Snowy 2.0 is a major pumped-hydro expansion of the existing Snowy Scheme, and a complex engineering project. These are some of the most common questions.
Why do we need Snowy 2.0?
Snowy 2.0 will underpin Australia’s transition to a renewable energy future at the lowest cost to consumers.
As the transition to renewables accelerates, reliable and stable energy supply cannot be achieved without large-scale energy storage and on-demand generation. Snowy 2.0 will provide this large‐scale energy storage, along with quick‐start electricity generation at critical times of peak demand when energy supply is constrained, and at times when intermittent renewable energy output is low.
It has the capability to run for more than seven days continuously before it needs to be ‘recharged’. By comparison, small and large-scale batteries have limited storage (typically one to four hours). Snowy 2.0 also has a 100-year design life.
Snowy 2.0 has clear, natural advantages.
It leverages the existing Snowy Scheme, which means it does not require new dams. It is a closed loop system that ‘recycles’ water and is centrally located between Sydney and Melbourne.
What’s the business case for Snowy 2.0?
In 2017 Snowy Hydro undertook a comprehensive Feasibility Study for the project and prepared a Final Investment Decision (FID) report in 2018. Extensive market modelling and economic analysis was conducted for FID. The 2018 FID report and the two independent energy market reports undertaken by Marsden Jacob and Associates are available here.
Based on these exhaustive, detailed studies, it was agreed the Snowy 2.0 project met Snowy Hydro’s stringent investment criteria. The internal rate of return (IRR) for the project has been modelled at more than 8%, which is strong for this type of project.
Standard & Poor’s, the global ratings agency, has acknowledged the strength of Snowy 2.0 and has had full access to the project’s business case and economic modelling.
The Snowy 2.0 project is largely funded from Snowy Hydro’s balance sheet. The company has secured $3.5 billion in corporate debt facilities from a range of banks. This program was twice over-subscribed and carries no recourse to the government or other Snowy assets. The Australian government, as Shareholder, has provided $1.38 billion in equity.
Why is Snowy 2.0’s storage important?
As Australia’s largest battery and storage for renewable energy, Snowy 2.0 will play a lead role in Australia’s energy transition. The future National Electricity Market (NEM) will require a huge amount of storage capacity (far more than just Snowy 2.0), which will be provided from a mix of projects and storage options.
Snowy 2.0’s size and scale (350,000MWh or 175 hours of operation) provides longer-term energy storage that can underpin the stability and reliability of the NEM. Domestic and commercial batteries, small-scale and large-scale hydro projects and demand management will also play a role. Batteries provide storage over short time intervals (several minutes up to a few hours),
An example of when high amounts of storage would be needed include when there are wind or solar ‘droughts’. In South Australia across the financial years of 2015 and 2016, there was a deficit between average wind production and minimum wind production over a two-week period of 60GWh. If a 100MW battery was fully charged at 0.129 GWh, it would only be able to cover 0.2% (or a few hours) of this two-week energy deficit. Snowy 2.0, however, could generate energy to fill the gaps throughout the two-week period without needing to recharge.
Is Snowy 2.0 the cheapest way to achieve large-scale storage and generation?
Yes. modelling of the NEM conducted by independent expert Marsden Jacob Associates proves that Snowy 2.0 is the cheapest possible option to provide firming capacity and large-scale storage in the NEM. The NEM needs dispatchable generation and large-scale storage (according to the Australian Energy Market Operator, the NEM will need the equivalent of eight Snowy 2.0-sized projects) at the lowest cost. Snowy 2.0 is the most cost-effective option to meet that need.
- Batteries provide very short-term and localised storage, they cannot do the job of Snowy 2.0 as they can neither compete on price or scale.
- Batteries, on a $/megawatt hour storage basis, are at least 60 times more expensive than 2.0, will be replaced many times within Snowy 2.0’s lifetime (a 100-year design life). Matching the storage of Snowy 2.0 would necessitate 2,700 SA big batteries.
- Gas plants provide firming capacity, but cannot provide storage.
- Snowy 2.0 provides both generation capacity and large-scale storage, and thereby underpins cheaper NEM prices by capping price peaks and bringing new wind and solar into the system by providing ‘firming’ which will increase overall generation supply.
How will Snowy 2.0 lower energy prices?
Snowy 2.0 will provide both capacity (the ability to provide on-demand energy) and bulk energy storage for extended periods. This underpins cheaper NEM prices by capping price peaks and will underpin and support new wind and solar into the system by providing ‘firming’.
Adding supply to the NEM pushes prices down because there is more energy and capacity to satisfy demand.
At periods of high wind and solar generation, Snowy 2.0 will use cheap surplus energy to pump water to the upper storage. Much of this energy will be sourced from offtake contracts which Snowy Hydro has signed for more than 1,000MW from 10 new wind and solar projects. These new projects will also bring much needed extra energy supply to the market.
At periods of high demand, Snowy 2.0 will generate using this stored water putting downward pressure on prices.
How will Snowy 2.0 support renewables and what will it use for pumping?
When the wind blows and the sun shines, and NEM customer demand is low, spot prices will be low and Snowy Hydro will pump. When the wind and solar resource is low, and demand is high, the NEM price will be higher and Snowy Hydro will generate and displace coal-fired electricity in the process. Snowy Hydro is already doing this on a regular basis with its pumped-hydro capabilities at Tumut 3 Power Station.
Snowy 2.0, with its capacity and long-term resource storage, is also the only means that has been identified to economically bring another several thousand megawatts of wind and solar energy into the market. Independent expert Marsden Jacob Associates’ modelling has proven beyond doubt that Snowy 2.0 is the cheapest possible option for the NEM to gain access to both the necessary firm capacity and large-scale storage within a single project.
