Snowy CEO blasts ‘flawed’ NSW energy plan
Snowy Hydro boss Paul Broad has slammed the NSW energy infrastructure plan as “fundamentally flawed”, saying it risks building in extra costs for consumers, but has backed the federal government in pushing for a large new gas-fired power plant in the Hunter Valley.
In his first public comments on the NSW road map developed under Energy Minister Matt Kean, Mr Broad said he was worried it would drive “sub-economic” investments that will be passed to consumers and render the nation uncompetitive later this decade.
The road map, which was released by Mr Kean in November and passed into legislation on December 2, provides for the government to offer long-term contracts for renewable generation and grid services, and will include floor prices and guaranteed revenues for project developers.
It has also raised concerns with the federal government – Snowy Hydro’s 100 per cent owner – about the risk of driving up power prices, despite NSW’s modelling showing the opposite. Large integrated electricity suppliers such as AGL Energy and EnergyAustralia have also been wary about the NSW road map, and are reconsidering investments in new on-demand gas power plants that the federal government says are needed.
“I don’t want to be overly critical but I don’t like [that] what he seems to be doing is massively underwriting investments and sort of guaranteeing returns: I just think that’s a fundamentally flawed principle to start from,” Mr Broad told The Australian Financial Review.
“What I worry about is that … you are overlaying a cost that consumers will be confronted with post-2025 and [by later in the decade] there will be an underpinned flat cost that consumers will pay, and our nation will just lose any competitiveness we might be able to gain from our move to renewables strength.”
Mr Broad also voiced concern that the Energy Security Board, led by chairwoman Kerry Schott, is moving away from purely market-based principles in its proposals to reform the National Electricity Market.
Among options being considered by the ESB is to apply the NSW-type energy investment scheme across the national market.
“I think governments are the last ones to be dictating markets,” Mr Broad said, calling for policymakers to let the NEM provide the incentive for needed generation in “firming” power by raising the price cap for wholesale power, of about $14,000 a megawatt-hour.
But he backed the federal government in its drive to have new dispatchable generation built to help replace AGL’s closing Liddell generator and said Snowy is “ready to roll” on a gas power project at Kurri Kurri if AGL and EnergyAustralia do not proceed with their gas-fired plans.
“We are a long way down the track to getting ourselves organised to make sure we can hit the target date,” Mr Broad said. Snowy’s proposed 750-megawatt gas plant was declared “critical state-significant infrastructure” in December.
He said the state government’s plan for renewable energy zones pointed to the need for new “firming” generation, and that generation north of Sydney would become more attractive and necessary as renewable power used up available transmission capacity in the south and amid an apparent delay in TransGrid’s HumeLink transmission project.
While the federal government’s target of 1000 megawatts of new dispatchable generation in NSW has been widely criticised as too large, Mr Broad said the economics of a gas-fired plant “get better the bigger it is” because of the sunk costs around a new project.
Other companies’ investments in gas power and in batteries – such as Origin Energy’s proposal to add a large battery at its Eraring generation site – would also factor into Snowy’s project, he said.
Mr Broad reiterated that Snowy is also considering gas-fired power investments in Victoria, but would have to consider the capacity of its balance sheet.
The comments came as fresh data confirming a collapse in the use of gas to generate electricity last year fuelled criticism from anti-fossil-fuel groups of plans for new gas power and of the Morrison government’s gas-fired recovery strategy.
Gas power generation in the NEM fell by 19 per cent in 2020 from 2019, while solar and wind power had a record year despite the COVID-19 pandemic, the Climate Council said.
Gas power supplied only 7.5 per cent of generation across the NEM last year, compared with 26.4 per cent from renewables. In NSW, gas power slumped by 46 per cent to just 1.6 per cent of power generated, in Victoria the drop was 52 per cent.
Climate Council researcher Tim Baxter said the data showed it was “foolish to waste taxpayers’ money building new gas power stations”.
But Mr Broad put the dive in gas power use down to the combination of lower power demand due to COVID-19 and milder weather conditions, and said gas plants were still critical to firm up weather-dependent renewables.