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New coal-fired power would kill off Snowy 2.0

New coal-fired power would kill off Snowy 2.0

By Andrew Tillett

Snowy Hydro is yet to model the impact of the National Energy Guarantee on the Snowy 2.0 expansion but a top executive has warned the construction of new coal-fired power stations would jeopardise the project's viability.

The taxpayer-owned company's chief operating officer Roger Whitby also told a Senate estimates hearing on Tuesday that higher renewable energy targets would benefit Prime Minister Malcolm Turnbull's pet pumped-hydro project.

The Turnbull government is attempting to end the so-called climate wars while tackling higher power prices for consumers and businesses and boosting reliability of power through its National Energy Guarantee, or NEG, which will impose dispatchable capacity and emissions reductions on electricity retailers.

Mr Whitby told senators the feasibility study into Snowy 2.0 had been completed before details of the NEG were known but would be updated once the final design was settled.

He believed a "well-designed NEG should enhance the viability of Snowy 2.0 project but we are not assuming it in terms of the work that has been done to date."

"The two elements of the NEG, the reliability or dispatchability arm and the emissions reduction arm, both those elements complement Snowy Hydro's operations generally. They are both value-enhancing elements for our business."

Mr Whitby said Snowy 2.0 was a "project for the future", not the current state of the energy market.

Asked by NSW Labor Senator Kristina Keneally whether construction of the new coal-fired power stations to boost baseload power, as some Coalition MPs have called for, would undermine the business case for Snowy 2.0, Mr Whitby replied: "Simply put, yes".

"Assuming the world most players accept where coal-fired generation is ageing and retiring and there is increasing penetration of intermittent renewable energy, clearly if we have a reversion essentially to the past, then of course under that scenario Snowy 2 is not viable," he said.

"Why this project wasn't done in the past - in fact some of the early visions for this project were floated in 1966 - in that time new coal-fired plants were being added and without imposts or constraints on carbon dioxide production, coal-fired generation in that time was the most economically viable way to provide electricity."

Mr Whitby agreed with Greens Senator Janet Rice that an increase to the renewable energy target would benefit Snowy Hydro.

"I think the more that intermittent renewables enter the market over time, the more and more need there will be for storage projects in general, whether it be Snowy 2 or Snowy 3 or alternate [projects]," he said.

Mr Whitby said the estimated cost of $3.8 billion to $4.5 billion to build Snowy 2.0 proposed in the feasibility study released in December remained valid. He said the project had a finish date of 2024, and concluded Snowy Hydro Ltd would be able to fund the project itself from its cash flow and taking on debt.

Mr Whitby said significant work was still underway on geotechnical studies, detailed design work and a tender process, with a final investment decision to be made on whether Snowy 2.0 goes ahead to be completed before the end of 2018.

The Commonwealth owns 13 per cent of Snowy Hydro Ltd with negotiations underway to acquire NSW's (58 per cent) and Victoria's (29 per cent) shares.

While some conservative MPs flagged concerns over the design of the NEG earlier this year, Environment and Energy Minister Josh Frydenberg told the Coalition party room on Tuesday he hoped to finalise an agreement with the states by the middle of the year, with South Australia's Labor government the only one standing in the way.

Financial Review

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