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Snowy Hydro 2.0 delay and coal exits spark power supply alert

Delays in the Snowy 2.0 expansion and coal station closures have sparked fresh fears of power shortages, with the market operator to make an urgent call to avoid blackouts.

Delays in the giant Snowy 2.0 expansion and coal station closures have sparked fresh fears of power shortages.
Delays in the giant Snowy 2.0 expansion and coal station closures have sparked fresh fears of power shortages.

Delays in the giant Snowy 2.0 expansion and coal station closures have sparked fresh fears of power shortages, with the market operator to make an urgent call for new generation to avoid blackouts.

The exit of 8000 megawatts of coal-fired power this decade is expected to lead the Australian Energy Market Operator to warn of a fresh supply crisis for multiple states over the next few years unless new supplies come online. Adding to pressures, a potential 18-month delay in the Snowy Hydro project Snowy 2.0 may be modelled as a “sensitivity” in official AEMO forecasts for the first time.

AEMO’s electricity forecast report, due out this week, is expected to lay out in stark detail the diminishing reliability of existing coal plants, with the market squeeze set to worsen unless the be­leaguered Snowy Hydro can claw back significant delays.

Snowy’s chief executive Paul Broad quit on Friday after cost tensions and a disagreement with Energy Minister Chris Bowen. A later deadline for the hydro expansion would see the crisis worsen, while the need for $10bn of new transmission projects also looms as a pressure point.

Concerns are growing over whether the HumeLink project that would connect Snowy 2.0 and other transmission developments will be ready on time to feed capacity into the grid.

The hydro expansion was due by 2026 but a potential delay until 2028 is worrying market experts, given that Australia’s largest coal plant, Origin Energy’s Eraring, may close seven years early in mid-2025.

AEMO in April warned that NSW faces an increased risk of blackouts by 2025-26, and Victoria and Queensland were also set to be squeezed before the end of the decade due to uncertainty on whether enough generation will be available Eraring shuts down.

A Snowy 2.0 delay may add to pressures.

“It stands to reason that outlook (from April) might deteriorate somewhat if Snowy 2.0 can’t help reduce reliability risks,” said Dylan McConnell, a research fellow with the University of Melbourne’s Climate and Energy College.

Cashed-up LNG exporters have also been put on notice by the competition regulator to plug a 56 peta­joules shortfall set to hit in 2023, or face sweeping regulatory intervention.

While dozens of solar, wind and battery projects are being built in the National Electricity Market, relatively few large-scale, long duration “firming” or back-up storage schemes are currently being developed.

While some eight gigawatts of coal-fired power is currently set to exit by 2030, AEMO predicts that number could nearly double to 14GW by the end of the decade.
While some eight gigawatts of coal-fired power is currently set to exit by 2030, AEMO predicts that number could nearly double to 14GW by the end of the decade.

AEMO is concerned a lack of timely replacement investment could reduce the reliability of the grid and raise blackout pressures.

While some eight gigawatts of coal-fired power is currently set to exit by 2030, AEMO predicts that number could nearly double to 14GW by the end of the decade, given the number of generators bringing forward the retirement of ageing plants.

The gap between the slated closure of Eraring in 2025 and Snowy 2.0 coming online several years later was a concern, Green Energy Markets analyst Tristan Edis said.

“Things likely to get uglier over delays and cost blowouts for Snowy 2.0,” Mr Edis said on Twitter. “Unfortunately it scared off private sector investment in alternatives that would have been less risky and far easier and faster to build. Two-year gap between Eraring exit & 2.0 completion.”

Still, Snowy Hydro chairman David Knox said Snowy 2.0 might not be delayed for years, while acknowledging challenges in the schedule. “We’re about a third of the way through 2.0, so there’s a long way to go,” Mr Knox told The ­Australian.

“We’ve got the three tunnel boring machines in the mountain, which is very exciting. We’ve got two of them at or in the location at the cavern. The project is now set up with accommodation, roads, access, so we can now start to build the momentum following Covid-19, which has obviously been quite a challenge.

“I recognise there are challenges ahead but we all know about that.”

Progress in excavating a vast power station cavern later this year will play a big part in determining the final deadline, the Snowy chairman said.

“Depending on how we go with that it will determine the ultimate outcome,” he said.

“Until we are in there it’s just not sensible to determine the schedule. We obviously have a baseline, but it will depend on whether the baseline goes faster or slower.”

A spat between Mr Bowen and Mr Broad over introducing green hydrogen to the Kurri Kurri gas plant near Newcastle also contributed to tensions over the Snowy chief’s exit.

Labor in February committed a further $700m to ensure it is fully powered by green hydrogen “as soon as possible”, potentially by 2030.

Mr Knox hinted that the hydrogen component of Kurri Kurri might not be managed by Snowy.

“We have to feed the plant with hydrogen, so that’s the second stage we’re now starting to think about. How is the best way to do that – it’s not necessarily that Snowy will do that – but we’ll definitely be in the mix alongside the Port of Newcastle. It’s exciting but it’s not easy.”

Possible delays in bringing TransGrid’s 360km HumeLink transmission project online may worsen the problem.

“In order to get the plant fully up and running we need the ­HumeLink in place,” Mr Knox said. We can commission but we can’t actually run it at full pace until we have the transmission.”

The Future Generation joint venture building Snowy 2.0 has filed giant cost variation claims with Snowy Hydro.

Mr Knox said it was a difficult project to execute.

“It’s not been easy for Future Generation. Covid is hard, very hard when borders are shut. They have a lot of Italian expertise they’re bringing in, which is why we recruited them. So it’s not been easy for them at all. But, no, I think relationships right now are actually in reasonable shape for where we are in the project.”

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Original URL: https://www.theaustralian.com.au/business/mining-energy/snowy-hydro-20-delay-and-coal-exits-spark-power-supply-alert/news-story/012841a9a6f5a6fde2eb8916f72b3270