Snowy Hydro warns of high costs and potential blackouts if AEMO’s energy blueprint proceeds
The federal government-owned Snowy Hydro has attacked a planned national energy blueprint warning it could trigger instability in the power grid.
The federal government-owned Snowy Hydro has attacked a planned national energy blueprint, warning a failure to push ahead with crucial investment in new electricity transmission could trigger higher power prices, blackouts and dangerous system instability.
Snowy, currently building a giant expansion of its hydro scheme, has written to the Australian Energy Market Operator saying its 20-year plan for the national electricity market released in December has gone backwards in recognising the urgency of transmission reform, and contains false modelling assumptions.
The major energy player, which owns retail power companies Red Energy and Lumo, has also attacked assumptions AEMO makes in its integrated system plan about the value of Tasmania’s wind farms, and says global energy investors are worried their spending on generation and storage may be put at risk due to the glacial pace of progress pushing on with more than $10bn of urgent transmission links.
“Transmission augmentation which takes place later than required not only leads to higher prices and slower decarbonisation, but also blackouts and dangerous system instability,” Snowy chief executive Paul Broad said in the company’s submission to AEMO, obtained by The Australian.
The 2022 integrated system plan “seeks to delay transmission upgrades until the last moment while retaining the flexibility to bring forward or yet further delay projects as needed. That may appear to be sensible policy but it is unworkable in practice.
“It is impossible to reconcile AEMO’s forecasts of an increasingly rapid structural shift towards renewables with its recommendations to delay key transmission links.”
Snowy is worried whether there will be enough transmission in place to transport power from its Snowy 2.0 expansion to market once it is completed in 2026. That includes TransGrid’s proposed Hume Link to southern NSW and the southern transmission link to Melbourne called VNI West.
AEMO, which runs the national electricity network, has plotted a “step-change” scenario after consultation with industry to guide power grid investment over the next decades and ensure Australia hits goals to cut pollution.
Under the plan, coal is set to be extinguished from the electricity system up to a decade earlier than planned, exiting three times faster than expected, under a radical blueprint for the power grid that requires a nine-fold increase in wind and solar capacity by 2050 to meet the nation’s net zero emissions targets.
Snowy also hit out at what it regards as the prioritisation of the Marinus Link, a second power cable connecting Tasmania to Victoria, ahead of transmission needed in NSW and Victoria under the latest draft of the power market scheme.
The plan “prioritises Marinus Link over VNI West, seemingly valuing Tasmanian wind resources (which, in fact, offer little diversity value) over the larger renewables investment in Victoria and access to Snowy 2.0, the single best asset for shoring up system security in the national electricity market. This is dangerous for consumers and industry,’’ Snowy said.
Mr Broad casts doubt on plans for Tasmania’s Battery of the Nation and the Marinus Link ever being built.
“Given that Snowy 2.0 is under construction, what is the probability that Battery of the Nation and Marinus will even exist? Deferring VNI West for four years (compared to ISP2018 and ISP2020) in the hope that a marginally economic and geographically remote undersea cable and remote storage will save the day is playing Russian roulette with national electricity market reliability and efficiency,’’ he said.
Snowy has previously warned the lack of transmission could kill the transition to renewables – with a string of major players weighing into the debate – and singled out concerns over infrastructure as a major issue that needs to be confronted to ensure supplies can flow to users.
Renewable developers and network operators are worried a pipeline of power generation and clean energy supplies faces delays or gridlock unless major electricity transmission projects are delivered across the national power system.
It cautioned that major global energy investors could be put off by the uncertainty in the transmission sector, an assertion that may raise heckles from other big market players that have previously accused Snowy of distorting the market with its government ownership.
“It does not help Australia’s case that these participants (many of whom already deliver renewable energy to Snowy via long-term offtakes negotiated across 2019-21) look on in dismay at the fate of VNI West’s role in transmitting their energy to the load centres and to Snowy 2.0,’’ Snowy said in its submission. “These investors are … typically global energy investors who cross-invest in generation and storage, and therefore know that Snowy 2.0 is a key piece to ensuring generation backup and storage for Victoria. The treatment to which Snowy 2.0 has been subjected provides them no comfort that their own investments would be treated equitably or transparently.’’
AEMO has said transmission projects will add $29bn in value while allowing renewables to be spread across the grid, with the Victoria NSW Interconnector and HumeLink projects both seen as critical to guard consumers against the risk of faster-than-expected coal retirements.
Consultation on the draft 2022 plan will be open until Friday.
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