It took just a day for two ministers to approve another Snowy Hydro $6 billion dollar cost blow-out and further delays to completion. Rex Patrick looks at how the project is travelling.
If you’ve ever tried to get a $250K, or even $50K, grant from the Federal Government to support a much-needed local community project, you’ll know the paperwork you must go through to get approval and then get the money flowing.
The bureaucratic red tape makes a funnel-web’s lair look inviting. After dotting the i’s and crossing the t’s and then submitting the application with voluminous attachments, there are months and months of waiting while the relevant Department(s) does its due diligence and value-for-money checks.
But if you’re Snowy Hydro Limited (‘Snowy’), all it takes is a 10-page ‘reset’ letter and a wait of just one day. On 29 August this year, the Chair of Snowy Hydro Limited, David Knox, sent a letter to Energy Minister Chris Bowen and Finance Minister Katy Gallagher proposing that $6B of additional Snowy 2.0 project costs be approved. Approval was granted the very next day.
Thinking to myself – wow, that must have been an extraordinarily convincing letter – and noting that the two shareholder ministers had written to Snowy in their approval and talked up the corporation’s new transparency approach, I thought I’d FOI the letter.
Despite the letter creating a $6B imposition on taxpayers, most of it has been withheld from the public.
We don’t get to see the rationale for the doubling of Snowy 2.0’s cost.
The 29 August redacted letter is embedded at the bottom of this article. Because it’s heavily redacted, it’s impossible to work out just what the compelling argument presented to the shareholder ministers could have been, MWM is going to tell you what should have been in the frank and fearless, or at least very honest, advice to the Ministers.
So here goes …
It’s not a renewable project
Ministers, before we kick off with the merits and financial argument, we thought we’d better come clean on a grand deception. Despite us regularly presenting Snowy 2.0 as “Australia’s largest renewable energy project”, that’s just not true.
Snowy 2.0 is planned to work by pumping water from the low-lying Talbingo Reservoir up to the high-set Tantangara Reservoir when electricity prices are cheap and letting the water flow back down through power-generating turbines when electricity prices are dear.
We’ll need power to do the pumping – lots of power. We’ll be taking that power from the grid … that is, the grid that’s a mix of coal-fired, gas-fired and renewable energy.
The strict truth is that the water is recycled, and the process is repeatable, but it’s not renewable energy.
It’s an energy storage system agnostic of where the energy comes from.
But to be clear, we’re not suggesting this be explained to anyone because you’ll continue to get away with a clear, simple, and straightforward explanation that it is renewable, and no one’s going to raise a twig.
As Sir Humphrey Appleby once said:
you don’t need the truth, you just need something to tell the Parliament.
This is a little bit complicated Ministers, but complicated is great. You can spin your way out of complicated.
Our project is very inefficient. Water is pumped from the lower reservoir to the upper reservoir, which at a later time returns to the lower reservoir, with a round-trip efficiency of about 75%. In other words, about 25% of the electricity generated is lost in the pumping process.
Then there are the losses associated with getting the power over transmission lines to and from Snowy 2.0, which is not exactly located close to the big centres of energy demand.
Inefficiency means cost. Snow 2.0 power will be expensive. It’s only ever going to be used as power-of-last-resort.
There are other better and cheaper last-resort solutions. But, just stick with “it’s renewable”. That ought to do it.
But wait, there’s more
When it comes to total cost Ministers, it’s important to hold the line that it’s $12B.
As you know, in order to simplify approvals and to minimise oversight, Australian taxpayers bought out the NSW and Victorian Government’s shares in Snowy Hydro in March 2018 for $6B. It’s of no benefit to anyone to include that number in the total.
The reality is when it eventuates that we’re significantly in the red and unable to get a return on this ‘investment’, the Commonwealth can always cut its losses and privatise Snowy. No one will remember the squandering of public money, and if you’re still in power, you can spin the $1B ‘fire sale’ as a huge windfall for the public purse.
But one final word of caution Ministers, don’t mention transmission lines. There are a couple of problems with that.
We’ve spent a bit of effort to distance the cost of transmission lines from the cost of Snowy 2.0. ‘Snowy Link North’ and ‘Snowy Link South’ have been renamed to ‘HumeLink/Sydney Ring South’ and ‘VNI West’. We don’t want the original estimate of $1B to $2B transmission line cost, now blown out to more than $12B, to be added to the $6B share buyout and $12B new project cost.
That would reveal Snowy 2.0’s real cost to taxpayers/consumers as a gobsmacking $30B. That is an embarrassment we just don’t want to deal with.
Oh, and the other thing you need to understand, but not promote, is that there’ll be no underground transmission lines, rather 8 kilometres of 120 to 140 metres wide easements running throughout Kosciuszko National Park. For the first time in 50 years, we’re going to see overhead transmission lines built in a NSW National Park. Over 100 hectares of pristine national park will be cleared.
And whatever you do, don’t mention the noxious fish and pathogens that will be transferred from Talbingo to Tantangara and from there to the Murray, Murrumbidgee, Snowy and Tumut Rivers, devastating native fish.
Wherever you confront dissent over the outrageous cost of this project, just mention the 2700 jobs that we say are created by this project.
We know there’s a shortage of skilled workers across Australia and that using workers on inefficient projects just drives inflation up. Stay away from that issue because it’s a hard argument to walk away from in one piece.
Don’t worry Ministers, nothing in this letter is likely to come out, thanks to our broken FOI system.
If anyone asks for this letter, you can deny them access under FOI, saying it’s all commercial-in-confidence.
Finally Ministers, if there’s one thing we can’t emphasise too much, it’s that we should keep talking about this being a “nation-building” project.
The original Snowy scheme was nation-building, so something the marketing team labelled Snowy 2.0 must be nation-building, too.
The ghosts of Ben Chiefly, Bill McKell, William Hudson, and so many tireless workers from distant shores are still pretty serviceable stage props for the political mythology draped over the shambles of a project we’re trying to run.
Don’t worry about Florence, the tunnelling machine that’s bogged down in our still very, very short tunnel; when we move a bit more, we’ll put up a plaque for one or both of you to unveil at a new media event.
We’ll whip up a speech about how we’re all “nation-building”.
This project is not value-for-money. This project makes no sense. It’s not nation-building. You already know that. But, Ministers, this project really is too big to fail, so please send us your approval to proceed.
The Six Billion Dollar Letter.