PRIME MINISTER: The Snowy Hydro – what an extraordinary achievement. This was the result of the vision and the courage of the generation that won the Second World War. They defended our freedoms, saved us and they came home and built this.
These are big dreams in these mountains; real courage, a belief in the future, a confidence in Australia.
What we are announcing today is our commitment to ensure that we build on that confidence, we continue with that courage. The projects that we are talking about today, which will add at least 50 per cent to the capacity of the Snowy Mountains Hydro Scheme - these projects were designed and engineered decades ago by the men and women who built this.
The capacity was there, all that was missing was leadership and money. My Government has both. We share that vision. We are determined to ensure that all Australians have affordable and reliable electricity.
Snowy Hydro already stabilises the grid all the time. Last night, two coal-fired generators tripped, Paul?
PAUL BROAD: Yes.
PRIME MINISTER: So these turbines swung into action and stabilised the grid. They can take a lot of the volatility out of the energy market. Giving Snowy Hydro more capacity, 2,000 megawatts of capacity, is a game-changer.
These projects have been designed a long time ago. They’re thoroughly commercial. What we’re doing now, is providing Paul and Snowy Hydro with half a million dollars of additional funding for the feasibility, that will enable them to review the geological studies, review the technology. Because it is a lot cheaper to build 27km tunnels now than it was 30 years ago. They didn't have big tunnel boring machines like we do today. So a lot has changed and it is all for the good.
The opportunity is greater than ever.
What this will mean, is the vision of that generation will be completed and developed. We won't shrink away from their courage. We are going to pick it up and run with it. This is a great project and as it is expanded, it will ensure that Australian families and Australian businesses have more reliable power.
This enables us to prevent blackouts. Snowy Hydro stepped in last night to prevent a black-out. It does that all the time. It will have so much more capacity to do it in the future and it will take the volatility out of the pricing and enable us to have more affordable power.
We are going to put the accelerator down on Snowy Hydro's development. In doing so, we will be putting the brake on rising energy prices. I will ask Paul Broad, the Managing Director of Snowy Hydro, to a bit say more about this exciting project.
PAUL BROAD: Thank you, Prime Minister. Yes, Snowy does keep the lights on. On 10th of February this year when it was very, very hot in New South Wales, this mighty beast behind us was going flat out. That beast kept the lights on.
The dream of Snowy from its inception was to have pumped storage schemes as part of it and the economics back in those days didn't work in our favour. We have been dusting off the old plans now for some years and when the opportunity came, when the Prime Minister led the charge on looking at pumped storage, we got a closer look into our pumped storage schemes and with the volatility in the market, the economics has changed.
So we are incredibly excited not just as the one big project but at least three or four others - that future generations will be able to be bring online as the market changes again. We at Snowy, are incredibly proud of our assets and incredibly proud of our history, incredibly proud of the role we play both in the energy market and supplying water to our irrigators in the food basin of the nation.
That is what we do every day, 24 hours a day, seven days a week. This project will add enormously to our potential to keep the lights on in the eastern seaboard of Australia.
PRIME MINISTER: Paul has talked about the importance of irrigation. I just want to stress that. The Snowy Hydro Scheme, of course, turned the rivers around, provided more water for farmers in the Murray Darling Basin. But the great thing about these projects, is they don't involve any reduction in water that goes out of the system to farmers, to irrigators at all.
This is essentially using the water within the system, using Snowy Hydro as a giant energy storage system, as a giant battery. What we do, is by being able to pump water uphill when energy is cheap in the middle of the night - sometimes you get paid for taking it Paul, don't you when the wind farms are really blowing hard - and pump it up the hill. Then you have it there, to be able to discharge and generate electricity again when there is demand, when there is a hot day, when the market is demanding more power. This is so important. This is securing affordability and reliability. It’s making a great Snowy Hydro scheme, even greater.
JOURNALIST: Prime Minister you mentioned that last night Snowy Hydro kept the lights on. Do you see, once it is expanded, do you see it contributing to base load power, so daily use or just for use in the peak periods?
PRIME MINISTER: Perhaps I’ll ask Paul to talk about the way it is used now. But the answer is a bit of both. Principally, the biggest opportunity for hydro is that they are able to switch on very quickly, they can come on, as you just saw, in 90 seconds, as we just saw in the machine hall. But Paul?
PAUL BROAD: Look, baseload is going to come more and more out of solar particularly. As that plugs into the market, you need power that can come on quickly to fill in the gaps, when the sun is not shining and when the system is out of balance.
When the frequency drops, as it did last night when I think the [inaudible] the frequency drops, and we turn on very quickly and rebalance the whole network. Power systems have to stay in balance. If frequency drops too much, you start getting brownouts. Now, we are a first world country. We’ve never had that problem for a long time in our country. This upgrade at Snowy will sustain that for a generation.
JOURNALIST: If you have the ability to do that now, why do we need to spend more money here?
