News

Snowy Hydro signs game-changing deals

01/11/2018

Snowy Hydro announced the signing of eight wind and solar contracts today to provide cheaper energy to 500,000 households.

The eight projects, totalling 888 megawatts (MW), are located across New South Wales and Victoria and are expected to generate about 2.8 terawatt hours of energy annually.

The new renewable energy generation, ‘firmed’ by existing Snowy Hydro assets, is a game-changer and will push down future energy prices. This will bring on significant new energy supply and therefore much-needed competition to the market, and will enable Snowy Hydro to pass on lower wholesale prices to our customers.

The renewable energy we have contracted will enable Snowy Hydro to offer very competitive, firm wholesale prices (ie. the cost of the raw renewable energy plus the cost of ‘firming’) – for below $70/MWh for a flat load, for up to 15 years.

Snowy Hydro is a key provider of fast-start, “capacity”-type products, and we keep the lights on at times of high demand. However, we are ‘energy short’ (meaning that we do not generate enough energy from own power stations to cover all of our customers) so we have to purchase energy from the wholesale market. We are one of the largest energy buyers in the NEM and, just like households, we are exposed to high wholesale prices.

Over the last 12 months, there have been rapid changes in the NEM and competitive pricing across all generation technologies has seen the cost of renewables fall.

Snowy Hydro was overwhelmed with the level of interest in our Renewable Energy Procurement Program, which saw more than 17,600MW of projects submitted through the procurement process. All eight winning projects are expected to come online within the next two years.

Snowy Hydro’s existing hydro, gas and diesel assets give us the ability to ‘firm’ up vast amounts of intermittent renewable generation today to ensure energy is available when needed.

In simple terms, ‘firming’ works by transforming intermittent energy into reliable energy so it’s available on-demand when a customer needs it. While the energy output of individual projects varies, Snowy Hydro’s power stations can work in combination with wind and solar, creating ‘firm’ reliable energy.

Snowy Hydro owns Red Energy and Lumo Energy, which together have more than one million customers.

News

Good business makes good business: The Case for Snowy 2.0

10/01/2018

The National Electricity Market (NEM) has long been an outstanding example of Australia’s microeconomic reform. It brought much needed competition to an industry once dominated by inefficient, state-run enterprises.

Snowy Hydro has been at the heart of this market, with volatility being the key driver of value for our business.

Our unique portfolio of fast start generation assets and large storages allows us to generate at times of peak demand, provide cap contracts insuring retailers against price volatility, and “time-shift” surplus, low price energy to high price/demand periods. We also underpin system security through synchronous generation and strong inertia capability.

Snowy 2.0 is an expansion of what we already do.  It is not new or unique. The concept of expanding our pumped storage capability has been around since the 1960s. The growth of baseload power negated its viability, but the economics are changing rapidly.

As intermittent renewables grow, the market will experience greater volatility and uncertainty. The Australian Energy Market Operator confirms this trend as we move to a lower emissions future.

Snowy Hydro has witnessed this first hand, with increased demand for cap contracts in recent times.  As it’s often said, when the wind doesn’t blow or sun doesn’t shine, how you fill the gaps forms the cornerstone of a secure, reliable and affordable NEM. In fact, filling in gaps has always been a key role of Snowy Hydro. As renewables increase, the need for our services will increase exponentially.

All independent analyses show that large scale storage is paramount to a lower emissions future. Snowy 2.0 will deliver 350,000MWh of storage to consumers at lowest cost. In fact, the project’s economics blow the alternatives out of the water. If Snowy 2.0 wasn’t built, the alternative would be a combination of batteries and open-cycle gas plants, costing at least twice as much and resulting in higher prices for consumers.

Some commentators have mistakenly sought to model Snowy 2.0 on today’s NEM, rather than the NEM we see coming. The future NEM, dominated by renewables, will require significant flexible peaking generation and storage. Snowy 2.0 will come online from 2024 at precisely the right time to fill the gaps and stabilise the market.

Snowy Hydro is already the leading provider of cap contracts. Increased market volatility, together with Snowy 2.0’s unrivalled storage capability, will allow us to expand our product offerings. These include insurance ‘floors’ and ‘collars’ (providing price certainty for wind and solar) and seasonal ‘energy exchange’ products. This will enhance long term energy security.

