Before the government started splashing billions of dollars on renewables, the price of energy was around $40/MWHr. That price has increased more and more since 2015.
Transcript
[Chair] Senator Roberts, you have the call.
[Malcolm Roberts] Thank you Chair, and thank you all for being here. What is the true costs of Snowy 2.0, including associated transmission linkages and all associated costs required to make it operational and productive?
[Paul Broad] Well, the transmission, as I’ve said many times here, is not part of 2.0. The transmission is to enable the transition to renewables. And the cost of all that transmission is in the hands of others, not in our hands. So I can’t comment on transmission. But Snowy 2.0., as I’ve just said here many times, in nominal dollars, it’s a 5.1. And then attached to that we have a contingency factor of $400 million. And we now can confirm that the environmental costs, the offsets costs are about roughly $100 million.
[Malcolm Roberts] Thank you. What is the average annual saving that Snowy 2.0 will enable in the marketplace?
[Paul Broad] Sir, I don’t understand.
[Malcolm Roberts] What was the saving? The economic modelling has found that Snowy 2.0 will provide savings of market benefits of between $4.4 and $6.8 billion and reduced spot prices, leading to lower costs for consumers.
[Paul Broad] Yeah.
[Malcolm Roberts] What will be the benefit?
[Paul Broad] So, as I said, I think he said it four years ago, what it does is firm up renewables and allows it to compete. And we do so at a price point, at that time I said, some senators were here at the time, we said that we can compete with base load power. And that’s been proven to be true, even with existing Snowy. So the benefits will come is to renewables, lower prices, etc, etc, that stem from 2.0. I emphasise again, you can’t go down the renewables track without significant amounts of deep storage.
[Malcolm Roberts] So it’s an added cost to renewables.
[Paul Broad] You can’t have renewables without it.
[Malcolm Roberts] Right, so that’s an added cost to renewables.
[Paul Broad] Yep.
[Malcolm Roberts] Do the projected savings take us back to a sustained $40 per megawatt hour price, that prevailed prior to government interventions favouring renewable energy that brought the post-2015 price increases?
[Paul Broad] I can’t comment on that. I can comment that the renewal penetration is significantly pushing downward on prices. Wholesale prices are significantly down, the forward curve is down. But you gotta be able to balance that out. That’s been helped a lot by existing baseline plants being flexed up and down to keep the lights on. So I can’t comment on going back to those days. Those days, where driven by cheap baseline.
[Malcolm Roberts] Driven by cheap baseline? So that’s correct. That’s my understanding too.
[Paul Broad] Mm-hmm.
[Malcolm Roberts] So coming to the Curry Curry project, do you think that private sector participants perceive the risks of such a new plant? My understanding is that the Minister was really keen for private and private sector to take on Curry Plant or provide that what the Curry Plant will be providing. But instead that’s not happening, so the government’s jumping in. So do you think that private sector participants perceive the risk of such a new plant to be excessive, in light of government subsidies, present and planned, to intermittent wind and solar?
[Paul Broad] So EA didn’t. So they’re building. Energy Australia didn’t, so they’re building a plant tolerably. Can I just say, the other one was AGL. They’d be talking about building a plant at Tomago since, I think, 2012. And I don’t believe the – in their interest to build and enable competitors to offer up more competitive products than what they currently supply from their base load power stations. So, I suspect there are wider considerations than just gas plants for AGL. But I can’t, you know, I’m speculating.
[Malcolm Roberts] So, there are many –
[Paul Broad] And for us sorry?
[Malcolm Roberts] So, many complicating factors.
[Paul Broad] Yeah, many. But, for us that, you know, we look on the other side. I mean, when the bush fires happened here, 18 months ago, the tragedy of those fires, only for Colongra – Only for Colongra the lights were a struggle to stay on in New South Wales. And we faced, because of the contract market that Roger was describing, we looked at losing somewhere in the order of $150 million because we were on the wrong side of the contracts. Colongra came on, we lost, I think, $30 odd million in an hour and a half, which is the risk to business. We are in a risky business, eh? So you gotta take the losses at times. So, you gotta be able to have faster firming generation to enable this transition to happen. That’s just what’s happening now, it’s happening in Queensland right now. Queensland have 400,000 properties without power. There’s a hospital in Queensland on emergency diesel. Right now. This is real. And they’re firing up gas plants. Please, this is serious. This is deadly serious. These are people who are in serious predicaments. And we sit here today. Let me tell you, I spend my life thinking about this. That’s what I do every day. I think about what we can do, to not let that happen.
[Malcolm Roberts] And Mr. Broad, I’ve been thinking about it for decade. I don’t have your level of expertise in the electricity sector, but we knew this time was coming. Based upon policies that Labor and Liberal governments have pushed. Does the decision of Snowy Hydro Limited, to undertake such an investment at Curry Curry, indicate it has a lesser risk aversion than its private sector rivals?
[Paul Broad] No, I don’t think that’s true at all. I think EA has obviously seen that they need to go. I think that as I say, energy has, AGL had other considerations to think about. I can’t comment on origin. I can’t work that out, because they have a wonderful hydro plant just on the edge of the Sydney Basin and the Victoria Falls Hydro Plant. It’s a fabulous plant. So I can’t really look into that, but I don’t think a difference on risk. We manage risk to the enth degree.
[Malcolm Roberts] So, is it because private firms just cannot justify the risk and investment because government has favoured high cost renewables? Or unreliables, as I call them?
[Paul Broad] I don’t think so. No.
[Malcolm Roberts] You don’t think so?
[Paul Broad] I think Energy Australia has proven that –
[Man] Energy Australia has proved positive of that effectively.
[Malcolm Roberts] Sorry?
[Man] Energy Australia has proved positive of that effectively.
[Malcolm Roberts] Okay. So isn’t Snowy 2.0, coming back to Snowy 2.0.. Oh well, let’s just ask another question on Curry. Isn’t the private sector effectively competing with government subsidised unreliables, especially after Matt Kean in New South Wales, and Lily D’Ambrosio in Victoria recently declared further fostering of unreliables and with transmission lines and guaranteed payments and controls, favouring and protecting unreliables?
[Paul Broad] So, I think the subsidies are flung to the private sector as much as anyone else. I note that Energy Australia got $80 million, I think or there abouts. So I think 50 from New South Wales and some from the Feds. I noticed Twiggy Forrest got $30 million for his proposed LNG plant. I’m sure he needs the $30 million. He got his – He got his $30 million for that. So there was a lot, you know, I don’t think you’ve singled out any one groups in the industry. But the transition is happening. Let’s be clear. The transition is happening. Once the renewables gets and transmission can deliver to market, the firming that needs to be built is massive. It is on a scale that it’s hard to even comprehend.
[Malcolm Roberts] Well, we have the Minister himself, the last question, Chair. The Minister himself, Mr. Taylor, has cited Bloomberg’s graph on support of clean energy or unreliable energy, as I’d call it. And Australian, per capita, is investing more. Twice as much as the next major country investing in this unreliables energy. We’re investing double the United States, six times what China is doing. And we’ve already heard from you and Mr. Whitby, what’s happening as this transition occurs, this forced transition, and it’s bringing considerable risk to our whole Electricity Sector. So, I would see Snowy 2.0 itself as an admission of failure because it relies on high peak power rates. It wouldn’t work without that.
[Paul Broad] I think that’s a comment, not a question, sir.
[Malcolm Roberts] Yeah. Thank you, Chair.
