QUENTIN DEMPSTER. Let ‘er rip!: Snowy 2.0 project now an integrity test for Gladys Berejiklian

The New South Wales Berejiklian Government now faces an integrity test over the fast tracking of final approval for the Snowy 2.0 pumped hydro electricity project in Kosciuszko National Park.

Desperate to create jobs in a COVID-19 recovery strategy NSW is preparing to green light 24 so-called “shovel ready” infrastructure and property development projects. In less contentious cases this can be done by authorising quantity surveyors and probity officers to sign off on the accuracy of the development proponent’s stated compliance with planning and environmental regulations.

But NSW Planning and Public Spaces Minister Rob Stokes, who is the consent authority for Snowy 2.0, the biggest energy project ever to be undertaken in Australia, told me: “It is important to recognise that the assessment process is accelerated, not changed. There is no change to the environmental approvals required.”

Snowy 2.0 is now contentious because of the weight of expert objection to its claimed cost-effectiveness as a renewable energy source and the massive collateral environmental damage to an alpine national park which is supposed to be inviolate and protected by state legislation.

Mr Stokes, the Premier Gladys Berejiklian, state Environment and Energy Minister, Matt Kean, the Prime Minister, Scott Morrison, and federal Environment Minister Angus Taylor, have all been bombarded with letters of objection to Snowy 2.0 from 30 acknowledged experts in energy, engineering, economics and environment.

After securing approvals for exploratory works and a “segment factory” Snowy Hydro’s main works application is currently under “accelerated assessment” by the Department of Planning, Industry and Environment.

Once that assessment is concluded the project will go to Mr Stokes for final approval.

Some objectors have expressed cynicism and scepticism about the integrity of the approval process,  speculating the Snowy 2.0 “deal” may already have been done in March 2018 when the Turnbull government agreed to pay Victoria and NSW more than $6.2billion for their shares in Snowy Hydro Ltd.

This cynicism seems to be based on the publicly released details of the inter- government negotiations at the time the purchase was announced on 2 March 2018. One of the terms of sale included “that NSW will provide all reasonable assistance to Snowy Hydro in relation to its current and future operations (including planning and approvals process for Snowy 2.0).”

Mr Stokes rejects any suggestion that the approval fix is in and is standing by the integrity of his state’s processes, telling me all projects would be subjected to the “same rigorous checks and balances that ensure they have merit and are in the best interests of the people of NSW”.

Snowy Hydro is sentimentally supported by Australians as a post-war immigrant success story in nation building. In  2006 the Howard government was forced by public protest to withdrew its plan to privatise the jointly owned government company. Kosciuszko National Park was declared by NSW after the hydro scheme was completed and operational.

Now under 100 per cent Commonwealth ownership Snowy Hydro has already purchased from Germany tunnel boring machinery for its exploratory works for a pumped hydro plan which had been mothballed for decades.

Expert objectors now say that at an estimated total construction and transmission grid connection cost of $10billion, Snowy 2.0 is too expensive.  There are alternative “shovel ready” pumped hydro projects without the environmental damage to Kosciuszko National Park.

A 27km 10-metre wide tunnel up a 700metre incline from Tantangara to Talbingo reservoirs, with a massive cavern for reversible turbines and a power station one kilometre underground,  is estimated to require the excavation of 20 million tonnes of rock and soil, quantities which could fill much of Sydney Harbour. The plan would require the dumping of the excavated spoil inside the national park’s boundaries including into existing reservoirs, reducing their water holding capacities.

In a letter to ministers last week one of the expert objectors, Mr Ted Woodley, former managing director of Energy Australia, said Snowy 2.0’s  main works application should not be assessed on its own as the totality of environmental impact should include the crucially associated transmission line project which has yet to be exhibited.

Mr Woodley said Snowy 2.0 was the first ever industrial development inside an Australian national park.  The transmission link from the power station to the national grid, which would cut an easement swathe through the alpine landscape, had yet to be assessed.  “Clearly it would take a very courageous minister to knock it back if the main works is already approved”.

Snowy Hydro declares that the project will create 2000 jobs during the construction phase over four to five years and rejects environmental impact concerns as manageable given the over-riding economic and energy storage benefits.

In his memoir A Bigger Picture former prime minister Malcolm Turnbull, the “father” of Snowy 2.0 and who described himself as a “frustrated engineer” on top of his merchant banking expertise, asserts that the economics of Snowy 2.0 were sound and confirmed by multiple engineering, geological and financial analysis conducted in 2017 and 2018.

“It was estimated to have an internal rate of return of over 8 percent, very good for a big infrastructure project, and Snowy Hydro said they could fund it without any additional government equity, as long as they could retain all their earnings, and not pay dividends for five years.”

But Associate Professor Bruce Mountain, director of the Victoria Energy Policy Centre, told me that Mr Turnbull’s claim that the project will return 8 percent on the Commonwealth’s investment was “implausible” given the company’s projected present value of its wholesale market income.  “Wholesale electricity forward market prices are now around half as high as Snowy Hydro had assumed.  Snowy 2.0 – even based on their own projections of inflated 2017 prices – have absolutely no chance of covering its costs.  Snowy’s board and its shareholding ministers will have some serious questions to answer”.

Professor Mountain referred to an AEMO (Australian Energy Market Operator) just-published projection which significantly differed from Snowy Hydro’s forecast for electricity generation.  The fact that Snowy 2.0 would be effectively idle for its first five years or so would have a “dramatic impact” on it financial returns.

Graph

Source AEMO

The shareholder, the Commonwealth government, rejects this: “Following Snowy Hydro Board’s final investment decision on 12 December 2018, the Government has reviewed the project’s business case and is satisfied that the project stacks up and will benefit energy consumers and the Snowy Mountains region”.