Developers of wind/solar plants require offtake contracts to make their entry into the NEM feasible, by underpinning their financial viability and firming up their physical output. Snowy Hydro is already firming variable renewable energy and providing the large-scale storage the NEM needs. Snowy Hydro has signed offtake contracts for more than 1,000MW with 10 new wind and solar projects.
Do you use more energy to pump than you make when you generate?
Yes, as with any form of energy storage, there is an efficiency loss when water is pumped. However, pumping water gives us the ability to absorb energy when it’s not needed, store the water, and release it to generate energy when required.
For example, solar generation is at its peak during the middle of the day, when many people are at work or school. Snowy 2.0 could use this solar energy to pump water so that when the sun sets and people get home, we can generate energy to meet the spike in demand that occurs in the early evening.
What workforce and business opportunities will Snowy 2.0 create?
Snowy 2.0 will create about 4,000 jobs across the life of the project. There will also be thousands of jobs generated throughout supply chains and support services.
Future Generation, a joint venture between Australian company Clough, Webuild (formerly Salini Impregilo) and Lane, has been appointed as the Snowy 2.0 principal contractor and is responsible for building Snowy 2.0 on half of Snowy Hydro as well as hiring the project workforce and sub-contractors.
The FGJV project website has information for potential Snowy 2.0 suppliers, along with current job vacancies listed on the Careers Centre portal and an option to register your interest in working on the project.
What are the environmental impacts of the Snowy 2.0 project?
For almost 70 years Snowy Hydro has responsibly operated the Snowy Scheme in Kosciuszko National Park (KNP). We are committed to avoiding and minimising potential impacts from Snowy 2.0, as we do for our existing business. The park is our backyard and we want to look after it.
The total area temporarily impacted by construction is less than 0.1% of KNP and post-construction, the operational footprint of Snowy 2.0 is less than 0.01% of the total size of the park.
Unavoidable project impacts will be offset and construction areas rehabilitated, in accordance with the approvals for the project. Around $100 million dollars will be spent by Snowy Hydro on the offsets program for KNP. The majority of these funds will go directly to NPWS. These funds are targeted to directly contribute to the ongoing and long-term conservation and recreational use of the park.
Will Snowy 2.0 use or need more water?
No. Snowy 2.0 is a pumped-hydro project. This means it is a closed loop system that effectively recycles water before releasing it downstream.
More broadly, the Snowy Scheme operates under a strict water licence issued by the NSW Government. Snowy 2.0 will not in any way affect Snowy Hydro’s continued compliance with the water licence.
There will be no change to Snowy Hydro’s water release obligations from both the Murray and Tumut developments, or to environmental release obligations. This means Snowy 2.0 will not have any impact on downstream water users, irrigators or on environmental flows.
Currently Snowy Hydro is permitted to operate Tantangara Reservoir between the minimum operating level and full supply level. This won’t change with Snowy 2.0.
How is Snowy 2.0 protecting fish species?
Snowy Hydro has been operating responsibly in Kosciuszko National Park for more than 70 years.
During the environmental assessment process for Snowy 2.0, Snowy Hydro worked with a number of independent scientific and technical experts. They determined that while pest fish could potentially be moved during operations from Talbingo to Tantangara Reservoir, the risk of pest fish establishing a new population or getting further into the rivers where threatened fish are present, is considered very unlikely.
In order for there to be any impacts to threatened fish as a result of the operation of Snowy 2.0, pest fish would have to overcome significant obstacles, including all of the following:
- Pest fish and their eggs in the Talbingo Reservoir would need to find their way into the tunnel intake, which is deep in the reservoir; and then
- they would need to survive significant pressure, compression, decompression and the blade strike from the Snowy 2.0 turbines spinning at 500rpm, and arrive in Tantangara Reservoir alive; and then
- transfer in sufficient numbers and/or be able to reproduce in Tantangara Reservoir where there is less than 20% chance of survival as the habitat is considered highly unsuitable for the pest fish; and then
- would need to get through the 0.5mm fine mesh screens designed to stop all life stages (eggs) that will be installed at the outlets from Tantangara Reservoir. This world-class barrier technology will cost at least $25 million.
Although no impact is expected on the threatened species, Snowy Hydro is investing $5 million in a captive breeding and species recovery program for the Macquarie Perch and for Stocky Galaxias. Additionally, a special weir designed with assistance of threatened species experts will be built on Tantangara Creek to protect the Stocky Galaxias.
How will excavated rock be managed?
Snowy Hydro has a detailed strategy for management of excavated rock from the Snowy 2.0 project which aims to maximise the beneficial reuse with material that can be reused. Material that cannot be reused will be carefully placed in allocated areas beside Tantangara or Talbingo dams, or placed on land to be used to create new recreational landforms for enjoyment by the public at Lobs Hole, or fully rehabilitated.
Are transmission upgrades needed for Snowy 2.0?
The existing transmission network was built many decades ago to transfer the energy from coal-fired plants to the market. Australia’s energy system is rapidly changing. New transmission routes are needed urgently to connect new generation through renewable energy zones and energy storage projects that are geographically dispersed right across the NEM.
The Australian Energy Market Operator (AEMO) released an inaugural Integrated System Plan (ISP) in 2018 which outlined the priority projects to meet the NEM’s critical need for transmission upgrades. The 2020 ISP was released in July.
AEMO’s ISP supports strategic storage initiatives such as Snowy 2.0, which is required to firm up intermittent renewables in NSW and Victoria, and indirectly, South Australia. The proposed upgrades to the grid are to the shared transmission network that a range of renewable energy generation and storage projects will connect to as they come online.