The Biggest Government Blowout In Australian History?

Added: 2026-05-07

[00:00:04]Well, good morning everyone. It gives me great pleasure to welcome Jason Tay to the view this morning. Uh we're recording this on Wednesday. Um just in the shadow of the RBA's rate increase yesterday.

[00:00:19]Um interest rates uh have been feeling the effect of inflationary pressures particularly in the energy sector. We've had the war in the Middle East causing uh energy prices to spike and energy is the focus of today's discussion. Um Jason, we we're in the middle of Australia trying to cope with um disruptions to its supplies of oil, refined products, uh energy. And two of the ways in which Australia has tried to cope with this have been uh with the growth of um non uh fossil fuel uh sources of energy specifically hydro in the form of the snowy hydro scheme and um solar and wind. Today we're going to focus on snowy hydro 2.0. 0 which was introduced with great fanfare by Prime Minister Malcolm Turnbull at the time in 2017 and then more recently we've had the uh government sponsorship I guess of the home batteries program cheaper home batteries program um and these two avenues have had differing successes um let's start off with uh Snowy Hydro and perhaps put that in context of Australia's energy requirements. Uh tell us a little bit about Snowy Hydro, Jason.

[00:02:03]>> Yeah, so back in 2017, uh Malcolm Turble, like you mentioned u just earlier, announced uh that the government's going to proceed with Snowy uh Hydro 2.0. Um, you know, the scheme was, um, basically designed as a pump hydro project whereby you got two reservoirs, one higher and one lower. Uh and the way it worked was uh during the day when there's cheap electricity uh it will pump water uh from the lower reservoir um up through tunnels 27 kilometers of tunnels up into the higher reservoir and then in the evening uh it basically release all that water again uh through turbines and generates electricity to take advantage of uh the higher electricity price um during the evenings. Now the reason why that was conceived was because back in 2016 u Australia actually experienced um an acute energy crisis um not of the oil kind of an electricity kind. Uh South Australia went through a period of blackouts. Uh that was quite acute. Um and also um you know not long after um you know 2017 the Hazlewood uh uh coal fire generator was going to be uh decommissioned and and that was a large generator um that was going to be removed from the system and obviously create more volatility in the uh house electricity market and and and the Snowy Hydro 2.0 was conceived to um handle you know um uh the supply shocks that we uh had at that time. Yeah, just to emphasize again um the way that it it's it's meant to um hit the spot in terms of demand. So during the day uh when the wind is blowing and the sun is shining, there's a lot of um power generated through uh solar rooftop panels. Uh but then when people come home from work at night and they turn on the air conditioning and they start cooking dinner and put the TV set on, that's when demand peaks, but it's getting dark and so we don't have um the power coming from solar. So is that where the battery usage is so important? I think you've written a a fascinating article on the subject and I think we'll try and link that article to this uh video. Um so is that is that what it's meant to uh to combat the the timing difference? That's right. So um you think about whether it's a home battery or a green scale battery or even Snowy Hydro 2.0. Um I guess the way to think about Snowy Hydro 2.0 is like a long duration battery. It can run for days. um but uh it stores energy during the day by pumping the water up the reservoir um and releasing it at night. So um the reason why you get that um peakiness in demand as you mentioned is because Australia actually has um had a successful adoption of solar rooftops. Um in fact uh today there's one in three households have solar on top of the roofs. I mean that that is a fantastic success.

[00:05:16]>> Incredible, right? and so much so that it generates about 14 to 15% of the national electricity market. Right. Um >> and that's from a zero start two decades ago.

[00:05:28]>> Yeah, that's right. Or even less than two decades ago. I think it's close to zero at 2015. So we are in in uh 2026 a little bit over a decade and from zero to um 14 15%. Which is uh extraordinary right from a solar rooftop perspective.

[00:05:46]But as you described, the sun disappears around the evening time. All that excess energy that we have in the system pretty much disappears. Um >> and and you know that's why you need >> a battery type solution such as Noi Hydro 2.0 or other other technologies that can transfer that energy that excess energy that we have during the midday to run during the evenings. so that um it can help alleviate u you know the price pressures that we see normally during the uh evening.

[00:06:18]>> Okay. So we'll we'll get on to the home battery um program in a minute but let's just stay with Snowy 2.0. So um Malcolm uh Turnbull um was very proudly standing in front you know at the Kiosco uh nature reserve and uh saying that this was going to be an iconic nation building piece of infrastructure. Um, I don't think they did a detailed feasibility or costbenefit analysis, but they said it would cost about 2 billion.

