Shock Snowy 2.0 Delay Pushes States to Compromise on Gas and Coal

The lag means Australia’s energy industry is likely to release more carbon in the near term, making it harder for the government’s election promise to cut emissions by 43% this decade and increase new business fears and households counting on an orderly transition to renewable energy.

“It is disappointing that this is the case, given that this was a so-called signature initiative by the previous government,” Mr Bowen told the Financial analysis Thursday.

“I will work as closely as possible to try to get him back on track, but the harsh reality is that he is far behind par.

“The bottom line is that Australians will be waiting longer than they thought for the new energy to start flowing.”

Snowy 2.0’s setback came as patterns and regulators of energy warned that planned electricity market reforms agreed to by state, territory and federal leaders on Wednesday will have to accept natural gas and potentially coal to “firm up” weather-dependent renewables and avoid blackouts.

A statement released after the emergency meeting only mentioned renewables and storage – of which Snowy 2.0 is the starkest example – in its reference to the proposed capacity mechanism for Australia’s national electricity market.

Gas and coal were absent, raising suspicions the deal was driven by concerns from jurisdictions such as the ACT, where Labor has a power-sharing deal with the Greens, and Victoria, where the minister of energy Lily D’Ambrosio has ruled out any mechanism that supports fossil fuel production in her state, which is heading for an election this year.

NSW Federal Minister for Labor and Energy Matt Kean is equally sensitive to the issue after campaigners branded the capacity mechanism a ‘Coalkeeper’ when it was recommended the last year by the Energy Security Board, although its architects were decidedly technology agnostic.

Final design at the end of the year

Alinta Energy CEO Jeff Dimery said Thursday the energy market was “tightly balanced at the moment” and insisted that every fuel and every technology would play a role in keeping the lights on.

“We need coal and gas to be included in a capacity market because, for example, if you were to exclude the roughly 60% of supply provided by the Latrobe Valley in Victoria, there would not be much capacity left. to call. .”

Australian energy regulator chairwoman Clair Savage told the Financial analysis Thursday in Melbourne that coal and gas were important sources of dispatchable capacity and that the transition would be more difficult in their absence.

“It’s easier with them,” she says. “We need dispatchable capacity. There are options on how you could create a capacity market with or without coal and gas. Essentially, we will be asking stakeholders for their perspective. We will give a final design to ministers at the end of this year.

Grattan Institute energy program director Tony Wood said he had never heard of a capacity mechanism that did not include coal and gas, and that referring to the policy tool in as ‘coal keeper’ was ‘bullshit’.

“The one in the UK even includes diesel,” he told the Financial analysis. “You cannot reinforce renewable energy with renewable energy. It must be something available on demand. Solar power is not: you cannot get solar power at night. You can’t have wind when the wind isn’t blowing.

“Not in great shape”

Speaking of the Snowy 2.0 delay, Mr Bowen said it would have implications for Australia’s energy transition as well as energy security “in an unstable environment” and carbon emissions.

“We supported Snowy because he has a role to play in energy security. It has a role to play in providing that stability to the system because, ultimately, it’s a form of storage,” he said.

It could also have dampened the petrol price hikes that sparked national alarm and forced the new Labor government into crisis mode.

“If he was on board and fully operational and connected last week, it would have made a material difference,” Mr Bowen said. “But we are going to wait much longer than what the previous government told us for him to play this role.”

Snowy 2.0 involves the construction of a huge power plant 800 meters underground in a cavern with 15 floors and 27 kilometers of tunnel in a delicate national park ecosystem to connect existing remote tanks. When operational, the system will be able to power the equivalent of 500,000 homes for a week without releasing any carbon.

Announced by former Prime Minister Malcolm Turnbull in 2017, the project was originally expected to start producing electricity in 2021. Snowy Hydro’s website on Thursday afternoon said first power was expected in 2025, the first of six production units being brought online, before completion in 2026. .

It is understood that the current estimated delay is 19 months, but work is underway with contractors to see if this can be reduced to 13 months.

The company declined to comment on Thursday.

Asked if the delay means coal will be needed longer, Mr Bowen said: “The more renewable energy and storage we have on board from things like the Snowy, the smoother the transition will be.

“And the longer it takes, and the lumpier something like the Snowy, the lumpier and more difficult it will be.

“It’s a renewable energy source and if it’s not there then the alternative has to come from somewhere.”

Mr Bowen said he had “no problem” with the board of Snowy Hydro – which is wholly federally owned – or with the company’s chief executive, Paul Broad.

He said they were working “as hard as they could to turn the tide”.

“But yeah, it’s definitely not in great shape right now.”

With Patrick Durkin

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