Snowy Hydro’s ability to provide ancillary services, critical for system security, will also increase to meet the demands of the future NEM.

As for claims that the economics don’t stack up – I refute them categorically.  Snowy 2.0 can be funded off our balance sheet, while delivering a healthy internal rate of return of 8%.

While historically we have not often used our pumping capability, we’re progressively pumping more and will be at capacity when Snowy 2.0 comes online. In fact, our analysis shows that future storage demand will surpass Snowy 2.0’s capacity from 2031, when we can again deliver by expanding the Scheme using the same reservoirs as Snowy 2.0, to benefit future generations.

The scale, complexity and challenging geology of Snowy 2.0 requires a significant investment. Like any major infrastructure project, it is not without risk. To mitigate these risks, we have handpicked a team of world experts as partners on the feasibility study and beyond as we finalise the project’s precise technical requirements.

Finally, to suggest Snowy Hydro isn’t paying for transmission is misleading.  The capital costs for Snowy 2.0 provide for the cost of the project’s transmission connection, that is, the lines connecting our assets to the wider shared network.  The shared transmission network is common infrastructure used by all generators, with Snowy Hydro being only one and in fact the most infrequent user today, given we only generate at peak times.

The transmission network was built decades ago around coal, and the ideal zones for renewables are not in the same locations. The shared network needs a major upgrade to cater for renewables growth as new projects – again one of which is Snowy 2.0 – come online. The suggestion that Snowy Hydro pay for the entirety of these upgrades is misplaced.

At Snowy Hydro, our financial track record speaks for itself. We conduct rigorous forensic analysis of all investment opportunities and apply stringent hurdles to ensure the best outcomes for our shareholders. Our independent Board exercises the highest levels of scrutiny in assessing investment decisions.

Our feasibility study demonstrated the sound economics of Snowy 2.0.  As we move towards a final investment decision late this year, our discipline will not waver. Our shareholders, and the energy industry, would expect nothing less.

News

Snowy’s highest power station to reach new heights

10/11/2017

Snowy Hydro, working with Andritz Hydro, is about to commence detailed design work for the replacement of the generator in unit one at Guthega Power Station. After more than 60 years of reliable operation this is the first time any generator across the Snowy Scheme has needed to be replaced.

The generator is connected to the turbine and is the part of the machine that converts the power produced by the spinning turbine into electrical energy for consumers. This project is certainly not your average flat pack. The generator will be assembled from thousands of individual pieces and weighing in at 230 tonnes it will need specialised trucks and trailers to get it on site.

Paul Broad, CEO of Snowy Hydro said this $13 million replacement project was the latest example of the company’s strategic investment in the Snowy Scheme.

“It’s not just Guthega Power Station we’re investing in. We have a thorough asset maintenance and modernisation program that upgrades our power stations and the water infrastructure across the Snowy Scheme.

“We’ve undertaken asset improvements that have actually increased the Scheme’s total generation capacity”.

“We’ve also implemented new technologies that allow us to start our generators faster, respond more quickly to changing market conditions and run our power stations remotely through our central control centre”, Mr Broad said.

The new generator will have a higher design rating (40 megawatts) than the existing unit to match the previously upgraded turbine. Every generator across the Scheme can be used independently and therefore each unit wears differently and is replaced based on its condition rather than age.

After undertaking a competitive tender process Snowy Hydro appointed Andritz Hydro to undertake the design, fabrication, install and commissioning of the generator. Andritz Hydro is a global supplier of electromechanical systems and services for hydropower plants and hydraulic power generation. The detailed design process and unit fabrication is expected to take around 12 months.

The Guthega Power Station houses two 30MW hydro-electric generating units and was the first power station built with construction starting in 1951. It’s on the Snowy River, just 12 kilometres from the summit of Mount Kosciuszko and sitting at 1330 metres above sea level, it is the highest power station in the Snowy Scheme.

Media contact: Stephanie McKew – General Manager, Corporate Affairs & Media 0409 298 757

News

Snowy Hydro briefs industry on Snowy 2.0

15/06/2017

Snowy Hydro Limited (SHL) held an industry briefing in Sydney today for a large group of representatives of leading construction and engineering firms on the Snowy 2.0 pumped hydro project.

