RESPONSE TO INCORRECT CLAIMS
Impacts of Snowy 2.0 on threatened fish species
The claim about Snowy 2.0’s impact on threatened fish species is incorrect. 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 to determine 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.
Snowy 2.0’s purpose could be met more cheaply from other sources
This is incorrect. The forensic NEM modelling conducted by independent expert Marsden Jacob Associates over a period of two years 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. Snowy 2.0 is an economic project precisely because it is cheaper, in providing its suite of different products to the NEM, than the alternative sources to supply each of those products. The NEM needs dispatchable generation and large-scale storage (according to AEMO, the NEM will need the equivalent of eight times Snowy 2.0) at the lowest cost. Snowy 2.0 is the most cost effective option to meet that need.
- Batteries, on a $/MWh 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) and are small scale in the context of storing bulk energy in the NEM. Matching the storage of Snowy 2.0 would necessitate 2,700 SA big batteries.
- Gas plants provide MW of capacity, but cannot provide storage.
- Snowy 2.0 provides both capacity and storage, and thereby underpins cheaper NEM prices by capping price peaks and bringing new wind and solar into the system by providing ‘firming’.
Snowy 2.0 will cost five times more than the then Prime Minister Malcolm Turnbull said.?
Dr Mountain is comparing the original figure quoted by the then Prime Minister when announcing that ARENA was funding a feasibility study into Snowy 2.0. Firstly, it is misleading to refer back to the estimate quoted by the Prime Minister, which was simply a preliminary estimate made in relation to the project’s pre-feasibility stage. Following that announcement, Snowy Hydro undertook the feasibility study and published the outcomes of that study (along with thousands of pages of supporting material) in December 2017. Any assessment of the ongoing performance of the project should properly be made against the feasibility study, which included a cost estimate (which is public and published on Snowy Hydro’s website) of $3.8-4.5 billion (in December 2017 dollars). The capital cost of Snowy 2.0 remains consistent with that estimate. Secondly, Dr Mountain has included the cost of augmentation to the transmission networks between Snowy 2.0 and Sydney and Melbourne. No other project of this kind is valued on this basis. It is incorrect and misleading to include those costs for the following reasons:
- There is a clear separation in the National Electricity Rules between generation and transmission, and Snowy Hydro does not and cannot invest in transmission network augmentation.
- Transmission network investments are undertaken by Transmission Network Service Providers, subject to the NER, and will only be undertaken if their market benefit exceeds their cost.
- The relevant augmentation projects, HumeLink and KerangLink, are currently being pursued by the respective TNSPs (TransGrid and AEMO). Both were identified in AEMO’s Integrated System Plan published in July 2018 as being required for the future needs of the NEM (which include increased interconnection, integration of Renewable Energy Zones, and access to grid scale storage).
- Snowy Hydro has been clear from the outset that transmission augmentation is required to support Snowy 2.0, and we support HumeLink and KerangLink, but they are not – and cannot be – our projects and accordingly cannot be factored into Snowy 2.0’s capital cost.
Capability nowhere near Snowy’s claims
Snowy 2.0 will add 2,000MW and 350,000 MWh of pumped hydro storage. The 2,000MW of capacity, and the 350,000MWh stored in Tantangara Reservoir, individually and together constitute the two key capabilities of Snowy 2.0. While Dr Mountain implicitly accepts the 2,000MW capacity, he ignores the fact that this is one of Snowy 2.0’s critical capabilities. It is critical for keeping the lights on in the NEM. 2,000MW of reliable, on-call capacity backs several of Snowy 2.0’s revenue sources, including the $300/MWh cap contracts that have been a mainstay of Snowy Hydro’s role in the market since the beginning of the NEM. This “capacity value” is simply ignored in Dr Mountain’s “analysis”. Dr Mountain claims his “analysis” demonstrates that Snowy 2.0 will only be capable of generating “less than half” the 350,000MWh. While Dr Mountain appears to concede that Tantangara Dam has the storage capacity to provide 350,000MWh, using the Snowy 2.0 generating assets, he claims that downstream hydraulic constraints in Talbingo, Jounama and Blowering dams limit that capacity. This is quite simply wrong. Dr Mountain has made the following errors:
- Because it has a much higher elevation, Snowy 2.0 passes through water at a much lower rate when operating at full capacity than Tumut 3 Power Station (T3). In fact, one third of T3, that is 2 of the 6 units, is able to pass all the water that Snowy 2.0 passes when generating at its full 2000 MW capacity. Given this simple fact, Snowy 2.0’s ability to generate at full capacity at 2,000MW for 175 hours will never be constrained by the operating level of Talbingo Dam because Snowy Hydro is able to pass water out of Talbingo Dam much more quickly than it flows into it.
