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Environment and Communications Legislation Committee
18/02/2019
Estimates
ENVIRONMENT AND ENERGY PORTFOLIO
Snowy Hydro Ltd

Snowy Hydro Ltd

[17:15]

CHAIR: Mr Broad, welcome back. Do you have an opening statement?

Mr Broad : No. Not today.

CHAIR: We'll go straight to questions.

Senator KENEALLY: Thank you for being here today. I do have some questions on Snowy 2.0. Mr Broad, what is the current state of the project? Has it received a final investment decision from the board yet?

Mr Broad : Yes. It received a final investment decision in December. We have selected a civil and an electromechanical contractor. We are in negotiations with both them. Final contracts will be signed once the shareholder—the government—has signed off on the project.

Senator KENEALLY: Has the issue of required transmission investment been resolved?

Mr Broad : AEMO has put out a map of the transmission upgrades. We believe that at least the upgrade in the north will be in time for 2.0. There is still some debate about whether the one in the south will come in time both for the renewables that are being developed in Victoria and to allow Snowy 2.0 to firm it up.

Senator KENEALLY: So do you need the issue of the upgrade in the south to be resolved? Is that a hold-up in any way to 2.0?

Mr Broad : No. It won't be a hold-up. In fact, this project is going so well, there is an argument that we could, with others, fund our own shorter transmission south. We would argue that the economics are strong for this project to keep the lights on in Victoria. It calmed down a few weeks ago. There is an economic argument. But we would argue that the biggest issue is developing a transmission network that caters for the emergence of the new technology that is coming. That network is part of the AEMO's proposals. We think that will come up in a timely manner both for the renewables coming on to the market and for Snowy 2.0.

Senator KENEALLY: When you say there is an economic argument, were you suggesting an economic argument for Snowy to invest in that?

Mr Broad : Yes. But it wouldn't be the one necessarily for the benefit of all the markets. We would actually look at a much shorter length in duplicating the southern link today. I think the whole market needs a much bigger linkup along the Murray, picking up the renewables market that has developed in Victoria in the north-west. That is a far more rational outcome. But if you take a very short-term Snowy-centric view, which I don't like doing—I like to think we could stand back and get this thing right—we believe the economics are starting to move in favour of us putting those proposals. We've discussed that with AEMO. We would look at that. They are very receptive now, as part of their process, to looking at bringing forward some of those southern links, which would then, I think, benefit all participants in the market and probably mean better outcomes for everybody.

Senator KENEALLY: Is there a timeframe by which you have to have a clear sense of what is going to happen with those southern links?

Mr Broad : We would obviously like to get it done now, but the links now look like 2030. We would like to think that could be brought forward by about five years.

Senator KENEALLY: What would be 2030?

Mr Broad : The current proposal by AEMO is to have the southern link in by 2030. We think it's better off by 2022, 2024 or 2025, that sort of timeframe.

Senator KENEALLY: Have the timelines around the project—I believe they were previously for a 2024 completion date—changed at all?

Mr Broad : No. Not really. We may slip into 2025. It is of that sort of order, yes.

Senator KENEALLY: You may slip into 2025. What was that?

Mr Broad : With these massive projects, you don't want to be hung up on a few months. Now with all the bids in, and all the technical solutions resolved, we are very confident by 2025, and we are very hopeful by the early start in 2024, yes.

Senator KENEALLY: New energy policies have been announced by the government since we last met. In particular, have the proposed big stick divestment reforms and the government's generation underwriting program affected the plans for Snowy 2.0 in any way?

Mr Broad : No.

Senator KENEALLY: Neither of them?

Mr Broad : No.

Senator KENEALLY: Has Snowy made an internal assessment of the big stick divestment reforms and any potential impacts? Would you be that confident to make that statement?

Mr Broad : The government owns us. If they wanted to split us, they could.

Senator KENEALLY: I really apologise. We have had trouble in this room today with the acoustics. For some reason, this corner is missing some of the commentary from the table. I'm sure it's not deliberate. To be fair, I did choose to sit here, Chair. Could you repeat that? Did you say that the government owns you and they could divest you if they wanted to?

Mr Broad : Yes.

Senator KENEALLY: So you have already considered that you may well face that decision of government?

Mr Broad : I want to put a bit of context. The question is about competition and whether the integrated companies over time have reduced the number of players, which in effect reduces competition and is not in the best interests of consumers. I would argue—and I suspect you and most of us who have been around and benefited from competition since the market opened would—that greater competition is always the greatest friend of consumers. We did participate with the ACCC when they challenged the decision by the then state government of New South Wales to allow AGL to buy Macquarie Generation. The ACCC challenged on the basis of reduced competition.

Senator KENEALLY: Yes.

Mr Broad : We probably would have supported that view. You would recall from your days in New South Wales government that the proposals were always to have three players in New South Wales.

Senator KENEALLY: Yes.

Mr Broad : I was running in the old EnergyAustralia days. We were going to combine the generators and create three markets. I think that would have been in the consumers' best interests.

Senator KENEALLY: Given that Snowy is the fourth largest supplier of electricity into the NEM, did you provide any advice to the government on the potential impact of the big stick reforms?

Mr Broad : Neither asked nor provided.

Senator KENEALLY: Thank you. Chair, I think they are all the questions I have for Mr Broad.

CHAIR: Excellent. I think that's all the questions we have for Snowy Hydro. Thank you very much, Mr Broad and colleagues.

Mr Broad : Thank you very much.

CHAIR: We'll now move to the Clean Energy Finance Corporation. We might just suspend for two minutes.