The industry briefing was told that SHL’s feasibility study was in full swing, with plans in place for geotechnical tests to begin shortly. While it was still early days, the company felt optimistic about the viability of the project and all going well, construction could begin in 2018, subject to the outcomes of the feasibility study.

SHL CEO Paul Broad told the briefing that the Finkel Review’s recommendations of a new Clean Energy Target and Regional Security Obligation offered major opportunities for the Snowy 2.0 pumped hydro project.

Mr Broad said there would be a strong increase in the use of intermittent power in the market – wind and solar – that would require reliable and rapid back-up supply of renewable energy. Snowy 2.0 would help further strengthen the critical role that SHL currently plays in ensuring system security and reliability.

“We are already the largest and most reliable battery storage option for the National Electricity Market. With Snowy 2.0, we will be able to provide an extra 2,000 MW of new renewable capacity and provide increased energy security and stability. This will be crucial as Australia transitions to a low-emissions economy over the next 20 to 30 years,” Mr Broad said.

Mr Broad said the importance of the Snowy 2.0 project was apparent from the participation today by key representatives of leading global and local civil engineering, tunnelling and electrical experts.

“There was strong support for the project from the leading industry players who attended the briefing today, and who are keen to partner with us to deliver this exciting project.There has been nothing like this in Australia since Snowy was completed in the 1970s and we want the best people available to assist us,” Mr Broad said.

Snowy Hydro advised industry that it would be undertaking a three-stage process to procure two packages of services, with one covering civil works and the other electrical/mechanical works.
Expressions of Interest would be called for shortly, with selected suppliers to be shortlisted for an Early Contractor Consultation Phase by late July.

Snowy Hydro Media Enquiries:
Simon Troeth

0439 300 335

e: Simon.Troeth@newgatecomms.com.au

News

Snowy Hydro and SMEC reunite for Snowy 2.0

11/05/2017

Snowy Hydro Limited and the Snowy Mountains Engineering Corporation Australia (SMEC) will join forces once again, this time to carry out the feasibility study into the potential expansion of the Snowy Scheme’s pumped hydro storage capability.

Snowy Hydro and SMEC have a long association and worked together from the earliest days to develop the iconic 4,100 megawatt (MW) Snowy Mountains Hydro-Electric Scheme under the auspices of the Snowy Mountains Hydro-Electric Authority, established in 1949.

Selected through a tender competitive process which attracted interest from a field of world-class engineering firms, SMEC has now been appointed as the lead consultant engineer for the feasibility study into the first major expansion of the Scheme since construction days.

Snowy Hydro CEO Paul Broad said “SMEC was the obvious choice to partner with us on the study, given we share the same DNA. It really is a case of getting the band back together. The task now will be to bring together our best and brightest to revisit some of the visionary proposals developed over many years by the talented men and women who built the Scheme.”

The feasibility study will first review existing proposals to expand pumped hydro storage on the Snowy Scheme, many of which have existed since the 1960s. Under the most prospective proposal, up to 2,000 MW of hydro-electric energy could be added to the grid to act as rapid response back-up during periods of high demand and fill the gaps in energy supply caused by the growth in intermittent renewables and the exit of thermal baseload power.

The pumped hydro capability means the water utilised for electricity generation can be recycled to provide supply when it’s needed most, with no impact on the Scheme’s ability to continue to supply valuable water to irrigators in the food bowl of south-eastern Australia.

“This project has the potential to deliver one of the largest pumped hydro schemes in the world and underscores the importance of the Scheme’s existing role as the battery of the National Electricity Market.”

“While it has long been an Australian engineering icon, the importance of the Snowy Scheme’s role as the battery storage of the NEM will only become more critical as we move to a low carbon economy. The reliable, fast-start Scheme can help to responsibly manage the exit of baseload thermal power and the rise of intermittent renewables.

“As we move through the feasibility study phase, we will gain greater clarity around the technical and engineering requirements for the expansion as well as costs and timeframes for its construction”, Mr Broad said.

SMEC CEO Andy Goodwin said “Snowy Mountains are part of our namesake and the backbone of our heritage, so the chance to be involved in this project again is a unique ‘twice-in-a-lifetime’ opportunity, both for our organisation and those engineers who worked on the original scheme.

