The former boss of Snowy 2.0 describes the energy market intervention as ‘madness’ and says consumers are paying the price for past mistakes on industry structure.
A serious lag in the build-out of transmission and firming power to support renewable energy means Australia’s coal power stations will need to stay open for longer to avoid a hit to the national economy, according to energy and water industry veteran Paul Broad.
He says the concentration of the energy market was “the root cause of many of the problems we have today”, and advocates for a spin-off of Snowy’s retail business, comprising Red Energy and Lumo Energy, to ensure more competition. In Broad’s view, the transition is in big trouble on three grounds: the build-out of transmission falling far behind what is required; a lack of adequate firming capacity to back up renewables; and an inability to get new gas developments up.
“You’ve got to be able to look yourself in the eye and say the transition will deliver up the same reliability and the same price to customers. To the extent it doesn’t, you’ll lose your competitive advantage.”Although the hugely complex Snowy 2.
“Our energy industry is paying such a huge price for Bob Carr being weak all those years ago and Michael Egan wanted to privatise and backed away,” Broad says. “The Feds really are not great owners of assets, particularly assets that are market-facing. And I would argue strongly market-facing business should be owned publicly provided you set the regulatory frameworks up.”
Also of irritation was a government crackdown on public statements by Snowy without clearance from the minister’s office, which shut down Broad’s open criticism of the proposed “capacity mechanism” to reform the NEM. The construction problems at Snowy 2.0, exacerbated by complex geology and the pandemic, didn’t help.
He insists the economics of Snowy 2.0 will still stack up even with the higher cost, given the average cost of pumping water – originally budgeted at $40 a megawatt-hour – is now “more like $10[MWh]”. “We’re prehistoric in our transmission – it’s not just 2.0 – the transmission needs to be brought up to the 21st century,” he says, criticising the upgrade as 10 years overdue. He points to the need to move renewable energy around the grid in the peak-demand evening period, taking advantage of the NEM’s geographic spread.
Meanwhile, the big expansion required in firming generation – whether pumped hydro, gas power or batteries – will require many more new transmission lines that should be being signalled to the market now“That’s why I’m preaching 3.0, it’s a signal to the transmission guys, you’re gonna have to build for 3.0. When you put towers up, the lines up, put it up for 3.0 because it’s coming, it’s got to come.
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