Snowy Hydro pumps up the case of 2.0 before more delays, cost blowouts

Snowy Hydro is pushing back on critics of its controversial energy project with new modelling showing the huge pumped hydro project will be needed in coming decades to keep a lid on power prices as renewables flood the electricity grid and coal plants close.

Chief executive of Snowy Hydro, Dennis Barnes, has conceded that cost blowouts above the current $12 billion price tag are inevitable, and hinted that ongoing delays may mean the project may not reach its 2028 completion deadline.

However, he told this masthead that an independent study on the electricity grid showed that Snowy 2.0 would fill a gap that could not be plugged with large-scale batteries and would, in fact, deliver big savings in average wholesale electricity prices.

“I struggle to see how the energy transition is done without it, and our people are doing good work. But it’s complex, it’s remote, and it’s a globally significant scale.”

Snowy 2.0 costs have blown out from an initial $2 billion estimate to more than $12 billion. Snowy has commissioned an audit that is set to report this month, and Barnes conceded a further price rise was expected.

The report from consultancy Baringa Partners, which will no doubt be questioned by critics of Snowy 2.0, found that increasing volumes of energy storage will be needed to keep the grid supplied as coal plants reach the end of their life in coming years and renewables take over.

Wholesale power prices spike in the rare but inevitable weeks when calm weather combines with cloudy weather, known as the dark doldrums, depressing the amount of wind and solar power supplied to the grid.

The study projected a hypothetical scenario for a week of the dark doldrums in 2041, when coal power is gone, and found that the cost of wholesale electricity in a grid with Snowy 2.0 would be around $7000 a megawatt hour cheaper than a grid powered by the alternative, a vast array of large-scale batteries.

Barnes said it would cost more than $100 billion to replace the capacity of Snowy 2.0 with batteries, and the electricity grid would face increased risks of blackouts once coal retires.

“Every one or two years, you get a three- or four-day lull in wind generation and batteries run out of juice, simply put, to handle those situations. Every 10 years or so you get seven days of renewable lull, and without the Snowy 2 storage levels there’s an impact on price, and while we don’t want to be too sensationalist, grid reliability’s at risk.”

Snowy Hydro uses surplus electricity to pump water from a reservoir at the bottom of a hill to the top, from where it will be