PAUL BROAD: So as there is more and more replacement of baseload power with intermittent power, that demand well that’s going to increase. You notice now energy prices have increased significantly in the last 12 months. Hazelwood is closing and the other base loads are closing. More renewable is coming in. De-carbonising the economy. The more that goes on, the more you will need it.
JOURNALIST: When do you expect this project to be completed and, given that Snowy Hydro is owned by the Federal Government, the New South Wales and Victorian Governments, are you going to be expecting the state governments to stump up some of the cash to get this off the ground?
PRIME MINISTER: In terms of timing, again Paul can talk to this but Paul is expecting the feasibility work to be completed before the end of the year. Then subject to environmental approvals and the finance being available, then the work would start next year. Is that right?
PAUL BROAD: Yes, that is right.
PRIME MINISTER:
In terms of the money, of course this is a project that is a very - this is commercial. This will make money for Snowy Hydro. We would look forward to the other shareholders contributing to it but if they don't wish to contribute additional equity and they would rather the Commonwealth Government did that; we are very happy to contribute equity on a commercial basis into this project. That is our commitment. This is very bankable -
JOURNALIST: Will you fund the whole thing?
PRIME MINISTER: That is a matter for the other shareholders.
JOURNALIST: Will you draw a profit out of it?
PRIME MINISTER: The company is very profitable now actually. Paul can describe that.
PAUL BROAD: We are a very profitable company. Last year we did something like $560 million [inaudible] of free cash and this year we will do close to $800. We are a very profitable company. We will invest in this in our own right. We will use both debt and equity put into it. We will approach our shareholders and they will make the decisions as to whether they wish to contribute to the equity raising.
PRIME MINISTER: What we are saying is that if other shareholders didn't wish to contribute to equity, we would contribute, subject obviously to the feasibility being completed and all of the analysis being completed but we would stand ready to contribute more equity and increase our shareholding relative to the others.
When I spoke to the Premier of New South Wales about this yesterday, she was so excited about it. She can see the vision here. This is a big opportunity, a really big opportunity. It is a game-changing opportunity to provide more security, more affordability for Australian families and businesses.
JOURNALIST: A local question, what will this mean for the region in terms of jobs?
PRIME MINISTER: Well Paul's estimate was about 500 jobs?
PAUL BROAD: Yes.
PRIME MINISTER: So about 500 jobs. Clearly this is a very big project. The most likely project, by far the most likely one, involves a 27 kilometer tunnel and then a large machine-haul. A turbine haul like the one behind us, but 600m below the ground in a cavern.
So it’s a big project. But it will give the Snowy Hydro much more flexibility. It will enable the company to optimize its operations in a way that will enable all parts of the system – Paul if you’d like to elaborate on that – to enable all parts of the system to operate more efficiently and more effectively and do the very important job it does in stabilizing the grid, the whole eastern electricity market. Also, of course, stabilising it from a price point of view too.
JOURNALIST: Just on another matter if I could?
PRIME MINISTER: Can we just keep going on Snowy Hydro.
JOURNALIST: Prime Minister is this the bold idea you needed to have to turn your political fortunes around?
PRIME MINISTER: Right, thanks for the commentary. Are there any other questions about the project?
JOURNALIST: Did you also talk to the Victorian Premier? You mentioned you spoke to Gladys yesterday.
PRIME MINISTER: Josh Frydenberg spoke to, rang, both his counterpart and Tim Pallas and he spoke to Tim Pallas about it, so the Victorians were advised.
JOURNALIST: Is there a guarantee that this is going to lead to lower power prices for consumers?
PRIME MINISTER: Well again Paul can elaborate on this, but one of the features of the electricity market at the moment is increasing volatility in supply and in demand. That has had the consequence of much greater fluctuations. You are seeing more peaks, sometimes $14,000 a megawatt hour peaks in the market.
Now the ability of a hydro scheme to come in and out quickly, that enables it to reduce that volatility and make money out of it. This is a commercial business, but it plays a very important part.
So as you have more intermittent or variable renewables, like wind and solar, you need to have more storage. This is the point I have been making for some time now. This was the thing that our friends in South Australia overlooked, frankly. They are now obviously playing catch-up, in an expensive way. But you need to have more storage. You have to plan for the future.
So our forebears, our parents and grandparents planned for the future when they built Snowy Hydro. What we are doing now is completing that vision, building on that vision, with the same courage to ensure that we plan for our future and we’ve got the security and the affordability of electricity that we need.
JOURNALIST: Are you asking the New South Wales Government, the Victorian Government and the Commonwealth Government to cover for South Australia's fragility?
PRIME MINISTER: No. Australia needs secure and affordable electricity. This is a vitally important project and because South Australia is connected to the national electricity market, it will benefit from it.
JOURNALIST: You prosecuted an argument in the last month that said South Australia has failed the national grid. Other States have had to come to its aid and now you're announcing the Hydro to cover the shortfalls of other markets. So surely, this is covering them by virtue of two other states.
