Snowy Hydro wants transmission fast-tracked
Snowy Hydro has called for transmission to be fast-tracked to ensure generation from its Snowy 2.0 expansion can supply the power market and says finetuning the details of a proposed payment mechanism being used to extend the life of coal and gas generators will be critical to its success.
The federal government-owned Snowy, which delivered underlying earnings of $577m in the 2021 financial year, will release its five-year corporate plan on Wednesday covering a construction-heavy timeline that will result in its Hunter Valley gas plant being delivered by late 2023 and its 2000 megawatt hydro expansion by mid-2025.
The company is also focused on ensuring enough transmission is in place to transport power from Snowy 2.0 to market. That includes TransGrid’s proposed HumeLink to southern NSW and the southern transmission link to Melbourne called VNI West, warning a failure to have enough infrastructure in place could lead to higher costs for users.
“The lack of transmission could kill the transition to renewables,” Snowy chief executive Paul Broad told The Australian. “This transition can’t happen without it.
“A fit-for-purpose transmission system for tomorrow must be done now and really should have started five years ago.”
The Australian Energy Market Operator forecast on Tuesday the expected exit of Victoria’s Yallourn coal plant in 2028 and NSW’s Vales Point and Eraring units from 2029 would result in reliability gaps in Victoria from 2028-29 and NSW from 2029-30 if no back-up generation or transmission projects were delivered to the market.
Snowy Hydro’s 2.0 expansion and the HumeLink transmission connecting it to the grid would go some way to easing stress on the system, AEMO said. TransGrid, which in May approved a $2.2bn, 900km power cable called EnergyConnect to transmit renewables between NSW and South Australia, is working through regulatory processes for HumeLink and hopes to deliver the project by late 2026.
Snowy noted that transmission constraints in the Wagga region of NSW have been subject to severe congestion for more than 500 hours since the start of January, which it describes as a material volume of curtailment for renewable power generation in the region. “This is an issue that is growing in intensity each year and with each new renewable generation installation that is not accompanied by a significant transmission upgrade,” Snowy warned in its corporate plan.
“Transmission constraints are attracting the attention of debt and equity capital providers. Constraints directly and negatively affect a generator’s cashflows with no offsetting reduction in operating costs and therefore economic returns.”
The industry has also been debating the Energy Security Board’s post-2025 market design, with a new “capacity mechanism” that would offer financial incentives to encourage the construction of dispatchable power sources and prevent the premature closure of coal generators.
While the mechanism could benefit Snowy, Mr Broad said he wanted to work through the detail of how it would be introduced to the market before making any outright call on its merits.
“We’ve been very pro the market that’s been in place which has served us well and some interventions in the market have been a problem. So the devil will be in the detail,” Mr Broad said.
“We try to imagine this world where how do you get a big coal plant on and off and if you keep it going all the time, does it push out renewables during the day.”
Snowy also called out the move by states including NSW to develop their own energy blueprints, saying it was leading to market fragmentation.
The NSW roadmap “does not provide sufficient clarity on the much-needed augmentation of the transmission network to support its ambition,” it said.