Secret $8bn sweetheart energy deal

A deal between the commonwealth and NSW will see the Snowy Hydro 2 and renewable energy zones connect to the national grid.

The NSW government has agreed to an $8 billion sweetheart deal to connect the Snowy Hydro 2 to the national grid.

A landmark $8bn deal has been struck between the commonwealth and NSW to connect Snowy Hydro 2 and a bank of renewable energy zones into the national grid as part of a sweetheart deal to secure the Perrottet government’s agreement to impose a $125 coal price cap.

An announcement on the secret agreement will be made on Wednesday after the NSW parliament is recalled to pass legislation that would apply the controversial cap on coal prices agreed between the states and the Albanese government at a national cabinet meeting two weeks ago.

It is understood Anthony Albanese offered to provide $4.7bn in funding to the NSW government for the $7.8bn transmission as a sweetener to get NSW Premier Dominic Perrottet over the line.

Similar funding deals were made with the Queensland government to secure its agreement to cap coal prices in its state in exchange for the federal government imposing a $12-a-gigajoule cap on domestic gas prices in its bid to try to curb skyrocketing energy costs.

While the plan has been condemned by the energy industry, which is warning of a looming investment crisis in gas, the states have been rewarded with significant federal funding for other energy projects.

The Perrottet government will provide $3.1bn to the new project, which it claims will create 3900 new jobs in regional areas of NSW and deliver a more reliable energy system across the state, as well as further helping arrest the spiralling cost of electricity supply in the east coast energy market.

NSW Premier Dominic Perrottet and Prime Minister Anthony Albanese in Eugowra. Picture: NCA NewsWire/ Steve Gosch

The commonwealth component will be funded under Mr Albanese’s $20bn Rewiring the Nation policy. The NSW funding will be provided through its NSW Transmission Acceleration Facility as part of its Electricity Infrastructure Roadmap, which the government says will increase reliability across the east coast grid.

“The commonwealth has worked hand in glove with the states and territories to shield Australian households and businesses from the worst impacts of the energy crisis caused by Russia’s illegal invasion of Ukraine,” Mr Albanese said.

“But as well as that critical short-term action, the Australian economy can seize the opportunity of more affordable and reliable renewable energy over the long term – creating jobs in the regions that have always powered Australia, and insulating ourselves from global fossil fuel shocks at the same time.

“Support for critical transmission infrastructure like Sydney Ring, VNI West and HumeLink, to get across the line, will help transform Australia into a renewable energy superpower.”

The joint deal will fund eight critical transmission and Renewable Energy Zone projects across NSW.

These include the Sydney Ring – Hunter Transmission Project, Southern Sydney Ring, Central-West Orana (CWO) REZ, the New England REZ, HumeLink, VNI West, Hunter-Central Coast REZ – which includes potential offshore wind projects – and the South-West REZ.

Mr Perrottet said Australia’s electricity grid was in urgent need of reconfiguration to “meet the demands of the rapidly changing electricity market it serves”.

“This joint $7.8bn funding deal will support the projected $32bn in private investment for regional energy infrastructure by 2030,” he said. “This is our opportunity to invest in our future industries that will drive jobs and wealth creation in our state.”

NSW Treasurer and Energy Minister Matt Kean said it was a win for NSW and the creation of new jobs in the energy sector. He said it was expected to support more than 3900 jobs through construction.

Federal Climate Change and Energy Minister Chris Bowen said the projects would be critical in keeping a lid on prices by connecting more firmed renewables into the grid.

“Today’s announcement helps make that a reality by supporting the projects to plug Snowy 2.0 into the grid and linking REZs to ensure the energy can be supplied from wherever the wind is blowing and the sun is shining, to where it’s used by households and industry.”