Malcolm Turnbull’s spokesman praises move as a ‘nation-building project’ after report shows it to be financially feasible

This article is more than 2 years old

This article is more than 2 years old

A feasibility study into the proposed expansion of the Snowy Hydro scheme has given the project the green light, but says it will cost billions of dollars more than predicted.

The study, supported by Malcolm Turnbull, found the proposed expansion was both technically and financially feasible, and that Snowy Hydro would be able to finance the project itself.

But it says the current estimate for the project is between $3.8bn and $4.5bn, more than the $2bn estimated by Turnbull when he promoted the project earlier this year.

It has withheld details of the cost estimate, saying they include commercially confidential information, but says the larger capital costs take into account the need for “extensive reinforcement” of the project’s proposed structures owing to the challenging geological conditions that were uncovered during the geotechnical drilling program.

If construction gets under way shortly the expanded Snowy Hydro could begin operating from 2024.

Turnbull to announce $2bn expansion to Snowy hydro-electric scheme Read more

The $29m feasibility study – led by Snowy Hydro’s former engineering unit SMEC, now owned by Singapore-based Surbana Jurong – was released on Thursday.

“Snowy Hydro 2.0 is a nation-building project,” a spokesman for the prime minister said before its release. “It will not only deliver a more affordable and reliable energy system but will also generate jobs and grow our economy.

“The feasibility study clearly demonstrates that Snowy 2.0 is a viable pumped hydro project that will futureproof the National Electricity Market (NEM), helping stabilise the system and deliver lower prices.”

The Snowy Mountains hydro scheme, built between 1949 and 1974, is made up of 16 dams, seven power stations and 225km of tunnels.

The proposal to expand the scheme – dubbed Snowy Hydro 2.0 – involves boring 27km of tunnels linking the Talbingo dam, at an elevation of 552 metres, to the Tantangara reservoir, at 1,233 metres, so energy can be generated by pumping water uphill to the higher reservoir when energy is cheap (say, in the middle of the night) and releasing it back downhill when energy is in high demand and prices are higher.

It will expand the Snowy Hydro scheme by 2,000 megawatts, enough to power 500,000 homes, adding to the scheme’s 4,100MW capacity.

Snowy 2.0 could run for over seven days continuously or 15 days at times of peak demand without “recharging”.

An expert on climate change mitigation and clean energy warned this month the all-in cost of the project could be as much as $6bn or $7bn, once transmission upgrades to transport the stored energy were taken into account.

“I wouldn’t expect [the feasibility study] to have a positive NPV [net present value],” a Monash University engineering senior lecturer, Roger Dargaville, told Fairfax Media. “I think it would be a loss-making venture but that being said lots of big infrastructure projects don’t make money so that doesn’t have to be a hurdle.”

In the shadow of a cabinet reshuffle on Tuesday, the Turnbull government released a long-anticipated review of its climate policies that revealed it would be loosening the current safeguard mechanism that sets limits on pollution.

The late-year release of the climate policy review, which pointed to allowing Australian businesses to increase their emissions as their production grows, came as new figures confirmed Australia’s annual greenhouse gas emissions were the highest on record when emissions from land use change were excluded. Projections also suggested the country would increase its emissions all the way to 2030 and beyond.

The new official emissions data confirmed projections produced exclusively for the Guardian six months ago. In both 2015 and 2016, the government quietly released this data in the days before Christmas showing rising emissions. This year they were released almost a week before Christmas.

Labor and the Greens have blasted new annual emissions projections, and the Turnbull government’s review of its climate policies, characterising the Coalition’s action on climate change as woefully inadequate.