It’s a shame Chris Bowen can’t harness some of the heat from his baptism of fire as new energy minister because it could come in handy this winter.
Even before he’d been sworn in, Victoria nearly ran out of gas. This week, there were more coal-fired power woes – with AGL Energy down to six of its 11 units operating – and a new winter demand record in Queensland for electricity.
In between, he helmed his first energy ministers meeting that pledged to create new gas storage soon – to the surprise of some states – to head off future supply panics. Regulators were also told to expedite work on a scheme to pay for standby capacity in a power pinch. Whether coal and gas plants get included will be a future fight.
Speculation was also swirling by week’s end about whether the biggest single energy project in the nation – the more than $5bn Snowy 2.0 pumped hydro project – would now be delayed almost two years to 2028, after an AFR report that Snowy Hydro refused to confirm.
If Snowy 2.0 has indeed been delayed, nobody told the Australian Energy Market Operator (Aemo), which in turn didn’t brief the assembled energy ministers about it . For now, Aemo is sticking by the December 2026 commissioning date that Snowy Hydro gave it in April.
But Bowen seemed to accept the report the project was not on schedule, telling Guardian Australia the reported delay “looks to be another hidden parting gift” from Scott Morrison and former energy minister Angus Taylor.
Other gifts included the deliberate delay of regulated default power prices until after the election, and a gas trigger to limit prices of the fossil fuel that turns out to be all but useless.
One senior energy employee within the private sector said Snowy 2.0 “was really complex with its 27km tunnels – it’s not like building a battery”. Add in Covid disruptions of global supply chains, limited access to giant borers, a labour shortage at home and abroad, escalating material costs and the fact the project is in a national park – and it will be no small feat to pull it off close to budget or by 2028, he said.
The New South Wales treasurer and energy minister, Matt Kean, said he hopes Labor’s $20bn Rewiring the Nation plan can cover at least some of the cost to ensure Snowy 2.0 comes online.
“We can still cope with 2028 but it’s going to get tight,” he said. “We’ll need it to be up and running.”
Looks like Snowy Hydro might need to update its website about first power being generated by 2025. #auspol pic.twitter.com/M5lEuxTTcG
— Peter Hannam (@p_hannam) June 10, 2022
Kean made the comments on Friday as he drove back from Orange in central-west NSW where he had unveiled a $1.2bn plan to accelerate the construction of transmission to the state’s new renewable energy zones over 10 years.
By putting funds upfront, the government hopes to unlock $14bn in private spending on infrastructure and get the $1.2bn paid back to the Treasury.
Dylan McConnell, an energy expert at the University of Melbourne, said it will be interesting to see how the Aemo’s Integrated System Plan (ISP) now treats Snowy 2.0.
He said the draft Isp for 2022 had Humelink finished by July 2026, Sydney Ring Project by July 2027, NSW’s New England Rez by the same month, and the Marinus link between Victoria and Tasmania ready by 2029.
To have all four as “anticipated” in the separate Electricity Statement of Opportunities report was “rather bold”, McConnell said. Two of them had yet to even begin the lengthy regulatory investment test needed before regulators will agree to consumers paying for them. The next update of Esoo will be in August and will be closely watched for its projection of future potential supply gaps.
The former Aemo boss “had a habit of making mountains out of molehills,” McConnell said. “The new approach is very much about making molehills out of mountains.”
The head of energy policy at Ai Group, Tennant Reed, said any delay of Snowy 2.o would be of concern as it is “a very important project to the future of the national electricity market”. He said it also pointed to the difficulties facing many projects.
“It is not unknown, to say the least, for megaprojects to have some delays but we are seeing that across a whole range of current projects,” he said.
Reed said the issues were not just technical but social, particularly when it comes to winning over communities that may dislike having giant transmission lines passing through them. The industry would do well to avoid the path of coal seam gas fields in parts of NSW and Queensland that left “a lasting and toxic effect” because of perceptions landholders and communities were not treated with respect, he said.
AGL is facing challenges just to keep their existing fleet of ageing coal-fired power stations operating.
The company on Friday blamed global supply chain issues and the lack of “specialised materials” for having to delay the restart of its 550 megawatt units at Loy Yang A power station in Victoria.
Its other two coal-fired power plants – Liddell and Bayswater – had four of their remaining seven units down due to various faults and maintenance as of Friday.
With many kilometres of pipes and tubes at risk of breakdown, the chance of losses for AGL are “only going to get worse”, one person familiar with the situation said.
But one point of cheer this week for AGL was a meeting between tech billionaire Mike Cannon-Brookes and several board members. The gathering came just weeks after Cannon-Brookes – now AGL’s biggest shareholder with 11.3% – scuttled the company’s plan to split into two by the end of June. It apparently went well although neither side would comment publicly.
Bowen praised Wednesday’s cordial gathering of ministers from states and territories with Labor, Liberal and even Greens affiliations as giving hope for faster change.
One hint of discord, though, was whether that mooted capacity market should include paying for a coal plant like Origin Energy’s Eraring to stay open beyond 2025. Calls for such payments could increase, particularly if Snowy 2.0’s delay is confirmed.
Another came when Queensland’s Mick de Brenni queried the need for the competition watchdog to include his state’s coal-fired generators in an investigation into possible price gouging, according to one observer.
De Brenni fired back at such claims on Friday evening.
“That is simply not true, but beyond that it would be inappropriate to comment on discussions in the room,” he said.
“Energy ministers agreed to examine bidding behaviour across the NEM and Queensland generators will be subject to that examination just like every generator in the NEM.”
Welcome to the hot seat, Chris Bowen.