- Talbingo Dam level does not “almost always” operate at close to full as Dr Mountain claims. The ‘active storage’ of Talbingo Dam is only the top 9m of a dam that is up to 140m deep in places. This 9m constitutes the 160GL of ‘active storage’. Accordingly, if the water level in Talbingo is only 4m below Full Supply Level, and appears close to full, its active storage is actually half-empty.
- The active storage in Talbingo is also augmented by the 30GL active storage in Jounama (from which Snowy Hydro can also pump water), which means there is 190GL of active storage in the lower dams, which is 80% of the 240GL storage of Tantangara. So as a closed cycle system, Snowy 2.0 can operate at 80% of its full capacity (not less than 50% as Dr Mountain claims).
- However, of course, Snowy 2.0 will not operate in isolation and one of the significant advantages of adding Snowy 2.0 to the existing Snowy Scheme is that Tantangara and Talbingo dams both operate as part of an integrated portfolio of 16 dams, with water capable of being stored in multiple places throughout the Scheme. In particular, both are connected to Eucumbene Dam, which has 4,400GL of storage capacity. There are in fact three ways to recharge Tantangara Dam: natural inflows, which average 294GL/annum; water passed into Talbingo from Snowy 2.0 and then pumped back up (190GL); and water passed into Talbingo from Eucumbene through the existing Tumut 1 and Tumut 2 power stations. Accordingly, there is no question that Tantangara can be fully recharged.
Snowy 2.0 is a drain on public purse
The claim is incorrect on many levels. At the most basic level, Snowy 2.0 is an earnings-accretive project which will add to the overall earnings of Snowy Hydro, resulting in higher dividends being paid to Snowy Hydro’s shareholder, the Commonwealth Government. Snowy 2.0’s IRR was projected to be above 8% at FID, exceeding Snowy Hydro’s hurdle rate. Since that time, every material assumption has trended positively for Snowy Hydro, implying a higher IRR for Snowy 2.0. It will therefore result in a material uplift in the enterprise value of Snowy Hydro, as confirmed by the Snowy Hydro Board, Macquarie Capital and the Shareholder. The project’s IRR information and other economic modelling has been publicly available for nine months. In addition to generating a net benefit to the public purse in its own right, Snowy 2.0 will become a major benefactor to the public due to its impact on consumer bills. Put simply, wind and solar energy are cheap, and getting cheaper. To gain the full benefit of this, pumped storage hydro provides the “firming” capacity and the electricity storage to harness this cheap energy to bring customer bills down. Dr Mountain ignores this benefit, yet it will be instrumental in adding to the reliability and affordability of electricity to consumers in the NEM.
There has been no credible market assessment and this alone represents an unjustified risk.
This statement is incorrect. The Snowy Hydro website provides summaries of extensive economic and NEM analysis conducted over a period of two years. Snowy 2.0 has progressed through its initial assessment, a Feasibility Study in 2017 and a Final Investment Decision in 2018. This analysis includes forensic, industry-leading NEM modelling by independent expert Marsden Jacob Associates, selected by Snowy Hydro to perform the task of modelling the future NEM and the market outcomes that underpin Snowy 2.0’s (and Snowy Hydro’s) revenue streams.
An investment bank should be retained to estimate how much Snowy 2.0 would be worth if it was built.
An investment bank, Macquarie Capital, has been employed by Snowy Hydro since 2017 to provide independent opinions to the Company and Board. Macquarie has had full and unfettered access to all relevant project and financial information, including the commercially sensitive information that cannot be publicly released. The question of “how much will Snowy 2.0 be worth” has been answered comprehensively and using numerous sensitivities and scenarios. These are of course commercial-in-confidence, but have been considered by Standard & Poor’s as part of its assessment of Snowy Hydro’s credit rating (which was subsequently upgraded from BBB+ to A-) and by Snowy Hydro’s banks.
The project will have a devastating impact on Kosciuszko National Park
The construction footprint for the project is 0.1% of Kosciuszko National Park (KNP). The operational footprint, following extensive site rehabilitation, is 0.01%, or about 90ha. The NPA’s statement that Snowy 2.0’s ‘construction “project area” of 250,000ha encompasses one-third of KNP is false and misleading.
Snowy Hydro’s approach has always been to avoid and minimise project impacts as much as possible. Where residual impacts cannot be avoided, they will be offset. Since the Main Works Environmental Impact Statement was released, Snowy Hydro has refined the overall construction disturbance area considerably so that it is up to 60% less than in the EIS. This was documented in the Response to Submissions earlier this year.
