Interview with Kim Landers, ABC AM

KIM LANDERS: The massive cost blowout in Australia's largest renewable energy project, Snowy Hydro 2.0 isn't deterring the Federal Government as it tries to deliver the countries energy transition.

The price tag's doubled to $12 billion in the past six months. The pumped hydro scheme in Southern New South Wales is supposed to supply power when solar and wind projects can't be running, and it should be up and running by 2028.

Chris Bowen is the Minister for Climate Change and Energy. Minister, at $12 billion is Snowy Hydro 2.0 still value for money?

CHRIS BOWEN: It is actually, Kim. The analysis shows that there's still $3 billion net value, and of course is 40 per cent built, so it would be a huge waste of money to cancel it at this point. Obviously, the cost blowout is disappointing. There's a couple of factors at play here. Every major construction project in the world is going through these cost blowouts, this is one of the complicated engineering projects underway in the world at the moment. So, to a certain degree that's understandable.

Also, the original contract entered into very clearly left a lot to be desired, and based on the strong advice of Snowy management, we've authorised them to fix that going forward.

KIM LANDERS: So, are you confident that that $12 billion figure is where it's going to stay?

CHRIS BOWEN: Well, that's certainly the advice to me, and it has been very thoroughly examined across the board after a project review and reset by the new Chief Executive of Snowy Hydro, Dennis Barnes, based on the very best advice, I have no reason to question that; it is a conservative figure and now –   

KIM LANDERS: So, is the project so critical to our energy transition now that it just has to be done no matter what the cost?

CHRIS BOWEN: Well, I wouldn't put it in those terms, Kim, but it is a critical project. I mean the other things that we announced yesterday as a result of this review are that we now expect 2.2 gigawatts instead of 2 gigawatts, so it's going to have more capacity, not a huge amount, but material. It's also expected now to be delivered by December 2028, which is a little earlier than previously indicated. Snowy management's done a good job at getting this project back on track as best they can, and I do want to say very clearly, Kim, the workers on Snowy, the thousands of workers, and I've been through the site from one end to the other, I just want to pay tribute to them as well. It is not their fault. They're doing a good job in difficult circumstances as well.

KIM LANDERS: The Australian Energy Market Operator, AEMO, said yesterday that there's an urgent need for investment to ensure reliable power supplies, and yet in some cases we've got Snowy Hydro that's been running behind; I'll give you another example, the South Australian Government is opposed to the Southern Ocean Wind Farm zone off its coast. Is this an example of the doubt about whether all of this investment is actually going to come off?

CHRIS BOWEN: I think these are examples of the fact that we are in the middle of the biggest economic transformation our country has undertaken in modern times. And of course, that is not going to be a linear line. That requires very careful management, and that's exactly what we're doing.

Now let's run through, we know some examples we've had from the latest figures, $2 billion worth of storage and hybrid projects reaching investment stage in the last quarter; we had six big batteries also reach that stage with $3,800 megawatts added across Australia, breaking the billion-dollar barrier for the first time.

So of course, there are going to be, you know, various obstacles along the way. That's what we do when we're managing the biggest economic transformation our country's undertaken in modern times, and we're getting on with all the above, I could talk about offshore wind and all the progress we're making – 

KIM LANDERS: What are you saying to the South Australian Government, which says, "No, we don't want it off our coast?”

CHRIS BOWEN: Well, okay, let's run through, I've declared two offshore wind zones already, Gippsland and Hunter, there are two currently up for consultation, Southern Ocean and Illawarra. The Southern Ocean one is the one you're talking about is only partly in South Australia, it's mainly in Victoria, very important for the economic future of Portland in particular. But I take community consultation very seriously, this is very important for our country, but so is it important for the communities I consult widely. The two zones I've already declared, I've made changes after consultation. That's the process working. It's listening to communities, it's saying, "Okay, offshore wind's important for Australia, but we're going to work with you to make sure it works for your regions as well." And the same process will apply in Southern Ocean.

KIM LANDERS: Let me ask you about another crucial project, and that's the Marinus Link undersea cable to deliver electricity between Tassie and Victoria. Do you know what the current price tag on that is?

CHRIS BOWEN: So, there's no secret that there's been a cost increase there as well. The Tasmanian Government undertook those costings, and it has come back, that's no secret.

KIM LANDERS: What is it, sorry?

CHRIS BOWEN: We have not yet released those figures; we will imminently. The discussions between the Tasmanian, Victorian and Commonwealth Government, which I've been negotiating with those two governments are very well advanced and productive and positive, and I'll have more to say in the near future, and when doing so, we'll then obviously release more figures.

KIM LANDERS: Well, the Tasmanian Government is saying it can't support the project at any cost.

CHRIS BOWEN: And as I said, Kim, we've been in discussions with them, and obviously when there's a cost increase, governments then work together to manage that, that's exactly what our government has been doing, looking at what more and differently should be done, and I'll have more to say about that quite soon.

KIM LANDERS: Well, I was just going to say, if State Governments start saying, "Well, we're capping what we can chip in for projects like this," is it up to the Federal Government to have to contribute more?

CHRIS BOWEN: Well, I'm not sure what I can really add productively to what I've just said, Kim. Look, this is a very important project. This will help Tasmania, which is already 100 per cent renewables, get to a higher proportion of renewables and export those renewables, but also, also, Kim, important for Tasmania, because as you'd imagine, Tasmania is a very heavy user of electricity in winter, when it gets very cold, They need a two way float, they need to be able to call on the mainland grid in winter, there's only currently one cable, which is a pretty risky proposition when you think about it, just having, you know, one line wandering between Tasmania and the mainland; we're going to fix that.

KIM LANDERS: Okay. Well, we'll wait to –

CHRIS BOWEN: And obviously there are challenges along the way.

KIM LANDERS: We'll wait to hear more details then. Minister, thank you very much for joining AM.

CHRIS BOWEN: Always a pleasure, Kim.