The Snowy 2.0 project will provide us with new design challenges from its predecessor and we’ve created a team of our most experienced specialists to deliver the feasibility stage.

We’re honoured to be part of the project and looking forward to resuming our presence within the Cooma community again.”

SMEC’s appointment will deliver significant benefits to the local Snowy Mountains community. As part of its commitment to this project, SMEC will reopen its previous offices in Cooma, which will see more than 30 staff permanently based in the town.

News

Expanding Pumped Hydro Storage

15/03/2017

The iconic Snowy Scheme’s role as the battery of the National Electricity Market (NEM) could be supercharged as part of plans to expand the pumped hydro storage capability within the Scheme.
Snowy Hydro, working with the Australian Renewable Energy Agency (ARENA), will shortly commence a feasibility study into several sites across the Scheme which could support new large-scale, pumped hydro-electric energy storage.

The proposal could add up to 2000 megawatts of new renewable energy to the NEM and act as rapid response back-up to fill the gaps in energy supply caused by intermittent renewables and generator outages.

The pumped hydro capability means the water utilised for electricity generation can be recycled to give continuous supply when it’s needed most, with no impact on the Scheme’s ability to continue to supply valuable water to irrigators in the food bowl of Australia.

Snowy Hydro Managing Director and CEO, Paul Broad, said the proposal has the potential to deliver an innovative clean-energy solution to the critical security and supply issues in the NEM, helping to take the pressure off power prices for consumers and businesses, while reducing emissions.

“From our earliest days, Snowy Hydro has been moving water to support the irrigators in the food bowl of Australia and generating electricity during peak demands to keep the lights on in the NEM,” Mr Broad, said.

“The creators of the Scheme foresaw a time when its capabilities may need to be expanded and, as a result, there are very real options in-built in the Scheme’s design to extract more value to the community.

“At a time when the security and stability of the NEM, energy affordability and emissions reduction are under scrutiny, there is an opportunity to leverage the iconic Snowy Scheme to once again deliver an energy solution for the country.

“By supercharging the utilisation of the Snowy Scheme’s storage, we can help the NEM best cope with peak demand through new supply at a time when baseload energy is exiting the market and renewables with intermittent generation are not providing the reliable capacity needed by Australian businesses and consumers.

“While the feasibility study is the first step, this project could once again bring together the world’s best and brightest engineers and technicians to enhance a national icon.”

The Scheme itself already operates as the ‘battery storage’ of the NEM, utilising dams to store energy in the form of water that can be delivered to the grid within minutes through the fast start capabilities of the Scheme’s nine power stations.

There are a number of sites across the Scheme capable of supercharging Snowy Hydro’s storage capability – providing additional generation capacity, helping the security and stability of the NEM, and with pumping capability to maximise the water resources and existing dam storage in the Scheme.  The most prospective project could increase the capacity of the 4100 megawatt Snowy Scheme by 50 per cent and result in a power station at least as powerful as Snowy Hydro’s 1800 megawatt Tumut 3 Power Station, which already includes pumped hydro capability.

The feasibility study will explore the physical, technical and environmental requirements for expansion of pumped hydro at sites across the Scheme, the potential output of new pumped hydro facilities and the costs associated with each project.

The Australian Government, through ARENA, is negotiating grant funding to support the Snowy Hydro feasibility work as part of ARENA’s ongoing efforts to accelerate Australia’s shift to renewable energy.

ARENA CEO Ivor Frischknecht said expanding the Snowy Scheme could help to deliver ARENA’s goal of ensuring a smooth transition to a renewable energy future.

“Australia’s energy system is rapidly evolving and ARENA is funding solutions like pumped hydro storage that provide consumers with more affordable and reliable renewable energy,” Mr Frischknecht said.

“Pumped hydro is economically viable right now and supports our grids by providing long term energy storage capacity that’s available on demand.”

