Turnbull ignores own blank cheque warning
By David Speers
Malcolm Turnbull said it himself: “No one in their right mind would ever give a blank cheque to an analysis that hasn't been done”.
This was back when Turnbull was an ambitious Shadow Minister giving Labor one of his regular sprays for failing to conduct a cost-benefit analysis before committing to the “rolled gold” NBN. It was a good point then and it’s a good point now.
Yet Turnbull has ignored his own advice and committed an unknown amount of money to a project that still needs to go through a feasibility study.
The “Snowy Hydro 2.0” project is sound in concept. The idea is to use the scheme’s existing dams, but create a new “pumped hydro” facility, generating enough power to feed roughly half a million homes.
In theory, the case for the project is strong. Coal and gas fired power will only become more expensive as the old generators shut down. Wind and solar power will only become more affordable as technology and scale improve. But renewables need battery back-up when the sun isn’t shining and the wind isn’t blowing. “Pumped hydro” operates like a very big, wet battery.
The Snowy Hydro Corporation, owned by NSW, Victoria and the Commonwealth, is a safe pair of hands too. It’s been running pumped hydro for years. The technology is proven and it’s what the market needs. If all goes well, it will be driving another 2000MW of power into the national grid within 4-5 years. By contrast, the Hazelwood power station which is about to shut down, generates 1600MW at full capacity.
Fortunately the Snowy Hydro extension won’t cost anywhere near as much as the NBN. But with a price tag of around $2 billion, it’s still good advice not to hand over a blank cheque until the analysis is in. Yet this is exactly what Turnbull is doing.
“We would look forward to the other shareholders (NSW and Vic) contributing to it but if they don’t wish to contribute additional equity and they would rather the Commonwealth Government did that, we are very happy to contribute equity on a commercial basis to this project. That is our commitment.” Not a lot of wriggle room there. The Commonwealth is all in.
In fact, Turnbull is so convinced the numbers will stack up, he declared, “this will make money for Snowy Hydro.” Which raises the question: why hasn’t the company done this already? If it’s such an obvious money maker, why do we even need a feasibility study? Why not just get on with it?
I put these questions to the CEO of the Snowy Hydro Corporation, Paul Broad on my “Speers Tonight” program on Sky News. While clearly excited about the PM’s enthusiasm, he acknowledges there’s still work to do.
The plan announced by Turnbull yesterday is “based on a report done by Snowy Hydro back in the early 80s”, he says. That plan showed the expansion was technically possible, but just too expensive. Given power prices have soared since the 1980s, it’s no doubt looking more viable now. Broad also says they need to “re-affirm the geology” before digging new tunnels and installing pipelines. This could also have a considerable impact on the final cost and timeframe.
Here’s the political reality though: Malcolm Turnbull can’t afford to wait for the feasibility study at the end of the year. He’s under the pump (sorry) right now. This sort of bold, visionary, nation-building stuff is exactly what he needs.
Turnbull knows the politics of investing in a big clean, green energy project work in his favour. That’s why he did a media blitz yesterday. It’s hard to believe he would appear on “The Project” were he spruiking an investment in a new coal plant, as some of his Ministers have been advocating.
I’m told there will be more to come on pumped hydro. This won’t be the last major project Turnbull supports.
It also doesn’t hurt that the Snowy Hydro announcement coincided with the Newspoll survey going into the field. Those results early next week will set the tone for an important sitting fortnight.
Turnbull’s enthusiasm on “Snowy Hydro 2.0” was understandable, even if his own warnings from years gone by are now being ignored.
Published: Friday, March 17, 2017
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