the supernormal profits reported this week by Energy Australia, one of the three oligopolistic gentailers that all invest in renewable energy while milking their fossil fuel ­assets?

The reason: sky-high wholesale electricity prices.

Labor will probably go quietly on this government initiative. Opposition energy spokesman Mark Butler knows that a system dominated by renewable energy is in trouble without backup such as Snowy 2.0.

The wind and solar operators can’t wait until Labor wins to save their bacon: without a rejigged renewable energy ­target (50 per cent by 2030), the massively oversupplied market will start to throw up a significant number of commercial failures.

Were the electricity market not so distorted, there would not be any economic case for Snowy 2.0. The project has been around for many years and it never stacked up. The cost and the ­execution risk made it a complete non-starter.

The fact the Coalition government refuses to unpick the distortions in the market, rather than adding to them by promoting Snowy 2.0, is a sad indictment of where energy policy has landed.

And, by the way, for the sort of investment being devoted to Snowy 2.0, you could get several high efficiency, low emissions coal-fired plants.
The Australian

H-E-L-E spells fair dinkum power.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Jackie Rovensky says:

    I don’t think Morrison is happy with going ahead with the Snowy scheme proposed by Turnbull, you have to wonder what the price for supporting him to becoming the PM was!
    He doesn’t look or sound comfortable with the decision to go ahead with this scheme – but he has to keep some in the political machine happy and be buggered to the rest of us who can see the rot continuing with respect to reliable cost effective energy requirements of this Nation.
    The sooner he accepts he is now the leader and required to go with sensible solutions the better – he is now the PM and the leader of this Nation – not Turnbull or his cronies.
    Morrison can and should ditch it and admit it as a mistaken decision. Yes we are coming to an election but this announcement is not going to curry favours with those who will have to pay higher energy prices, and suffer the consequences of blackouts and brownouts, while watching our Political leader having to dance to the tunes of those he superseded.
    A strong stand against the mistakes of the Turnbull regime will find him seen as a better stronger leader, one who is not controlled by those with allegiances to the ideologies of the Greens and Labor while serving as Liberals.
    We need security and reliability of our power generation to meet the needs of today and the future, we do not need things that have been shown to not meet lauded criteria, that show no move to reducing our energy bills, and scar our once beautiful land. We need a leader who can make a decision to bring back some common-sense into the production of our energy requirements. We need to have factories built away from prime farming lands, that don’t constantly need additions to store backup that is only able to ‘smooth’ the grid when the erratic wind fails to meet our needs with the result of constant events where we could at the drop of a hat see the Grid collapse causing pandemonium across the whole Grid.
    The use of dirty Diesel generators and costly environmentally damaging batteries, or even a dam with water that can be scarce at times. None of these costly extra’s would be necessary if we had factories/plants contained at single sites, in each State that could meet our needs when and were required at the drop of a hat.
    Wake up Canberra and State Parliaments you are there to serve us all not just the cry’s of ideologically challenged fools and those companies/industries they bow to.

  2. Crispin says:

    If Snowy 2.0 is going to run in tandem with new generation nuclear power, then I support it. It would mean using less gas in times of peak demand. There would be less likelihood of gas fracking in future.

    However, if the master plan is to use it as a massive battery to back up yet more ‘ruinables’, then I do not support it. Gas will be required in vast amounts which will lead to a greater likelihood of gas fracking in future. I do not support gas fracking.

    I do support HELE as it will reduce emissions over the old coal technology. And this is a step in the right direction. Less pollution.

    The case for nuclear and hydro is proven in the recent Channel Islands (UK) example that I posted. Link below. Not only are they reducing emissions, they are also increasing customers! This is a model that can be scaled up.

    https://www.jec.co.uk/about-us/about-us/key-facts/

  3. crakar24 says:

    Singleton,

    When you can demonstrate how carbon DIOXIDE emissions placed between the sun and a thermoter makes the temperatures rise you can look at reducing emissions.

    In the mean time the notion “lets just build a nuke and be done with it” mentality is ridiculous because we are so far behind the 8 ball on this it would take years to accomplish.

    Our universities are not equipped to train engineers in this field, we have no engineering experience what so ever, our ignorance and fear of nuclear power has left us in a very bad position, we simply cannot switch every thing on and build one.

    As the article states we could/should build 3 HELE plants with that money and also start on a nuclear program which would bear fruit in the next 15 to 20 years.

    Obviously we cant do that because a vast majority of the ignorant and uneducated populace like you think we need to stop/reduce our unmeasurable levels of CO2 emissions.

    JESUS EFFING WEPT

  4. Sarcastic Cynic says:

    Labor is aiming for 50% renewable energy mix. Liberal is aiming for 27% and Snowy 2. Both policies spell economic doom. Vote Labor or Green at the next election. Consign the Liberal party greens to the dustbin of history while sharpening the guillotine blades. Get the economic pain over and done with ASAP. What a choice for voters.

  5. C. Paul Barreira says:

    “[T]he grand achievement that is South Australia – again destroyed by Labor lunatics.”

    With Liberal complaisance at the very least. Australia’s economic suicide note is bipartisan. As well, for the time being, there is no political alternative. And by the time there is, the expression of any programme of renewal of reliable and relatively inexpensive electricity generation will have become illegal. The War Precautions Act of the newly-elected Labor government of 1914 provides a perfect model.

  6. Reblogged this on ajmarciniak.

  7. David Stone says:

    He can’t be that stupid. And Angus Taylor?? It must surely be an attempt to placate SMH journo’s, left wing inner-city elites and any other brain dead sections of the electorate who think any form of renewable energy is clean, green, cheap and renewable. Then,if re-elected, suddenly come to their senses and drop the whole idea – again.

  8. Ertimus says:

    There is no hope, the loonies from the left and the would be greenies in the LNP have won the day and within a few years the once best electricity generation system and distribution system in the world with be a shambles. We give a bunch of lawyers politicians the electricity system to run and they wouldn’t have a clue what they are doing.

  9. singletonengineer says:

    If, like me, you prefer to aim for no carbon emissions, then instead of the HELE lowish carbon emitters, then go for nuclear. $12B would certainly buy a couple of thousand MW of new nuclear, on existing power station sites – with no need for new switchyards, etc and in the same timeframe.

    2000MW of nuclear power with a capacity factor of about 6 times that of the proposed 2000MW of hydro, will produce 6 times as much electricity, with none of the pumping losses – so, perhaps at 10 or 12% of the cost.

    Remember also, that is additional power to the grid, not power that takes more energy and returns less, every day of the year, thus requiring additional wind or solar plant somewhere else, plus additional interconnectors.

    But we don’t dare consider the safest, lowest polluting option, do we? That’s Australia for you. Spend $10 for political white elephants when the engineering decision would achieve the same for $1.

    And with no CO2.

    And no $85/MWh subsidy for wind power, either.

    In closing, we have not seen an EIS yet. Fisherfolk tell me that there are introduced fish in Talbingo’s water that should not be pumped into Tantangara.

    This is starting to look like a 45-year old bad dream.

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