Snowy Hydro will also provide offsets for any unavoidable impacts, as well as rehabilitation of the site. Snowy Hydro is also pushing for these funds to be directly invested in KNP. If the NSW Government decides to do so, it will make a huge difference to the KNP’s recovery, especially following the January bushfires.
Snowy 2.0 supports coal or will pump with coal and increase emissions
The reality of how Snowy 2.0 will operate is the opposite of the NPA’s claim. When the wind blows and the sun shines, and NEM customer demand is low, NEM 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 over a period of two years 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 in the last 18 months.
Snowy 2.0 will push up energy prices
Snowy 2.0 will provide both capacity (the ability to provide instantaneous MW) and storage (the ability to store GWh of bulk energy for extended periods), and thereby underpins cheaper NEM prices by capping price peaks and bringing new wind and solar into the system by providing ‘firming’.
The NPA’s claim is at odds with the commercial logic by which the NEM, and any other open market, operates in accordance with basic economic fundamentals. Adding supply to the NEM pushes prices down, as it does in any competitive market.
Given any level of demand, subtracting supply pushes prices up. This is what happened when Hazelwood Power Station closed. Prices went through the roof. Adding supply, like Snowy 2.0, pushes prices down because there is more energy and capacity to satisfy demand.
At periods of high wind and solar generation and low NEM demand (these two factors are, unfortunately, highly correlated), 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 in the last 18 months.
At periods of high demand and high prices, Snowy 2.0 will generate using this stored water, and it will displace generation from coal plants that are trying to access those same prices.
The Snowy 2.0 project is inefficient
All pump-storage hydro projects, and indeed any form of battery, have a degree of efficiency loss. The efficiency loss claims by NPA are grossly exaggerated.
Critically, however, Snowy 2.0 will perform an essential function for the NEM, in utilising wind and solar energy that would otherwise be wasted.I t will underpin reliability and minimise prices to consumers by using surplus NEM energy at times of low demand (when spot prices are very low or even negative) to pump water into the upper storage, and then use this stored energy to provide supply when consumer demand is high.
‘Snowy 2.0 doesn’t stack up’ – lack of an overall plan
A disconcerting genesis: The Commonwealth Government announced the Snowy 2.0 project within two weeks of being informed of the proposal, without even advising the two other Snowy Hydro shareholders at the time, the NSW and Victorian Governments.
The Federal Government announced a study to determine the feasibility of expanding the Snowy Scheme. It involved the Federal Government via the Australian Renewable Energy Agency (ARENA) making a financial contribution to the initial study. The Company did not need involvement from shareholders to undertake a Feasibility Study. Two weeks is an appropriate period of time to arrange a funding agreement for the study. Snowy Hydro’s media release ‘Expanding Pumped Hydro Storage’ outlined these steps. Following this announcement, Snowy Hydro undertook eight months of intensive analysis and due diligence, in consultation with industry experts, to prepare the Feasibility Study for Snowy 2.0.
Three basic premises were postulated – $2 billion cost, 4-year construction period and fully funded by Snowy Hydro. None of these premises have turned out to be anywhere near realistic.
This announcement was subject to a feasibility study being completed. CEO Paul Broad publicly stated on 14 October 2019 on the 7.30 Report that the $2bn figure was only an initial estimate that was subject to further study and analysis. The Snowy 2.0 Feasibility Study established the correct parameters for the project, and the project cost remains consistent with these.
No information was provided then, or has been since, justifying Snowy 2.0 as the most suitable energy storage project of the many alternatives.
Extensive information has been publicly provided over the past years since the Government’s announcement. This includes:
- the detailed Feasibility Study (December 2017);
- independent market modelling by Marsden Jacob and Associates – NEM Outlook (December 2017) and NEM Study Report (December 2018) (MJA Reports);
- Final Investment Decision supporting information (December 2018); and
- Environmental Impact Statements for Exploratory Works (July 2018) and Main Works (September 2019) (see DPIE’s Major Projects website)
No comprehensive business case for the entire project Snowy 2.0 has been split into 4 components/stages – Exploratory Works, Main Works, the electricity transmission lines through Kosciuszko National Park and the transmission circuits connecting to the grid.