Since Mr Turnbull’s departure from office the Morrison government, as the sole shareholder, has committed up to $1.38billion in an equity investment while still declaring the project will be financed by Snowy Hydro Ltd.

Mr Woodley and other objectors contend that Minister Stokes should reject Snowy Hydro’s submission as it has not included detailed assessment of any viable alternatives and does not take into account future energy market trends identified by AEMO.  These included the capability of a more robust grid to take the majority of its power from solar and wind enhanced by the rapidly declining costs of in situ battery storage. Mr Woodley said this would push any need for Snowy 2.0’s pumped hydro generation capacity of 2000 megawatts or more out to beyond 2030.

Such is the intensity of the objections that it appears inevitable Snowy 2.0 will end up in litigation before the NSW Land and Environment Court.

Over to you Minister Stokes.

This article was first posted in Crickey on May 13.

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Quentin Dempster, former chairman of the Walkley Foundation, is a contributing editor at The New Daily.

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10 Responses to QUENTIN DEMPSTER. Let ‘er rip!: Snowy 2.0 project now an integrity test for Gladys Berejiklian

  1. Avatar Matt. Kaarma says:

    Has anyone considered pumping seawater up into a holding dam, filling the dam and then using that water for hydro electricity production? There must be a few suitable areas where that could be achieved.

  2. Just a quibble: because of its high costs, battery storage is limited to a few hours and so is not a substitute for pumped hydro. However, off-river pumped hydro offers many small potential projects giving storage of days to weeks with very low environmental impact.

  3. Avatar Michael S Harewood says:

    Alternative “shovel ready” pumped hydro projects without damage to the Kosciuszko National Park….what and where are they? Most would require the construction of a second dam above or below an existing dam. The Snowy scheme already has grid connection which could be enhanced without major development of new corridors. It is centrally located to act as the “battery” to store electricity generated by wind and solar when prices are at or below zero.
    While it may be the first ever industrial development inside a national park, the Snowy Mountains National Park was essentially created to conserve the soil and catchment capabilities of crown leasehold land in order to maintain the value of the Snowy Hydro Scheme.
    Prices for electricity vary dramatically over the daily cycle and annual cycle in response to demand. Pumped hydro and battery storage have the ability to capture peak prices and replenish their reserves at times of very low or negative prices.
    Armoring the perimeter of existing storages with excavated rock would seem like a good way to reduce bank erosion where the water level is subject to frequent fluctuation.

    • Avatar Ian Dunn says:

      Michael, the designation of the large parts of the Australian Alps as a National Park, was indeed as the result of government decision. True! But the creation of that most Beautiful and valued area was by no means the result if actions by anybody. The mountains, the streams the alpine ecology— these were assets which all of us inherited. And now we have a proposal which constitutes a massive insult to that area. It is true that Lakes Talbingo and Tantangara are results of Snowy 1. But can you believe that part of this proposal involves tipping millions of tonnes of tailings into those lakes? Quite incredible!

      • Avatar Michael S Harewood says:

        A “massive insult to that area” is in fact an impact on 0.25% of the area. Most of the engineering works will be deep underground and undetectable by those who enjoy the Snowy Mountains National Park, except for the reduced greenhouse gas emissions. The ability of pumped hydro to store excess variable renewable energy and provide peak power at times of high demand will reduce overall greenhouse gas emissions from the electricity sector and contribute significantly to a sustainable future. The environment does not start and end at the National Park boundaries.

        • Avatar Richard England says:

          There is a danger that the unprecedented flow of water produced by filling and emptying Tantagara Reservoir on a daily basis will eventually erode all the millions of tons of unconsolidated sediment that presently underlie the reservoir, redepositing the coarse sediment in the bottom of the reservoir and carrying the fine sediment through the tunnel and the turbines, into Talbingo Reservoir, and down the Tumut River through the Blowering Reservoir, causing all these pristine waters to be turbid for many years. I’ll be most interested to see whether this occurs.

  4. Avatar Michael Flynn says:

    The work of the SMH-EA to complete the Snowy scheme came in on budget of $400 million because of innovation, after starting with Guthega Dam, that included rock bolting and sustained work in scientific services in Cooma. The expertise from the US including the Tennessee Valley Authority was helpful and the contracting process by the Commonwealth mindful of the taxpayer interest. After this project gets under way there could be continuous improvement and better ways developed. Perfection up front including costing is the enemy of the good. We need some national development now.

  5. roger scott roger scott says:

    Beware the power of urban myths. “Hydro power” is a button which politicians can press in the certain knowledge that most voters across the political spectrum will have a positive response, irrespective of the underlying cost-benefit calculations of particular manifestations of the phenomenon. I reached voting age in 1960 Tasmania, having always regarded “the Hydro” and its agents as the locus of all goodness and “the Snowy” as mainlanders flattering us by imitation. So those expert objectors have a significant task in front of them, with roles comparable to religious reformers rather than mere policy analysts.

  6. Avatar Philip Duncan says:

    Just a little more precision required to make an impact:

    ‘…30 acknowledged experts in energy, engineering, economics and environment.’ 30 nameless experts?

    ‘Expert objectors now say…’ Okely dokely, that’s convinced me then.

    Cynical, me?

    • Avatar Randal Lawrence says:

      You are not being cynical, but a simple internet search would show you that the list of people raising serious questions about this project is quite impressive. The list is about as impressive as the list of contributors to this blog – and I mean that as a very positive observation (in case you are still in a cynical mood :-).

      There is a lot of material available on this from impeccable sources – not just politicians wanting some media exposure and an excuse to spend a lot of money.

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