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Snowy Hydro bosses defend $600m gas plant as key to avoid blackouts

Commonwealth-owned energy company Snowy Hydro has defended the federal government’s $600 million investment in a gas-fired power plant, declaring it may prove vital in preventing blackouts and replace capacity lost when AGL closes its Liddell power plant.

Last week’s announcement that Snowy will build a 660 megawatt generator at Kurri Kurri, NSW, to replace the closure of AGL’s Liddell coal-fired power plant in 2023 has faced extensive criticism from environmentalists and industry players. The Australian Energy Council, a group representing big power providers, said official projections do not foreshadow meaningful future supply shortfalls that would warrant funding a giant gas plant.

In response, Snowy Hydro chief operating officer Gordon Wymer on Tuesday insisted criticism of Kurri Kurri overlooked the fact that Australian Energy Market Operator’s (AEMO) forecasts for reliability were based on “averages” under which demand was expected to be exceeded once every 10 years.

“The thing about loss of loads – so, blackouts – is that it doesn’t happen around averages, it happens when there is system stress and that is hard to model,” Mr Wymer told an energy conference.

“We’ve spent a huge amount of time peering into the future to see what role Snowy 2.0 and Kurri Kurri will play and one of the key roles is reliability for the 1 or 2 per cent of the time that there is nothing else to keep the lights on.”

Despite the hastening influx of renewable energy, Mr Wymer said renewable “droughts” – extended periods with inadequate wind and sunlight to fuel renewable energy generators – were “not a theory, they are here”. While big batteries had an important role to play in plugging these gaps, they lacked the scale of dispatchable capacity required, he said.

Asked about the Kurri Kurri gas project, Alex Wonhas, AEMO’s chief system design officer, said the agency expected 19 gigawatts of storage or on-demand energy capacity would be needed in the next 20 years, but “deliberately doesn’t take a position” on the mix of technologies that should include.

“If you expect higher gas prices in the future and a decline of battery costs, really the future is predominantly dominated by batteries,” Dr Wonhas said. “If you believe in very low gas prices and maybe battery costs not coming down, then you’ll be seeing more gas in the mix.”

Dr Wonhas said AEMO had forecasted 150 megawatts of “dispatchable” capacity – assets that can provide on-demand power into the grid – would be required following Liddell’s closure in mid-2023, but acknowledged “that is cutting it fine”.

“If you put more into the system, it will put downward pressure on prices, and that’s what Snowy is attempting to do,” he said. “We don’t complain about dispatchable capacity, we will need more of it.”

Snowy Hydro chief executive Paul Broad said the business case for Kurri Kurri forecast the “internal rate of return is double-digit”. Snowy was in commercially sensitive negotiations for turbines at the plant, Mr Broad said, but he committed to releasing the business case within two months.

Separately, Federal Energy and Emissions Reduction Minister Angus Taylor on Wednesday is expected to announce the Hydrogen Industry Mission, a collaboration between government, CSIRO and industry to drive commercial research and development into hydrogen fuel and attract $68 million in combined investment.

“Australia can be a world leader in hydrogen and this partnership with the business and research communities is another positive step,” Mr Taylor said.

Source: Sydney Morning Herald