A business case has been released for the Snowy 2.0 project. It is available here on Snowy Hydro’s website. Snowy Hydro is only responsible for building Snowy 2.0. Snowy Hydro, as a generator, is legislatively prohibited from owning transmission, as this is a regulated monopoly asset. This really is NEM 101, the norm for arrangements in the market. No other project of this type is valued adding the cost of transmission. The ISP transmission is a shared service that will service the entire NEM, from Adelaide to Melbourne to Sydney to Brisbane, as a connected network that will draw on the power of tens of thousands of megawatts of wind and solar generation. This will bring down costs for consumers because it breaks down market concentration and increase much-needed competition in the generation and transmission sectors.
Disregard for EIS process
Snowy Hydro utterly rejects this ill-founded argument and has shown strong respect for this process. It has followed the well-established and robust regulatory process for the approval of Snowy 2.0 every step of the way. This includes the declaration of the project by the NSW Planning Minister as “critical State significant infrastructure” under the Environmental Planning and Assessment Act 1979 (NSW); the detailed assessment required for CSSI projects under that Act, importantly including public exhibition of Environmental Impact Statements for Snowy 2.0; referrals to the Commonwealth Department of Environment and Energy for decisions to be made under the Environment Protection and Biodiversity Conservation Act 1999 (Cth); and extensive consultation with the community and key stakeholders over the past two years.
The Snowy 2.0 project has no business case
Snowy 2.0 has a comprehensive and robust commercial business case which has been forensically analysed by the Company and its independent financial advisers Macquarie Capital, the Government and its advisers as the sole Shareholder, and by the eight individual banks that Snowy Hydro has signed debt financing agreements with.
Snowy Hydro’s website also provides project reports with significant economic analysis and market modelling. The information is published through two reports by independent industry-leading NEM modelling by expert Marsden Jacob Associates and across a number of chapters in the Snowy 2.0 Final Investment Decision report. https://www.snowyhydro.com.au/snowy-20/
Risk of premature approval of the business case by the Commonwealth already demonstrated
The business case was approved in December 2018 following almost two years of forensic and robust economic modelling, engineering and design, community consultation and risk assessments. The business case approved by the Board and shareholders is based on, and therefore is entirely consistent with, the contract awarded to construct Snowy 2.0. If this had not been the case, Snowy Hydro would have had to seek re-approval. No such re-approval has been necessary because no negative change in the total Snowy 2.0 economics has occurred. On the contrary, significant positive changes have occurred in the NEM since FID that have strengthened the business case.
Optimistic estimates and understated costs
Completion time has more than doubled
This is incorrect, a construction timeframe was determined during the Feasibility Study. Snowy 2.0 will be progressively commissioned from late 2024/2025.
Cost of pumped storage component has increased by 400%
The EPC contract signed in April 2019 is wholly consistent with the Snowy 2.0 Feasibility Study.
- The $3.8-4.5 billion range in the Feasibility Study is expressed in real 2017 dollar terms and is therefore not inclusive of escalation.
- The $5.1 billion contract for Civil and Electro-mechanical Works is a lump-sum EPC contract price. The key fact is that it is expressed in nominal dollars from 2019 to the commissioning of Snowy 2.0. It therefore includes 100% of all CPI-related cost escalation for the project.
- It also includes the contractor contingency, foreign exchange exposure and “interface risk”, which relates to the cost of managing multiple contractors working on the same project.
- The project has been therefore been significantly de-risked (a key benefit for Snowy Hydro since FID).
Snowy Hydro is not willing to divulge any other information in relation to the construction contract, out of respect to its contractors. As is universally the case on projects of this nature, the details of these contracts are commercial-in-confidence. Snowy Hydro continues to progress the project, with consistent dollar figures at every milestone. Any claim to the contrary is false.
Minimal allowance for transmission cost
Transmission cannot be included in the project’s costs as the transmission lines to be built are part of the NEM’s shared transmission network and are not controlled by, or to the sole benefit of, Snowy 2.0. The Australian Energy Market Operator has released an Integrated System Plan (ISP) which identified key transmission routes needed across the NEM to connect new renewables as they come online. The ISP identifies that new transmission is needed for the NEM, with or without Snowy 2.0. Transmission is urgently needed by the NEM today, highlighted by the Victorian blackouts in January 2019. During those blackouts, Snowy Hydro had power stations with 1,500MW of idle capacity available to generate, but lack of transmission access between NSW and Victoria meant that Snowy Hydro was unable to dispatch this energy.
Why are taxpayers providing a $1.38 billion subsidy?
Snowy Hydro has a very strong track record of providing dividends and return on investment and this will continue throughout Snowy 2.0’s construction period. The financing mechanism for Snowy 2.0 is typical for investments of this type, being made up of free cash flow, external debt finance and shareholder equity.