[00:06:53]Then they said it would cost about 4 billion and take perhaps three or four years to do the tunneling and so on.

[00:07:00]We're now uh 9 years later. Um there are some uh forecasts that it could cost as much as $42 billion and only start generating electricity um in the 2030s. Uh do do you think these criticisms are justified and what are the sort of engineering issues and other issues that they've had to cope with?

[00:07:31]>> Yeah. No, look, I mean, the criticisms are wellounded. You know, look, there's there's nothing wrong building, you know, uh, national infrastructure projects, but do it within our means, right? So, um, I guess the issue with snowy hydro when it was first, uh, talked about and initiated, um, the feasibility studies weren't weren't there to begin with, right? Um I think the initial numbers that was first talked about in 2017 was $2 billion and it was revised up through time when the feasibility studies came through.

[00:08:03]>> But the fascinating thing about um uh those studies like even after uh uh the work was done last year in 2025 um the cost estimates was raised to 12 billion where in 2026 now one year later and now independent analysts are saying now it's 42 billion. Right? It it is astonishing and like where where do you conjure up $30 billion in extra spending. So um look um and at the moment you can't sort of be critical in terms of how it operates because it's not even been built. You can't even say whether it's operating properly, but you can comment about the delays, the increased capex costs. And part of the increasing capex cost is really um uh and and it's obviously related to the feasibility studies is the geological um issues drilling at 27 km tunnels through uh you know through that area of Australia, right? So I think they've encountered, you know, softer uh soil with with water flowing through which makes it incredibly hard to, you know, maintain uh tunnels or or drilling through. Um and I suspect that's where a big portion of where the cost blows have come from.

[00:09:18]>> Yeah. not not least um it's a highly unionized workforce and uh I think um the AWE and the CFMEU are both involved um and they they had a walk out last year went on strike a thousand u workers and uh and the costs I I think they were given an 8% increase and 26% over the next four years we're talking about people paid on average the senior your tunnel is $250 to $300,000 a year. So you can see how much money is involved, but um uh and also environmental issues. Um so the snowy is having some serious problems. Uh tell us a little bit about the home batteries program because that's been an un uh unexpected uh positive surprise. Yeah, absolutely. So, um, now while Malcolm Turble, uh, you know, I guess initiated the Snowy Hydro 2.0 project, the Albanese government as part of their 2025, uh, federal election promise say, um, and one of the key focus was to relieve the cost of living pressures. And they said, look, we'll uh we'll help households um, you know, uh, with their, uh, battery deployment. Um and you think about how I mentioned earlier that we have had unmititigated success in regards to solar rooftops.

[00:10:54]One in three households have it. Um before this scheme came along, there was one in 40 households with batteries, right? So there was a huge disconnect between um the adoption of solar and batteries. And what was stopping that was because the cost of batteries was too high. So the government um in 2025 initiated the cheaper homes battery uh program uh which allowed um households to save 30% uh straight away uh by installing a home battery. Um within 5 months uh there was about 150,000 batteries installed >> and that was about half of the entire household battery fleet that was installed in the prior 10 years. So it was a huge success. So the subsidy that the government put aside for that was about uh just a little bit over $2 billion. And because it was so successful, it was going to run out in 2026, right? And the government had to do something about it. So in December uh 2025, they revised all estimates. So rather than aiming for 1 million households, they doubled it, said we're going to aim for 2 million households to household batteries. um and um you know quadruple the home battery uh target from 10 GW to 40 GW. So um which was on quite a big number. Um but the momentum in that battery installation has continued. 10 months later from July uh there has been about 350,000 household batteries that's been installed. So instead of it's so one in three households have have got roof panels. Uh it used to be that only one in 40 had a battery. Now what's it like one in three has got a battery and something like that.

[00:12:38]>> Well not as yet but uh definitely along that trend right um I I think any new uh solar installations now will come with a battery installation as opposed to in the past was just only solar. Um so that mix that one in 40 would obviously uh three time that would uh uh you know uh increase over time and and and that would have a huge impact on the national electricity market and so I mentioned about imagine a world where today solar supplies 14% of the national electricity market.

[00:13:10]>> Yeah. Right now, I'm not saying you could get there, but imagine another world where if you had 14% supply during the day, but what what about 14 supply 14% supply during the evening from batteries?

[00:13:21]>> Yeah.

[00:13:22]>> Um if that occurred, Snowy Hydro 2.0, its business case would all fall apart.

