NSW to underwrite pumped hydro project and two 8-hour batteries

The move comes as the state pushes to accelerate long duration storage capacity to support a wave of large-scale wind and solar developments.

NSW will underwrite the development of two 8-hour batteries and a pumped hydro facility as the state moves to accelerate long duration storage capacity to support a wave of large-scale wind and solar developments.

The state government said, once completed, the three projects — all due to be operational by 2031, with the batteries some four years earlier — will provide 40 per cent of its long-duration storage by 2030 target, and more than 65 per cent of the recently legislated 2034 target.

NSW Minister for Energy Penny Sharpe said the three projects will ensure electricity reliability and affordability.

“NSW is already powered by around 35 per cent renewable energy. These projects will help ensure NSW households and businesses have access to affordable and reliable electricity as we continue to transform our grid,” Ms Sharpe said.

“These new projects will drive local and regional economies with jobs and investment, while also delivering a reliable energy system for the whole of NSW.”

The federal Labor government has set an ambitious target of having renewables generate 82 per cent of the country’s power by 2030, a plan which requires substantial new wind and solar projects to materialise.

Australia — one of the world’s largest per capita emitters — is currently on course to miss its renewable energy targets to wean off coal, which has stoked concerns the country will have to either prolong the use of coal or risk blackouts.

To break the impasse, the federal government and states have said they will underwrite a wave of projects to ensure developers have revenue certainty and allow them to lock in funding.

The schemes work by offering developers a guaranteed minimum return on new projects. Under the scheme, should the wholesale electricity price fall below an agreed threshold, taxpayers will compensate the renewable energy project. Should the wholesale electricity price exceed a metric, developers pay the government — a design to remove revenue risk from developers and accelerate much-needed investment.

The governments have also vowed to streamline planning approvals for new projects, which can often take years to secure final approvals.

Australia’s energy industry has welcomed the support, but stressed the grid remains susceptible to so-called renewable energy droughts when unfavourable conditions would see wholesale electricity prices spike. Prolonged periods of elevated wholesale prices will eventually lead to higher bills.

Australia’s energy industry has urged the government to support gas, but the country’s east will face a supply crunch as soon as next winter and energy executives have said they will need government support to allow them to build gas fired power plants.

As a result, and incentivised by pricing signals, Australia’s energy grid has seen a rush of batteries with a typical duration of between two and four hours.

NSW said the two 8-hour batteries selected will be developed in Narrabri and Yoogali, while the pumped hydro project will be developed in Lake Burrendong and will have about 15 hours worth of storage capacity.

With a combined capacity of more than 1GW, NSW said once fully charged they will be able provide enough power for more than half a million households for a day.

But, while the projects are advancing, some of Australia’s energy industry have raised concerns schemes cannot guarantee projects like pumped hydro will materialise. They remain concerned about the complexity of developing pumped hydro projects.

Australia’s largest pumped hydro project, Snowy Hydro 2.0, is years behind schedule amid geological issues and billions of dollars over budget.