- The Federal Government will inject equity in future years during the construction period. This will appear in the Company’s balance sheet accordingly as shareholder capital. This is an investment, not a subsidy. Snowy Hydro will continue to pay dividends to the Federal Government during the construction period of Snowy 2.0 and thereafter. The increased dividends flowing from Snowy 2.0 are the return on the equity invested.
- This is made possible by Snowy Hydro’s strong balance sheet and its ongoing revenue generation. It is critical to remember that Snowy 2.0 is not a “project finance” type structure. It is simply an investment by an already strongly profitable operating company.
Did the Commonwealth pay a premium for Snowy Hydro to facilitate Snowy 2.0?
The report does not provide a source for the “$2.2 to 4.0 billion” figures “escalated to 2018 dollar terms” however, in responding, the Company has assumed this simply relies on some combination of balance sheet values. If so, this section makes the mistake of confusing balance sheet values in the financial statements with a risk-adjusted enterprise valuation conducted using conventional market practice, normally via a financial model that employs discounted cash flow analysis or an earnings multiple. Purporting that a transaction for the sale and purchase of company’s shares based on balance sheet values ignores the most basic principles of corporate valuation.
Minimal payment for commercial use of Kosciuszko National Park
It is misleading to look at the fees paid under either lease in isolation. Both leases impose extensive obligations on Snowy Hydro in addition to the payment of fees. Further, the leases must be understood in the context of the total arrangements that Snowy Hydro has with the State of New South Wales in relation to the operation of the Snowy Scheme, and in particular the irrigation capability provided by the Scheme at no cost (see below).
No payment for water
Snowy Hydro pays an annual fee under the Snowy Water Licence and the Snowy Park Lease. However, it is critical to note that Snowy Hydro is not an extractive user of water and does not consume any water. Further and most importantly, Snowy continues to provide a vast irrigation capability at no cost to the community or downstream users, at a significant cost to the business activities of Snowy Hydro. The social utility of the Scheme is enormous. During dry years, the Snowy Scheme releases contribute 30-60% to inflows to the Murray and Murrumbidgee, helping to drought-proof the Murray Darling Basin. During wet periods, as was the case a few years ago, Snowy Hydro used its large storages to reduce the impact of flows on downstream users. The improved water security sustains farmers and regional communities. All of this is provided at no cost to downstream users, with no other business in the country offering a comparable service. Finally, Snowy 2.0 results in zero changes to the Snowy Water Licence.
Snowy Hydro has recently completed a successful, highly competitive debt-raising process, advised by a leading investment bank, legal firms, economic modelling firms and world-leading engineering brands. The outcome of that process was that Snowy Hydro has been overwhelmingly supported and the debt funding requirement oversubscribed. The project has been fully funded up front, with zero financing risk during construction. This support follows the approvals granted by Snowy Hydro’s Board, endorsed by Macquarie Capital (for Snowy Hydro). In response to some of the specific points raised in this section of the report:
- The “$8-10 billion loan” value and “5.7% interest rate” are wildly off-the-mark and represent utterly uninformed speculation. We respectfully refer interested parties to Snowy Hydro’s long-term pragmatic stewardship of the Company’s finances, evidenced in the financial statements available on the website, and stable BBB+ credit rating, recently upgraded to A- as provided by Standard & Poor’s.
- Snowy Hydro operates a unique portfolio of assets, with unusually long asset lives. Therefore, 2075 is the correct measurement period for modelling value, being commissioning date of 2025 + 50 years.
- We reject the $10 billion total project cost assumption used in the report.
- Snowy Hydro has released buy-sell spread information.
- Snowy Hydro has also released information that states Storage Value is only part of the value equation for the Company, for example in the FID chapters on the Company’s website.
Snowy 2.0 will add 2,000MW and 350,000 MWh of pumped hydro storage. The 2,000MW of capacity, and the 350,000MWh stored in Tantangara Reservoir, individually and together constitute the two key capabilities of Snowy 2.0. While the report implicitly accepts the 2,000MW capacity, it ignores the fact that this is one of Snowy 2.0’s critical capabilities. It is critical for keeping the lights on in the NEM. 2,000MW of reliable, on-call capacity backs several of Snowy 2.0’s revenue sources, including the $300/MWh cap contracts that have been a mainstay of Snowy Hydro’s role in the market since the beginning of the NEM. This “capacity value” is simply ignored. The report appears to concede that Tantangara Dam has the storage capacity to provide 350,000MWh, using the Snowy 2.0 generating assets, but claims that downstream hydraulic constraints in Talbingo, Jounama and Blowering dams limit that capacity. This is quite simply wrong. The following errors have been made in the analysis:
- Because it has a much higher elevation, Snowy 2.0 passes through water at a much lower rate when operating at full capacity than Tumut 3 Power Station (T3). In fact, one third of T3, that is 2 of the 6 units, is able to pass all the water that Snowy 2.0 passes when generating at its full 2000 MW capacity. Given this simple fact, Snowy 2.0’s ability to generate at full capacity at 2000MW for 175 hours will never be constrained by the operating level of Talbingo Dam because Snowy Hydro is able to pass water out of Talbingo Dam much more quickly than it flows into it.