News

Keeping the lights on

22/12/2016

CEO, Paul Broad, weighs in on the recent blackouts in South Australia and the implications for the National Electricity Market…

Australia has been blessed with relatively cheap energy and we have grown as a nation as a result of it. A key part of that growth has been having enormous renewable resources such as Snowy and Hydro Tasmania, which have played an integral part in keeping the lights on with our reliable, fast-start responsiveness to the market. Equally so, in Snowy’s case, we provide more than 32 per cent of all renewable energy that is produced in this country. This clean, efficient and renewable energy continues to help light up homes and businesses in the Eastern states including South Australia and Tasmania.

The Snowy Scheme was visionary in its day and is an important part of our nation’s history. It was an amazing engineering success to make true the vision to collect and move water east to west and into the growing food bowl of Australia and to pay for it through electricity generation. This is still the vision we have today, but we have evolved over the years through innovation and diversification, and have gone beyond what our founding fathers had envisaged.

The modern Snowy Hydro operates a complex, integrated end to end energy business, which we are immensely proud of.

We continue to be the proud custodians of water that is collectively owned by the people of NSW and Victoria, and manage it under a strict Water Licence regime. Water in the Scheme plays a critical role as it not only underwrites the production of agricultural products worth around $3 billion each year, but through the Water Licence it also assists with counteracting the effects of severe droughts and improving productivity in the Murray Darling Basin. We are the leading provider of peak, renewable energy in the country. We also provide price risk management products for wholesale customers in the NEM and through Red Energy and Lumo, we deliver electricity and gas to homes and businesses. Finally, our ability to utilise the Scheme’s large, reliable, flexible and fast-start capability to our advantage also means that we play a critical role in keeping the lights on and are best placed to provide black start capability. It is disappointing that some regulators do not see it that way, given we are not currently part of AEMO’s contracted black-start arrangements, despite previously providing the service for many years and dedicating resources to respond quickly and safely.

On the recent statewide blackout in South Australia, I cannot help but reflect that if South Australia was fully interconnected with NSW, then the lights would have never gone out. The NEM has delivered very robust and efficient outcomes and, if left to its own devices, can deliver affordable energy to consumers drawing on the most efficient and effective means of generation to meet demand. But regulatory intervention and second best policy choices can often create problems, as they are now, by creating distortions in the market for which end-users ultimately pay the price. This is not the time to be picking winners or imposing solutions, but rather a time to trust the market to do what it does best. A more sensible approach could ensure we maintain a secure, reliable, affordable energy system while at the same time reducing emissions through a market based mechanism.

At Snowy we recognised that the uncertainty put into the NEM by knee-jerk reactions will be a challenge for the future and that Snowy will play integral role in filling in the gaps when the wind is not blowing and the sun is not shining, particularly in NSW. In the wake of South Australia, we are urging governments and regulators to ensure that there are proven, reliable ‘black-start’ arrangements in place across the country to both keep the lights on and to ensure they are turned back on quickly in the event that things go wrong.

Snowy has always played a critical role in keeping the lights on, from our earliest days. Our contribution to the nation since construction began in 1949 was formally recognised in October when the Commonwealth Government added the Snowy Scheme to the National Heritage List. The addition to the National Heritage List is recognition of our important place in Australia’s history and the contribution we have made to the social and economic fabric of the country. It’s an important nod to our past and helps new generations to appreciate the sacrifice and skill of the many thousands of Australians and new arrivals who helped build the Snowy Scheme. Importantly, the listing does not impact on our important operations nor on our ability to operate, modernise and upgrade the Scheme for the benefit of future generations.

As 2016 draws to a close, at Snowy Hydro we have had another successful year across both our retail and generation businesses. This time last year we were reflecting on the contribution made by the expansion of our retail energy business (with the acquisition of Lumo and Direct Connect) and the addition of the gas fired power station at Colongra to our generation portfolio. Those acquisitions (in late 2014 and early 2015) have paid off through their contribution to our financial performance and management of our exposure to transmission risk, should our Snowy Scheme assets become constrained if lines went down into Sydney or Victoria. 2016 has also been about consolidation and growth. For the first time in the company’s history we made more than $2 billion in revenue, we recorded more than $500 million pre-tax profit and hit the significant milestone of more than one million retail customers.

Finally, as always, I would like to thank you for your support for Snowy Hydro this year. We look forward to sharing more news about our business in 2017. On behalf of everyone who works for Snowy Hydro, I wish you a safe, prosperous and happy festive season.

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