Funds set aside in case Hunter Valley gas fired power station goes ahead

A new gas power station in the Hunter Valley would be funded by the federal government through a $3.8 billion war chest side aside in the Budget.

A new gas power station in the Hunter Valley would be funded by the federal government through a $3.8 billion war chest side aside in the Budget.

After tasking Snowy Hydro Limited with drawing up plans for a gas generator at Kurri Kurri in NSW last year, The Daily Telegraph understands the government has also decided to make provisions for its construction from next financial year.

It is believed this potential cost is included in a $3.815bn pool of funding which was set aside in Tuesday’s federal budget for “decisions taken, but not yet announced” in 2021-22.

Snowy Hydro already runs the Colongra Gas fired power station in NSW. Picture: Adam Yip

While the government has not decided to build the power station, it now has the provisional funding to do so if the electricity sector fails to meet the 1000 megawatt gap left by the closure of the Liddell coal-fired power station in 2023.

Independent modelling for the Liddell Taskforce found if the coal-fired power station closed and was not replaced, NSW average wholesale prices could rise by 30 per cent to about $80 per MWh in 2024.

The new gas station would have the capacity to generate 750MW of on-demand electricity.

The Telegraph also understands within the $3.8bn war chest, the government has accounted for potential unforeseen extra costs for COVID-19 vaccines or to pay for as-yet undiscovered new treatments for the deadly virus.

Prime Minister Scott Morrison has dismissed suggestions $3.8bn set aside for unannounced Budget measures is for election announcements. Picture: NCA NewsWire / Gary Ramage

Asked about the funding Prime Minister Scott Morrison on Wednesday told Nine’s Today Show the cash was not about election spending.

“What we’ve done is kept things in reserve over the course of the balance of this year to keep fighting this pandemic,” he said. “That’s what we’re doing.”

But Labor’s finance spokeswoman Katy Gallagher said setting aside such a large amount of money ahead of an election year without detail exposed the government’s “priorities”.

“There’s little doubt that Scott Morrison is lining his election war chest in this budget with billions of dollars to splash around as part of his election campaign,” she said.

Labor’s finance spokeswoman Katy Gallagher has questioned the purpose of the $3.8bn in ‘secret’ funding decisions. Picture: NCA NewsWire / Gary Ramage

Any unspent money from the funding war chest at the end of the financial year would be returned to the Budget as general revenue.

Mr Morrison announced last year the government was prepared to build a plant in the Hunter, if the sector remained overly focused on renewables and not dispatchable power.

“We won’t risk the affordability and reliability of the NSW energy system and will step in unless the industry steps up,” he said in September.

In response EnergyAustralia proposed its 300MW-400MW Tallawarra B gas-fired generator, and AGL proposed a 250MW gas peaking station in Newcastle and a battery in Liddell.

Energy Minister Angus Taylor has long-argued the Liddell coal-fired power station must be replaced with a ‘like-for-like’ alternative. Picture by Sean Davey.

A spokesman for Energy Minister Angus Taylor said in a statement the government would “take the time to consider private sector commitments”.

“We have always said our response will be shaped by the extent of industry action to deliver on the target,” he said.

“1000MW of new dispatchable power generation is what is required to keep prices low and address reliability concerns once the Liddell Power Station closes in 2023.”