- Talbingo Dam level does not “almost always” operate at close to full. The ‘active storage’ of Talbingo Dam is only the top 9m of a dam that is up to 140m deep in places. This 9m constitutes the 160GL of ‘active storage’. Accordingly, if the water level in Talbingo is only 4m below Full Supply Level, and appears close to full, its active storage is actually half-empty.
- The active storage in Talbingo is also augmented by the 30GL active storage in Jounama (from which Snowy Hydro can also pump water), which means there is 190GL of active storage in the lower dams, which is 80% of the 240GL storage of Tantangara. So as a closed cycle system, Snowy 2.0 can operate at 80% of its full capacity.
- However, of course, Snowy 2.0 will not operate in isolation and one of the significant advantages of adding Snowy 2.0 to the existing Snowy Scheme is that Tantangara and Talbingo dams both operate as part of an integrated portfolio of 16 dams, with water capable of being stored in multiple places throughout the Scheme. In particular, both are connected to Eucumbene Dam, which has 4,400GL of storage capacity. There are in fact three ways to recharge Tantangara Dam: natural inflows, which average 294GL/annum; water passed into Talbingo from Snowy 2.0 and then pumped back up (190GL); and water passed into Talbingo from Eucumbene through the existing Tumut 1 and Tumut 2 Power Stations. Accordingly, there is no question that Tantangara can be fully recharged.
Other, better alternatives not analysed
Snowy Hydro’s approach has always been to conduct a series of economic tests at milestone points or gates – this started with the Snowy 2.0 Feasibility Study and was confirmed at Final Investment Decision in December 2018. This has been done using a consistent and transparent methodology by conducting a NEM-wide review of the market “with and without Snowy 2.0”. This is the most objective method. All these results, analysis and commentary can be found on the Snowy Hydro website. Detractors should be clear about what basis their beliefs have in long-term NEM modelling. The key point is that there is no single, dominant “best” alternative. The strength of the NEM in the past has been its diversity of generating sources. To maximise competition and minimise consumer costs, future NEM developments should include all economic generating sources. In an optimal NEM, the balance between coal, gas, wind, solar, hydro and other sources is determined by effective competition. Snowy Hydro agrees with AEMO’s assessment that the NEM requires greater storage capacity than Snowy 2.0 can provide:
- Large-scale batteries have a role in the NEM (frequency control for example) however based on evidence provided on our website they suffer from prohibitive cost to provide the same products and service that Snowy 2.0 provides. There is no evidence provided that batteries will ever be economic.
- Demand management for industrial customers may play some role, but this is yet to be proven. Snowy Hydro has chosen to invest based on the best information available, not baseless aspirations. The re-orienting of VRE was included in the MJA modelling, but found to have limited impact.
- Gas and diesel asset planting has been available to NEM participants as an investment option for decades. Snowy Hydro owns them. Snowy Hydro continues to believe in a NEM that invites competition without a particular fuel source receiving preferential regulatory treatment.
Snowy Hydro absolutely relies on a well-functioning and competitive NEM:
- MJA modelled the entire Snowy Hydro portfolio from “water to wires”.
- MJA’s modelling methodology is best-in-class and is detailed in its reports.
The commentary is inadequate and appears to completely miss two key facts:
1. Snowy Hydro revenues are almost entirely derived from the financial products bought and sold in the NEM. The asset capabilities of the portfolio (hydro + gas/diesel) are simply the physical hedge to that function.
2. Snowy 2.0 will be operated over daily, weekly, monthly, seasonal timeframes and different pricing cycles, as well as providing maintenance flexibility to the existing business. Snowy Hydro has therefore never purported that the reservoirs would be operationally drained and filled in cycles as Section 5 seems to suggest.
