Pumped for hydro future

PM Scott Morrison might have left Hobartians wanting more from the City Deal he unveiled here on Sunday, but he will return to Tassie on Wednesday with what should be more significant news.

PRIME Minister Scott Morrison might have left Hobartians wanting more from the City Deal he unveiled here on Sunday, but today he will return to Tassie with what should be more significant news.

As we report today, Mr Morrison is expected to announce during a visit to the North-West that the Federal Government will develop an underwriting mechanism for pumped hydro development in Tasmania. Essentially that means the government would help the private sector to develop the expensive new renewable power generating systems by guaranteeing some form of support into the future.

PM PUSHES OUR PUMPED HYDRO PLAN

This could be done in a number of ways. The most likely would be via a financial product that imposes an effective price floor on the power to be generated, so the proponent could have confidence it can service its debt despite market shocks. Other potential support could include various forms of contracts whereby the government pays the proponent the difference when the spot price falls below a certain amount, but the proponent pays the government a premium when it rises above that level. The government might also consider various loans or grants.

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It’s all pretty technical stuff. But what’s important is that Mr Morrison’s commitment today to Tasmania’s pumped hydro future is a major advancement on a long talked-about promise that could be an economic game-changer for the state — and that should guarantee our power security into the future.

The basic thinking behind pumped hydro is that it’s a way to deliver more renewable energy more reliably. It relies on tapping in on renewable energy when it’s cheapest — say, from wind farms when the wind is blowing strong, or at night — to pump water from a lower reservoir into an upper reservoir. When electricity is later needed when prices are higher, that water is released and run through turbines to produce power. The water is then stored in the lower reservoir to be pumped back up when prices fall again.

Fourteen “high potential” sites have been identified for such schemes across Tasmania’s Central Highlands and on the North and West coasts. All up, they could deliver the equivalent of 2500 megawatts of power.

The Australian Energy Market Operator says there is a “strong role” for such schemes to deliver cheap and secure supplies of renewable energy across states. (And remember the PM earlier this week announced some seed funding for the second interconnector across Bass Strait that would allow us to sell our excess energy into the mainland grid, and act as a backup link.)

Modelling shows the construction of pumped hydro could create up to $5 billion of investment and around 3000 jobs in regional Tasmania over 10 to 15 years. As Premier Will Hodgman correctly says, the projects would cement our state’s status as the nation’s renewable energy powerhouse.

Before we all get too carried away, however, we must remember this is all in in its infancy. Much work still needs to be done. But the importance of the Prime Minister’s endorsement of the scheme today cannot be overstated. Labor should also back it in.

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