Bowen is spot-on with his observation that there’s no point building Snowy 2.0 without also building its plug. But from there on his claimed role is debatable.
Snowy 2.0’s plug was first planned in the 2018 Integrated System Plan of the Australian Energy Market Operator, with 500-kilovolt transmission connections to Sydney and Melbourne called SnowyLink North and SnowyLink South, since renamed HumeLink/Sydney Ring South and VNI West, respectively.
But the fundamental question is: who will pick up the tab?
The minister’s claim implies the government will be both plugging and paying, but his and Snowy Hydro’s intention is that electricity consumers will bear the cost, currently estimated to be about $12bn – nine times Snowy Hydro’s initial guesstimate of $1bn to $2bn.
How can this be? It was Snowy Hydro’s decision, approved by the (former) government, to build a massive battery in a remote location in Kosciuszko National Park, so shouldn’t they also pay for its plug?
Let’s take a look at the most advanced section of the 1000km-long plug – HumeLink, the 360km connection of Snowy 2.0 to Wagga Wagga and Bannaby (near Goulburn) in NSW.
Its cost has blown out from $1bn in 2020, to $3.3bn in 2021, to $4.9bn in August this year. And now, four months later, we hear the length has been increased to 385km to avoid 10 properties, raising the cost to nearly $5.2bn (my estimate). And we should not forget that HumeLink’s capacity has decreased 370 megawatts since first announced, from 2570MW to 2200MW (14 per cent less), compounding the increase in cost per megawatt of capacity to six times (in four years) – undoubtedly a world record in underestimation for a transmission project. And it has yet to be approved, let alone start construction.
There is no question that HumeLink is being built as the first section of Snowy 2.0’s plug – it will be maxed out whenever Snowy 2.0 is pumping or generating at its full capacity of 2200MW.
And HumeLink’s dogleg deviation to connect Snowy 2.0 has added 50 per cent to its length and cost, as well as increasing its transmission losses, its environmental, agricultural and social impacts and its susceptibility to lightning strikes and bushfires.
Yet the NSW government is meekly acquiescing to the demands of Snowy Hydro and the federal government that the entire cost of HumeLink be borne by electricity consumers. The only (spurious) reason proffered is that HumeLink will not be for Snowy 2.0’s exclusive use.
As former chief executive Paul Broad testily retorted: “We’ve said this 150,000 times. Transmission is for the common good. Everyone benefits from it.”
While transmission has broader benefits, there is no justification for Snowy 2.0 being allowed to shirk contributing its fair share (the majority) of the cost of HumeLink, even if Snowy Hydro disagreed 150,000 times.
For that matter all major electricity developments – solar and wind farms, pumped hydro, batteries, major loads and so on – should be charged the transmission costs they incur, to encourage the efficient locational development of the National Electricity Market and minimise overall costs.
Such a policy was supported by Australian Energy Regulator deputy chairman Jim Cox at the recent NSW parliamentary inquiry on undergrounding transmission: “I think they are worthwhile arguments to say that perhaps generators should be required to make a contribution to some of the costs of these links that may be of particular benefit to them, so that certainly is an idea in good standing. But it’s not the way the system works at the moment.”
Had Snowy 2.0 been required to pay for its incredibly long and expensive plug it would have been even more obvious that its business case was untenable.
And governments should not be swayed by the specious argument that consumers pay in the end anyway, so why bother allocating transmission costs to the project developers.
Snowy 2.0 has no ability to pass on the cost of its plug to consumers in the highly competitive NEM, such as somehow lowering its pumping purchase price or raising its generation sale price. If such manipulation were possible Snowy Hydro would do it regardless of the plug’s cost.
Surely it is undisputable that energy developers should pay for the connection costs incurred by their projects, to sheet home the responsibility and accountability.
As acknowledged by Bowen, Snowy 2.0 is useless without a plug.
Hence, as Snowy Hydro’s shareholder, he must accept accountability for the entire project, plant and plug, and its absurd cost of $25bn (and counting).
Tragically some $5bn has been sunk into Snowy 2.0, but the additional $20bn or more to be squandered should be reallocated to worthwhile energy projects.
If Snowy Hydro gets its way, NSW consumers will be lumbered with a one-third hike in transmission tariffs to pay for HumeLink alone.
The $5.2bn cost is equivalent to a tax of $650 on every NSW citizen – $2600 per household – with much more to be added for the rest of the Snowy 2.0 plug (plus thousands of kilometres of other transmission extensions across the state).
Surely the NSW government will step in and protect the interests of electricity consumers by requiring Snowy Hydro and other developers to pay their fair share of the transmission costs their projects incur.
Electricity consumers should not be slugged with Snowy 2.0’s plug.
Ted Woodley is former managing director of PowerNet, GasNet, EnergyAustralia, China Light & Power Systems (Hong Kong) and a board member of NSW National Parks Association.
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“There’s no point building Snowy 2.0 as the previous government started with no plan to plug it in. We’re coming along and plugging it into the grid,” Climate Change and Energy Minister Chris Bowen claimed last month.