Unaccaptable environmental impacts
A project of this size and impact should not even be contemplated in a national park
The Snowy Scheme has been operating in the Kosciuszko National Park for decades and Snowy 2.0 is an expansion of the existing Scheme so it cannot be built anywhere else. Snowy 2.0 takes advantage of two existing reservoirs and has proposed most infrastructure to be underground to avoid permanent impacts to the park. It is also strategically located between the two major load centres of the NEM – Sydney and Melbourne. The project has been purposefully designed to avoid and minimise the project’s footprint. The physical disturbance is limited to the surface footprint which is about 1,680 ha, which is 0.25% of the park (or 16.8 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’). This is the maximum disturbance expected during construction. It is also important to note that a significant proportion of the surface works are utilising areas that have a history of disturbance, such as the old mining works at Lobs Hole. Importantly, construction sites will be rehabilitated and some landformed. The operational footprint for Snowy 2.0 is just 99 ha or 0.01% of the park (or 1 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’). For these reasons and more, Snowy 2.0 has been declared critical State significant infrastructure by the NSW Planning Minister.
A 1½ year EIS process
The NSW and Commonwealth environment and planning systems allow for multiple major project applications to be submitted and assessed. Within this, cumulative impacts of projects are to be addressed where relevant. The EIS process for any major project of this size will take a number of years to complete in order for the appropriate design and environmental surveys, modelling and assessments to be undertaken with rigour and in line with best practice.
Main Works EIS has finally revealed the enormity of impacts on the park
The project area when generally described uses a broad region within which Snowy 2.0 will be built and operated to give context to readers. It’s like saying the Sydney Opera House is in Sydney city (it’s a point of geographical reference, not a suggestion that the Opera House impacts the entire city). Overall, physical disturbance is limited to the disturbance footprint, which is about 1,680 ha (or 16.8 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’). This is the maximum disturbance expected during construction. Importantly, a large majority of the disturbance area will be rehabilitated and landformed, while other parts will be retained permanently for operation (operational footprint). The operational footprint is the area required for permanent infrastructure to operate Snowy 2.0. The maximum operational footprint is about 99 ha (or 1 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’).
Project footprint – incorrect claim of 100 km2
This statement is incorrect and misleading. The project has been purposefully designed to avoid and minimise the project’s footprint and we continue to look to further minimise the disturbance area. The physical disturbance is limited to the disturbance footprint which is about 1,680 ha, which is 0.25% of the park (or 16.8 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’). This is the maximum disturbance expected during construction. Importantly, construction sites will be rehabilitated and some landformed. The operational footprint for Snowy 2.0 is just 99 ha or 0.01% of the park (or 1km2 not the quoted 100 km2 as ‘significantly or permanently impacted’).
Overwhelming destruction of threatened species habitat
The project has been purposefully designed to avoid and minimise the project’s footprint and we continue to look to further minimise the disturbance area. The physical disturbance is limited to the disturbance footprint, which is about 1,680 ha, which is 0.25% of the park. This is the maximum disturbance expected during construction. Importantly, construction sites will be rehabilitated and some landformed. The operational footprint for Snowy 2.0 is just 99 ha or 0.01% of the park (or 1 km2, not the quoted 100 km2 as ‘significantly or permanently impacted’). Due to the nature of the project and clearing required, impacts to some threatened species habitat is unavoidable. However, throughout the EIS process, a design integration and assessment approach was carried out. The objective was to identify and avoid sensitive locations, to minimise the construction footprint and maintain as much of the existing natural environment as is reasonable and feasible. This is consistent with the broader biodiversity mitigation process to avoid, minimise and offset. Where impacts are unavoidable they will be offset with projects funded to achieve long-term conservation outcomes in the park.
Waste rock spoil dumped in the Park
As clearly outlined in the Main Works EIS, the Snowy 2.0 project will result in approximately 9,000,000 m3 of excavated rock (unbulked), not 14,000,000m3. The EIS sets out Snowy Hydro’s detailed strategy for management of this excavated rock, which aims to maximise the beneficial reuse with material that can be reused. Material that cannot be reused will be carefully placed within Tantangara or Talbingo dams, or placed on land to be used to create new recreational landforms for enjoyment by the public at Lobs Hole.
Details of the transmission lines through Kosciuszko National Park have not been released.
It is not correct that the details of these lines have not been released. New transmission connection between the proposed Snowy 2.0 pumped-hydro and generation project to the existing high voltage transmission network is a separate project being pursued by TransGrid. In November 2018, TransGrid lodged a 195-page Preliminary Environmental Assessment in relation to this project, which is available on the NSW Department of Planning, Industry and Environment (DPIE) website. DPIE issued Environment Assessment Requirements in relation to this project in February 2019. Snowy Hydro understands that TransGrid is preparing an Environmental Impact Statement in response to these requirements, to be assessed by DPIE. All of this information is available on the DPIE website.
