Labor says it would spend up to an extra $700m on a contentious new Snowy Hydro power plant in the Hunter Valley to equip it to run on green hydrogen made with renewable energy instead of a fossil fuel.
Speaking in the NSW town of Kurri Kurri on Tuesday, Anthony Albanese said if Labor won the upcoming federal election it would ensure the publicly funded gas-fired plant announced by the Morrison government last May could run with 30% green hydrogen blended in once it started operation next year.
The opposition leader said the Kurri Kurri plant would run entirely on hydrogen “as soon as possible”, with a goal of 2030, under a plan that would take the Coalition’s “flawed approach and make it work”.
Labor’s climate change and energy spokesperson, Chris Bowen, said the party would allocate up to $700m in extra equity investment to Snowy Hydro, lifting the potential total cost from $600m to $1.3bn.
He said Snowy Hydro documents indicated the 660MW plant could run 30% on hydrogen immediately, but this was not in the government’s plans. “We’ll ensure, working positively with Snowy Hydro, that will be the case,” Bowen said.
Angus Taylor, the energy and emissions reduction minister, said the opposition’s plan was “economically incoherent”, and accused it of a “humiliating backflip” on the project aimed at shoring up support in the Hunter Valley, particularly in the Labor-held seats of Paterson and Hunter.
Taylor said it would not yet be technically feasible to run the plant on hydrogen by 2030, and that the government’s goal was to first help bring down the cost of the fuel. He would not comment on when the plant would run on hydrogen under the Coalition. “There’s technical feasibility – and getting some hydrogen into the generator is technically feasible – (and) there’s economic feasibility, which is: who’s going to pay for it?”
Albanese said Labor’s pledge would ensure a secure electricity supply while making the plant consistent with a shift to net zero emissions by 2050. “I see the Hunter as potentially a green hydrogen powerhouse for Australia and the world. Not just producing it here, but exporting it internationally,” he said.
The Kurri Kurri plant was announced as part of what the Morrison government has called a “gas-fired recovery” from the pandemic. It would be a “peaking” plant, turned on only occasionally when needed at times of high demand and to fill gaps in the market. Snowy Hydro expects it will run at 2% of its full capacity annually, and to employ about 10 people once operational.
Taylor has argued the Kurri Kurri plant is needed to avoid a significant increase in wholesale electricity prices when the Liddell coal-fired plant shuts in 2023, but analysts have said it is not needed to maintain electricity supply. Kerry Schott, the former head of the Energy Security Board, last year said a gas plant in the Hunter Valley did not “stack up” commercially given there were cheaper and cleaner alternatives in development.
Labor argues running the plant on hydrogen will make it economically viable as it will be in use longer than gas, which releases significant emissions. It points to the billionaire Andrew Forrest’s proposal to build a 660MW gas-hydrogen generator at Port Kembla at an estimated cost of $1.3bn, including $30m in federal funding to help make it hydrogen compatible. Forrest’s company, Squadron Energy, has said the plant will be capable of running on 50% green hydrogen when first turned on, with a goal of increasing that to 100% by 2030.
Debate over hydrogen in power generation
But analysts have questioned whether hydrogen will ever be economically competitive as a fuel to generate electricity. Michael Liebreich, the founder of Bloomberg New Energy Finance, ranked it as among the least viable likely uses of hydrogen.
Tony Wood, energy program director with the Grattan Institute, said the Kurri Kurri plant was never necessary to ensure the electricity supply once the Liddell coal plant closed as claimed, and was likely to deter private investment, but Labor’s pledge was pragmatic given contracts were likely to be signed before the federal election, expected in May.
He said moving the plant from gas to hydrogen would not reduce emissions by much given the plant would only run when needed and, depending on how hydrogen costs evolved, it could be difficult for a government to get a return on additional investment of up to $700m. “I think whether this is a good use of public funding is something they would need to think about in government,” Wood said.
The Greens leader Adam Bandt said even with a non-binding pledge to use hydrogen the project remained a “terrible idea”. “Gas is as dirty as coal. This power plant is Scott Morrison’s Trojan horse for more methane gas, and now Labor is backing it too,” he said.
‘Cynical political decision’
Bruce Robertson, a gas market analyst at the Institute for Energy Economics and Financial Analysis, said Labor had made a “cynical political decision that is not based on economics or the delivery of electricity to the Australian people at the cheapest possible cost”.
“This project is poorly located on a gas line that cannot even supply it with sufficient gas and is now proposed to be powered by hydrogen, a technology that’s unproven and whose costs are unknown,” he said. “Make no mistake this is a decision based purely on politics and is not in the best interests of the Australian people.”
Fiona Lee, from the Gas Free Hunter Alliance, said “not a single cent of public money” should be spent on a project using fossil fuels. “Any power station that burns more fossil fuels like gas is just worsening climate change,” she said.
The backdrop to Labor’s announcement is the National party targeting Labor-held seats in the Hunter Valley, hoping to recruit voters disaffected by Labor’s more ambitious climate change commitments.
Retiring Labor veteran Joel Fitzgibbon, who suffered a significant voter backlash in his Hunter electorate in the 2019 election, has spent much of this term warning Labor will lose another election if it pursues ambitious climate commitments at the expense of regional jobs in traditional industries.
