Two-year delay to Snowy 2.0 sparks fears over supply shortfalls, price surges, blackouts and emissions reductions target

A new two-year delay to the $5.9bn Snowy 2.0 has heightened fears over supply shortfalls, price surges, blackouts and the 43 per cent emissions reductions target.

Tantangara Dam, part of the Snowy Hydro system. Picture: Alex Ellinghausen

A new two-year delay to the federal government’s $5.9bn Snowy 2.0 has prompted fresh fears of supply shortfalls, price surges and blackouts in the national energy market and warnings that Australia will struggle to meet its 43 per cent emissions reductions target.

The warnings came on the same day that the Northern Territory government announced it would allow fracking in the Beetaloo Basin and the New Acland coalmine in Queensland officially opened its $900m stage-three ­expansion.

Snowy Hydro chief executive Dennis Barnes on Wednesday ­revealed that first power from the mega pumped-hydro project was now expected between June and ­December 2029 at the latest, ­almost five years behind its original projected completion date.

Dennis Barnes

The delay of the hydro expansion prompted NSW Premier Chris Minns to flag intervention to extend the lifetime of the Eraring coal-fired power station past 2025 in a bid to ease supply shortfalls and ease price pressures for consumers.

Energy Users Association Australia chief executive Andrew Richards told The Australian the delay could create potential shortfalls in the market if new generation failed to come online quickly or if there was a rapid exit of existing power generation. “I know we’ve got ambitious targets but it’s going to be very difficult to meet these targets in the timeframe we are talking about because we simply can’t get the renewables,” Mr Richards said.

“The same problems impacting the delay of Snowy are impacting a whole range of projects across the nation … potential shortfalls when there are so many moving pieces in the energy ­market.”

Qenos chief executive Stephen Bell said manufacturers were already unable to cope with surging prices and energy­intensive businesses would become unviable against inter­national competitors if costs did not come down.

“Anything that takes capacity out of the market or delays providing more capacity is clearly a concern. The issue is we just don’t have enough capacity. We’ve just had a shut-down of Liddell and it seems to me that we don’t have the baseload power,” he said.

“We are competing in the global market and we are trade-­exposed users so we have to have competitive priced energy while competing offshore.”

The Snowy Hydro project has been dogged by project issues including the collapse of one of its contractors, Clough, delays through Covid-19 and, more recently, a major tunnel boring ­machine getting stuck in the Snowy Mountains.

Energy and Climate Change Minister Chris Bowen defended the delays and cost blowouts, arguing Snowy 2.0 was suffering from global supply chain disruptions affecting “every construction project across the world”.

He told a Smart Energy Conference in Sydney that the project was being slowed down by “engineering complexities” and said Mr Barnes was being upfront and honest with the public by announcing the delay, as he attacked former Snowy Hydro chief executive Paul Broad and the former Coalition government for failing to inform AEMO about previous slow-downs.

“The impacts are for reasons that we all understand. This is a very large and complicated engineering project and there are supply chain consequences for every construction project across the world … from the overhang of the Covid-19 pandemic,” he said.

“The fact these delays were hidden was inexcusable.”

Coalition frontbenchers, however, said Australia’s energy market reliability was “under siege with rolling delays and blowouts under Labor” and the fresh delay would create a billion-dollar hole in the budget bottom line.

Opposition energy and climate change spokesman Ted O’Brien said further delays to the pumped mega project “spelled disaster” and urged Labor to work with energy providers to extend the lifetime of coal-fired power stations to ensure energy prices were affordable for consumers.

“The Albanese Labor government has created an energy vacuum in Australia, with baseload power stations being ripped out of the grid without a replacement ready to go,” Mr O’Brien said.

“Australia’s energy reliability is under siege with rolling delays and blowouts under Labor, including the 660MW Kurri Kurri gas plant which will not provide power for a year later than scheduled in 2024.”

Opposition finance spokeswoman Jane Hume said Labor must ensure the implications of the delays were reflected in next week’s budget, arguing the delays put “a new black hole in Labor’s budget” before it had been released. “Snowy Hydro has said it expects more detail on the budget implications around July 2023, more than a month after Labor delivers its budget.”

Mr Broad rejected Mr Bowen’s assertions he had failed to inform the market of potential delays, saying Coalition energy minister Angus Taylor had informed Snowy and related contractors he expected the project to be delivered on time and budget.