Permanent damage to Lobs Hole area
It’s been stated that there will be permanent damage to the Lobs Hole area. This is incorrect. Lobs Hole is an old copper mining site and is already heavily disturbed. Post construction, disturbed areas at Lobs Hole will be rehabilitated. Landforming is also proposed for the longer-term use and design of Lobs Hole for recreational purposes, which will follow the principles and concepts in the project’s Rehabilitation Strategy to achieve stable, non-polluting landforms and recreational areas.
Tantangara will become a holding tank, occasionally empty and an eyesore
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.
Groundwater levels depressed
The Main Works EIS makes clear that the groundwater modelling results are conservative and predicted impacts are overstated. This is for two main reasons as noted below. Regional groundwater modelling was undertaken in-line with the Australian Groundwater Modelling Guidelines. Attempts to ‘constrain’ the model to simulate unknown geological occurrences, or proposed design elements that will mitigate tunnel inflow, are not in-line with these guidelines and were therefore were not undertaken. Consequently, the modelling results are conservative and predicted impacts of water drawdown are overstated for two key reasons:
- modelling does not consider actual design, management or mitigating activities. During construction, the discrete fractures that yield excess water will be grouted and will reduce the actual overall tunnel inflow volume; and
- hydraulic parameters within the numerical model for two geological units – the Gooandra Volcanics and the Kellys Plain Volcanics – are conservative and assume significant connection to the water table based on limited pumping test data. However, in reality the entire unit is unlikely to behave like this, with some parts expected to be much less permeable.
1. We have carried out geotechnical investigations on many points across the 27km tunnel alignment, however, it is impossible to know the location and conductivity of every individual rock fracture, until the tunnel intersects them.
Risible biodiversity offset payment so far
The NSW Government determined that $10.5 million would be required to be paid by Snowy Hydro to offset the impacts of the Exploratory Works. The NSW Government committed that this funding would go towards improving the environmental and recreational values of Kosciuszko National Park. The $10.5 million has already been paid. If it’s believed that this figure is to be low, this reflects that Snowy Hydro was able to avoid and minimise impacts to the park through its design of the Exploratory Works. For the residual impacts resulting from the Snowy 2.0 Main Works (after all efforts to avoid and minimise impacts are taken), Snowy Hydro has, and will, continue to consult extensively with National Parks and Wildlife Service to achieve an Offset Strategy that will deliver real and long-term conservation outcomes for the park. Conservation actions developed in consultation with species experts from relevant departments and listed in the Offset Strategy for consideration include:
- Establish a program to restore and regenerate dry open eucalypt forest and woodland within Kosciuszko National Park, improving connectivity and water yield.
- Undertake an expanded weed control program across the park to improve vegetation condition and habitat for threatened species.
- Develop and implement a program to improve watercourses within the park, restoring alpine watercourses, recovering habitat for threatened species and improving water yield.
- Establish a program to reduce the distribution and abundance of feral predators across the park.
- Specific conservation actions for key species including smoky mouse, booralong frog, alpine tree frog and clover glycine.
Substantial modifications proposed for the Exploratory Works EIS, lack of consultation
Modifications to approved major projects are permitted under NSW planning law and are routine. Snowy Hydro rejects the contention that Modification 1 changed “most aspects” of the EIS and had extensive additional environmental aspects. As explained in Modification 1, the proposed changes are a result of design refinements by the contractor for Snowy 2.0. The public exhibition period is set by the NSW Department of Planning, Industry and Environment. If the view this as inadequate, this is a matter for the department.
Absence of life-cycle assessment of environmental impact
No sustainability requirements were stipulated by the Secretary’s Environmental Assessment Requirements for Main Works (noting an ISCA requirement would have needed consideration of life-cycle assessment). A greenhouse gas assessment was completed for the EIS which considered Scope 1 (direct), and Scope 2 and 3 (indirect) emissions, for both construction and operation. Indirect emissions relate to those generated from the generation of electricity purchased and consumed (Scope 2) and all other upstream and downstream activities, such as extraction and production of raw materials (Scope 3).
The Business Case should be revoked
Why was the Business Case commercially sensitive?
See answers above in section 1.2, 2 and 3.
The flawed Business Case should be revoked and the EIS refused
Snowy Hydro reaffirms its stated position in the EIS that Snowy 2.0 is critical to ensuring an orderly transition to a low carbon emissions economy, will result in lower energy costs for consumers, is in the public interest and should proceed.