PRIME MINISTER: You can make that argument if you like. But the reality is that there has been an increase in the volatility of supply and of demand. That means you need more storage. The most neglectful government was the South Australian Government, in allowing such a huge component of their electricity generation to be wind, which I should say can go from supplying more than 100% of their demand one hour and then zero the next. Right? So we saw that on Sunday, South Australia was exporting electricity from wind. Then by Monday, electricity was going in the other direction. So what you need is balancing factors.
Of course you’ve seen the very big increase in gas prices. Pumped hydro and storage is critically important and this pumped hydro can do it on a scale that no other technology can. So this is a very important part of the mix.
We are not picking one versus the other. We believe in ‘all of the above’; every technology has a role to play and in fact Snowy Hydro owns gas-fired power stations, it’s got -
PAUL BROAD: Solar.
JOURNALIST: Does it alleviate that argument for coal though? You’ve been talking about coal for weeks now, saying we need to build another coal-fired power station. Coal, coal, coal.
PRIME MINISTER: No, what I’ve said is we need to ensure that we have ‘all of the above’, so coal, gas, wind, solar, hydro, biomass. Everything can play a role, but it has got to be integrated in a way that delivers secure and affordable power. The security and affordability of our energy system will be determined by economics and engineering, not by ideology. I can't say that enough. I am not taking an ideological approach to these issues.
My job as Prime Minister, is as far as I can, I need to provide the leadership that ensures that we make rational decisions about our energy future that are based on economics and engineering. What we are doing here today is supporting a very important, game-changing development, that will provide more security, greater affordability into our electricity market.
JOURNALIST: Prime Minister, should Josh Frydenberg have gotten into a stoush with the South Australian Premier?
PRIME MINISTER: I understand that the Premier's conduct spoke volumes about the Premier's state of mind at the moment.
JOURNALIST: Given that a lot of the dams in this area, as around the country, were hit quite critically by the millennium drought, are we putting a lot of emphasis in technology like this that is essentially vulnerable to the whims of the weather that we have here in Australia? If another drought comes along, does this make this a tricky prospect?
PRIME MINISTER: Well this will enable, actually, the Snowy Hydro system to conserve water. Because it can use the same water again and again to generate electricity.
JOURNALIST: But if the water is not there to begin with?
PRIME MINISTER: I take your point but this enables a more efficient use of water resources to generate electricity. Do you want to elaborate Paul?
PAUL BROAD: It was 2007, I think, that you’re referring to and we did get down a lot. But this pumping here, saved us in the market place. Without the pumping, we would have been in trouble. We also had gas plants down in Victoria, gas in New South Wales as well, but pumping is an integral part when the droughts come. You conserve, you pump, you meet your market conditions from your pump storage.
ROGER WHITBY: It diversifies against drought, so it enhances our ability to deal with it.
PRIME MINISTER: Do you want to say that again, Roger?
ROGER WHITBY: I was saying the ability to recycle the water through pumping, diversifies against drought so we can swing that pumping into action, rather than using our storage hydro.
PRIME MINISTER: So it gives you more resilience in the face of drought?
ROGER WHITBY: Absolutely.
PRIME MINISTER: That is what you need. You see a market where, as I said, both supply and demand for energy is more volatile. Particularly when you have the prospect of future droughts, and we are the land of droughts and flooding rains and fires too for that matter. So we get plenty of extremes from nature in Australia.
The more resilient and the more flexible you can be, in a scheme like this the better.
PRIME MINISTER: Another local question. You mentioned irrigation and agriculture and in the Riverina which is down-stream, that has the best irrigation technology in Australia and the biggest. Does your leadership and money extend to the inland rail which has bipartisan support and when will we see action on that?
Well work has begun on that already. We are committed, we had $500 million committed in the last Budget towards the inland rail and that is a high priority of the Government.
The ARTC is working on that. That is underway. It is a big project and we are committed to it.
JOURNALIST: Are you concerned that you missed the 2016 deadline? Are you concerned that progress hasn't been made faster?
PRIME MINISTER: Progress is being made as quickly as it can be, I can assure you. We have the Minister for Infrastructure and the Deputy Prime Minister and I and our whole time are committed to inland rail.
JOURNALIST: Twenty chief executives have signed a letter to you urging you to legislate same sex marriage in the near term. Could you legislate in this parliament or even …?
PRIME MINISTER: Our policy on this is well-known which we took to the election. There should be a plebiscite on the issue first. The Labor Party has frustrated that by opposing it in the Senate and, despite the fact that Mr Shorten only three years ago gave his very public and vocal support for a plebiscite which would give every Australians a say on the matter. If there are no other questions on Snowy Hydro, thanks very much. It is a very exciting project. This is a Snowy Hydro 2.0. This is the next stage. Very exciting.
JOURNALIST: Are you hoping to have your leadership defined as a nation-building Prime Minister.
PRIME MINISTER: I am a nation-building Prime Minister and this is a nation-building project. This is the next step in a great story of engineering in the Snowy Mountains and the courageous men and women who are confident and committed to Australia's future. Thanks very much.