The Turnbull government has doubled down on their commitment to feature Snowy Hydro front and centre in Australia’s long-term electricity plans in this week’s budget.
They have signalled their intention to buy out Victoria and NSW’s stakes in the currently joint-owned company Snowy Hydro Limited.
At the moment the Federal government owns 13 per cent of Snowy Hydro, the NSW government owns 58 per cent and the Victorian government owns 29 per cent.
The Federal Government has offered to raise their share to 100 per cent at a cost of around $5.25 billion: $3.5 billion for NSW and $1.75 billion for Victoria. Of course, the states have to agree to sell their shares, and the Commonwealth said they are in talks with NSW and have initiated discussions with Victoria.
The buy-out would be on top of the $2 billion they have already earmarked for upgrading the scheme over the next four to seven years.
Snowy Valleys Administrator Paul Sullivan said the announcement was a pretty clear sign the government is serious about its plans for Snowy Hydro.
“It’s fantastic! Just brilliant,” he said. “It really looks like [the expansion] is going ahead, I’ve heard no negative feedback or suggestion that it’s smoke and mirrors. It seems like it’s a goer.
“And as well as buying it, they also guaranteed that they’re going to keep it in public hands, which is just amazing news. It should provide stability and puts it all to bed.”
If the Federal Government was the only owner of Snowy Hydro that would make it easier to sell it, but Treasurer Scott Morrison also said on Tuesday that the government intends to keep the asset in public hands.
This is significant nationally, as much of the recent surge in national electricity prices is due to previous governments’ decisions to allow Australian energy assets to be owned by the private sector, in this case gas infrastructure.
Gas companies have been exporting Australian natural gas overseas at lower prices than they have been selling it to Australians, and exporting gas overseas at the expense of keeping gas available for the Australian market, which creates an artificial shortage and drives up prices.
We’re in a situation where, in a country that is one of the biggest natural gas producers in the world, Australians are paying high prices for a resource we have plenty of, because it is all being shipped overseas, generating profits for private companies like AGL and Santos.
This is all perfectly legal, because it’s the private companies that own and run the infrastructure and they can essentially generate profits for themselves however they want.
So, keeping Snowy Hydro and other energy assets in government hands seems like a good move for consumers – and it also means profits generated by the company are a source of revenue for the government rather than private shareholders.
Over a decade ago the Howard government led plans by all three governments to turn Snowy Hydro over to the private sector, but pulled out at the last minute due to a backlash from voters.
For the time being at least, it seems this current Liberal government has no intention of letting go of this significant asset.
The government’s confidence in the benefits of Snowy Hydro to the electricity market, backed up by billions of dollars, is also a positive indication of a move towards renewables generally.
One of the main selling points of pumped hydro storage it that it can, when needed, generate massive amounts of electricity almost instantaneously, making it a complement for shortfalls in weather-dependent wind and solar.
The Commonwealth’s intention to buy Snowy Hydro also add weight to speculation they could be intending to develop it even further after the announced Snowy Hydro 2.0 expansion.