Snowy 2.0's revenue streams
There are four major revenue streams for Snowy 2.0, from storage products, capacity products, firming products and ancillary services, as explained below.
Buying energy at low prices and selling at higher prices. Snowy Hydro will use the price differential to ‘time shift’ and store energy. Snowy 2.0’s size and scale give us up to 175 hours of energy storage at full capacity, or 350,000 MWh.
The modelling by MJA assumes the following:
- Flat Price ($70/MWh - 2019 to $85/MWh - 2030)
- Average Peak-to-off/peak spread (all price periods)
- 2025: $85/MWh (off-peak $50/MWh, peak $135/MWh)
- 2030: $30 (off-peak $75/MWh, peak $105/MWh)
- Generating capacity factor (6 hrs / working week days i.e. 17% p.a.)
It’s important to note that Snowy 2.0’s dispatch-weighted average pumping and generating prices vary significantly over time, as operations are optimised in each year.
The graph below (Source data - MJA report NEM Outlook and Snowy 2.0, Jan 2017) shows when fully commissioned in 2025, Snowy 2.0 acts to REDUCE the peak to off-peak spread.
Selling ‘insurance’ to provide price certainty to market participants and protecting them from price shocks. For these contracts, premiums are paid in advance ($ per MW per hour).
- Capacity Price
- $11.70 per MW per hour (until July 2021)
- $13.40 per MW per hour (with 5 min settlement in July 2021)
For capacity pricing, Snowy 2.0 is at least 30% cheaper than the indicative capacity price required for reciprocating gas engines to be economic.
- Contracted portion:
- 2025: 600 MW
- 2032: 2,000 MW
Graph below: source data - MJA report NEM Outlook and Snowy 2.0.
Contracts with intermittent renewable generators where Snowy generates to make renewables both physically reliable and financially viable, so they can commit to supply contracts.
Note: 1MW of hydro can “firm up” more than 1MW of wind and solar.
This graph below (Source: AEMO) refers to the South Australian experience, which shows that Snowy 2.0 would pump using the wind in the early hours of the morning and then generate when the wind drops off during the day and into the early evening.
This graph, again referencing the South Australian experience (Source: AEMO), shows that Snowy 2.0 could pump using the solar generated in the middle of the day and generate before sunrise and after sunset. The dispatchability of hydro power also means it can be switched on/off to cover the cloudy periods.
For Snowy Hydro’s customers, we are able to offer contracts that take a non-firm, intermittent energy source such as solar, and convert it into a “firm” source of electricity to match their demand, as shown in the graphs below:
In these graphs, Snowy Hydro provides the “Residual - Solar” supply. Our modelling shows that the pricing of a 100% renewable energy firming product is, depending on the profile of a customer’s load, competitive with current market pricing for non-renewable energy.
Wind and Solar droughts
This graph (Source: AEMO data) shows the deficit in a low-wind production period over two weeks. Snowy 2.0 will future-proof the NEM by enabling central, cheap, huge energy storage to address the risk of wind and solar droughts.
Ancillary services to stabilise the grid and provide system security, such as load following frequency control, voltage control, inertia etc (providing system security).
Find out more about the Snowy 2.0 economics.