Australia’s Snowy Hydro Makes ‘Game-Changing’ Leap From Coal to Renewables

“The new renewable energy generation is a game-changer and will push down future energy prices.”

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The Australian government-owned energy provider Snowy Hydro this month announced a major switch to renewables in a series of “game-changing deals.” 

The company said in a press release that it had signed eight wind and solar contracts, totaling 888 megawatts of peak power and around 2.8 terawatt-hours of energy a year, that would provider cheaper electricity to 500,000 households.

The capacity is due to come online between now and 2020 and will replace the mainly coal-based energy that Snowy Hydro sources from Australia’s National Electricity Market to power pumped hydro storage and resell directly to customers at times of high demand.

Snowy Hydro — which owns energy retailers Red Energy and Lumo Energy that serve more than 1 million customers — is one of the largest energy buyers on the National Electricity Market. 

It purchases around 3 terawatt-hours of electricity a year to supplement the 4 terawatt-hours produced from its own generating assets. “Just like households, we are exposed to high wholesale prices,” said the company.

“The new renewable energy generation, ‘firmed’ by existing Snowy Hydro assets, is a game-changer and will push down future energy prices,” said Snowy Hydro in announcing the deal.

“This will bring on significant new energy supply and therefore much-needed competition to the market, and will enable Snowy Hydro to pass on lower wholesale prices to our customers.”

As a result of the switch from the National Electricity Market to renewable power, Snowy Hydro will offer energy to customers at a flat rate of less than AUD $70 (USD $51) per megawatt-hour, for up to 15 years starting in 2020.

This compares to a first-quarter 2020 electricity price of AUD $98.50 (roughly USD $72) a megawatt-hour in New South Wales and AUD $108 (roughly USD $79) per megawatt-hour in Victoria, according to ASX energy market trading data cited by The Sydney Morning Herald

Snowy Hydro said the move to renewables was prompted by “rapid changes” in the National Electricity Market over the last 12 months, along with an ongoing drop in the price of renewable energy. 

The changes prompted Snowy Hydro to start a renewable energy procurement program that attracted 130 bids totaling 17.6 gigawatts of capacity.

Details of the winning projects, known to be in New South Wales and Victoria, would be made public by the project owners, Snowy Hydro CEO Paul Broad told GTM.

Spanish-Dutch developer Fotowatio Renewable Ventures already confirmed it is on the list. This week, Fotowatio announced a power-purchase agreement (PPA) with Snowy Hydro for the 67.8-megawatt output from its Goonumbla Solar Farm.

The project, which should deliver around 195 gigawatt-hours of energy a year, is located in New South Wales and is expected to come online in June 2020, according to reports. 

The Australian Financial Review  said other projects in the portfolio included Neoen's 66-megawatt Parkes Solar Farm, also in New South Wales, and “ventures backed by BP and Macquarie, as well as by investors from Malta and New Zealand.” 

Not included in the procurement round were two South Australian projects — the 127-megawatt Tailem Bend Solar Power Project and the 212-megawatt Lincoln Gap Wind Farm — which are currently under construction with Snowy Hydro PPAs in place, Australian Financial Review reported. 

Snowy Hydro also owns around 620 megawatts of gas-fired capacity and 136 megawatts of diesel power, in addition to the 4.1 gigawatts of hydro generation, spread across nine plants, that make up the bulk of the company’s generating assets. 

The gas and diesel assets will remain in place following Snowy Hydro’s switch from the National Electricity Market to renewables-based electricity, Broad said.   

Separately, Snowy Hydro is planning to increase its pumped hydro capacity through a project called Snowy 2.0.

The scheme aims to link two existing reservoirs, Tantangara and Talbingo, with a network of tunnels running up to a kilometer underground.

If it goes ahead, Snowy 2.0 will start operating in 2024 and will last for 70 years, with enough capacity to deliver 2 gigawatts of power for up to 175 hours. A final investment decision on the project is expected before the end of this year.