[00:13:30]>> Yeah.

[00:13:30]>> Is not required.

[00:13:32]>> So, so battery technology, batteries becoming cheaper. um and um you know more accessible to to households at a reasonable price particularly with the government incentive.

[00:13:47]um if Snowy is uh you know reputed to only come on stream in 10 years time although the government says it's 70% uh on the way um is it going to be a big white elephant I mean uh or is there a difference in the battery storage capacity which still makes it valuable >> yeah so um look from a technology point of view, snowy hydro does have more storage capacity >> than household batteries. So if you think about a a typical household batteries, it can drain within 5 to 6 hours, right? So um which is a point, they're not meant to be long duration type energy assets, they're meant to run during the evening to alleviate that uh demand pressure that you see in the evening. Uh snowy hydro can potentially be run four, five, maybe six days continuously. Um so if you do get a period where you have you know lots of cloudy days um you know the the household batteries want recharging time yeah for the following days. So so there is >> a scenario where long duration energy assets like snowy hydro uh could come into play >> but think about how often that happens.

[00:15:08]So, first of all, it'll happen typically around winter. And then, you know, and during winter, how many days do you expect to not see any sun, right? We're talking about a small fraction of the time where potentially snowy hydro could come into play. M >> but then you know the way I think about it is that or the $42 billion question is is it worth that insurance policy to spend $42 billion >> when you got gas fire pickers which have been running in the evening anyway for the last few decades to to to provide that uh backup supply um and you would never have cost taxpayers a scent.

[00:15:48]>> Yeah. Yeah. I mean, is it too late to call a a halt to Snowy 2.0? I mean, I know a lot of money sunk in, but it's the question is, is the money still to be invested going to uh is it going to have a return for the Australian taxpayer or has technology, you know, destroyed the case for it?

[00:16:12]>> So, I think there's a couple of points there. I think um first of all the home battery scheme is meant to run to the year 2030. In fact, I think it will be finished before snowy hydro 2.0 start.

[00:16:25]Um the government is aiming for 2 million batteries uh home batteries. Um and there'll be a certain portion of them um you know with home batteries that uh could sign up for virtual power plants and and that's a scenario whereby a household relinquishes the control of the battery but their utility provider will control it right um and the households will get paid for it obviously um and they will use that battery to take advantage of you know high evening prices. Um, >> now theoretically you could have one in three household batteries sign up to a a virtual power plant type program. Um, that's 600,000 batteries. If those 600,000 batteries fire at the same time in the evening, um, you know, their dispatch capacity is twice that of Snowy Hydro, >> right?

[00:17:20]>> Right.

[00:17:21]>> They will hit the market first before Snowy Hydro can take advantage of any evening spikes. So, you know, there could be a case whereby snowy hydro could potentially become a white elephant, you know, uh by the time um you know, it starts. So, not only do you have home batteries, but then you got grid scale batteries, industrial size batteries, >> uh that have been planned for the next 5 years as well. So you compound the two together um and the technology has moved so fast and obviously with the recent government incentive um that um the cost of snowy hydro um doesn't look justified anymore.

[00:17:59]>> Yeah. And uh you know perhaps in in 10 years time we'll be uh looking at small uh nuclear you know modular reactors. Uh who knows? Um Jason, uh we'll have to end it there. Could you just draw some conclusions from this discussion so much time and money and energy has been spent on Snowy 2.0 hasn't seemed to panned out the way we hoped and yet something else um has been a great success. What what do you draw from that?

[00:18:32]>> Yeah, so so the world's obviously transformed since the initial announcement of Snowy Hydro 2.0. Um we have seen the success of batteries coming into the market and in fact uh the most recent report by um AMO mentioned that batteries is the de is the dominant technology now setting prices in the market.

[00:18:54]>> Yeah.

[00:18:54]>> Um for the last quarter now that provides you a glimpse of what the future's going to be like. Right. So as batteries begin to dominate more and more supply uh by providing extra supply into the market uh it will become the uh dominant price setter and it will then push out hydro and obviously pushes out gas as well. But um I I don't think $42 billion is a justified number even to complete it today to um to deliver something that may not uh operate well uh when it comes online.

[00:19:28]>> Yeah. Um an absolutely fascinating discussion Jason thank you so much for coming on to the view and uh to our audience out there please um link into Jason's article on live wire was it? Um it's it's a fascinating read and something that all Australian taxpayers should really be on top of. It is so important. Jason, thanks again.

[00:19:54]>> Thank you. Cheers.