Federal Energy Secretary Chris Bowen has revealed that the Snowy 2.0 project is experiencing major delays — a blowout of nearly two years — and has criticized the former Morrison government for hiding the news of an energy market already in crisis.
In a post-election revelation to the new federal energy minister, Snowy Hydro’s management says the Snowy 2.0 project faces expected delays of 19 months and may not start supplying power until 2028.
The slowdown could have serious consequences for an energy market with record prices, unprecedented coal outages and major consequences for important decisions, such as the closing date of the country’s largest coal producer and the design of a new market policy.
The coalition government threw all of its policy eggs into the Snowy 2.0 basket, and the government-funded venture had an impact on other storage projects, causing them to be withdrawn or reinstated. The Snowy 2.0 slowdown will further expose the energy market.
Bowen chided both former Prime Minister Scott Morrison and former Energy Secretary Angus Taylor for the lack of transparency, effectively hiding the news from the energy market and leaving such significant delays to a nationally important infrastructure project to be discovered after the election.
It also followed the coalition’s decision to postpone the announcement of expected spikes in retail bills – originally slated for May 1 – until after the election.
Bowen told RenewEconomics†
“It seems to be another hidden parting gift from Morrison and Taylor. I find it inconceivable that the former minister, now Shadow Treasurer, was not aware of this delay.
This is exactly the kind of chaos and mismanagement of the energy portfolio that has brought Australia into the current mess.”
The Snowy 2.0 project is expected to add 2,000 MW of generation capacity to the Snowy Hydro scheme and a significant amount of long-term pumped hydro energy storage.
The project was commissioned by the former Turnbull government in anticipation of the closure of several coal-fired generators, which would require significant new generation and storage capacity to replace.
The revelation that the project has now been significantly delayed confirms what many energy market experts have been warning for some time: that the Snowy 2.0 project would cost more and take longer to build than had been stated by both the Morrison and Snowy governments. hydro.
One of those critics, energy market expert Bruce Mountain, of the Victoria Energy Policy Center, took to LinkedIn to make it clear that he was not shocked by the news of the delay.
‘It [has] fooled many with this project. And who is responsible for this dog’s breakfast?’
Another critic, former utility director Ted Woodley, said: RenewEconomics that the confirmed delays were the latest in a pattern of delays and cost bursts for the project:
When Snowy 2.0 was first announced in 2017, the original build was four years, to be completed in 2021 at a cost of $2 billion. The project’s subsequent feasibility study said it could be completed by 2024 at a cost of between $3.8 and $4.5 billion.
When Snowy Hydro signed the contracts for the project, projected costs had risen to $5.1 billion. Since then, we’ve heard that the timeline has slipped and that the project will need to use the $400 million set aside for contingencies.
It is now 2022 and the project is still six years away. The business case has to be redone.
The delays are believed to be related to broader supply chain issues that have impacted several major infrastructure projects, as well as delays on the part of the Morrison government in getting the project underway.
Global supply chain factors were also mentioned by AGL Energy on Friday, when it announced it also expected delays in repairing a damaged generator unit at the Loy Yang A power station as it struggled to obtain replacement parts.
Obviously, in a best-case scenario presented by Snowy Hydro’s management – where Snowy Hydro can catch up on the construction schedule – the delay could be reduced to just 13 months. But if problems continue to hamper the project, expected delays could extend to more than two years.
It adds another challenge for the new Albanian government, as energy markets are already under pressure from rising fuel prices and coal-fired plant shutdowns.
It is also because it is considering pulling the “gas trigger” to guarantee the local gas supply and wants to accelerate the introduction of a so-called capacity mechanism in the national electricity market.
According to the original schedule for the Snowy 2.0 project, it would have come online sometime in 2025.
It was crucial timing as it would have given a significant boost to New South Wales’ generating capacity at a time when both Liddell and Eraring coal plants are expected to close.
Liddell’s power plant is slated to close completely in April 2023, with Eraring in 2025. But that timing may now be questionable.
An Origin Energy spokesperson pointed to a company statement in February that it would continue to monitor market developments as it manages the Eraring shutdown.
The statement said:
“We will continue to assess the market over time and this will assist in any final decisions on the timing for closing of all four units.”
Snowy Hydro has been contacted for additional comment.
Michael Mazengarb is a journalist from Sydney. This article was originally published on RenewEconomy and has been republished with permission.
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