Richard Willoughby
Summary
The National Electricity Market is in transition. It is increasingly moving toward distributed solar being collected on rooftops and then stored in local batteries to power houses and facilities. The gates to heavy industry are gradually being closed for the last time as owners move to countries offering base load electricity at base load electricity prices last seen in Australia in 2003 at $23/MWh.
The usable storage capacity of Snowy 2.0 able to generate a daily return will work out to be in the vicinity of 6,000MWh. The probable annual revenue in 2026 terms is $99.7M. This revenue to likely to be lower than the ongoing operating and maintenance cost of the Snowy 2.0 pumped storage scheme.
Any prudential review of any project, irrespective of terms of reference, should start with the obvious question – is there value?
Introduction
Each quarter, AEMO produce a market dynamics report detailing the key results for the National Electricity Market. This submission draws heavily on AEMO’s Q2 2026 Market Dynamics Report (Ref 1).
This submission looks at the management of the Snowy 2.0 Project in the broader context of an owner’s (tax payers’) perspective of value and whether Snowy 2.0 has any prospect of ever delivering economic value.
As sunk costs mount, the ultimate question of value for the Snowy 2.0 Project gets down to the simple question – whether its potential revenue will ever cover its likely annual operating cost.
Wholesale Market Decline
The NEM wholesale electricity market has been in decline since 2010 when Q2 demand averaged 23,672MW (Ref 2). In Q2 2026, the wholesale demand averaged 21,700MW or almost 10% lower than the peak with a continuing trend as shown in Image 1, which is extracted from the AEMO Q2 report.
The reason for the reduction in wholesale demand is also apparent in Image 1 showing the distributed rooftop solar contributed 2,520MW to the average demand. The uptake of rooftop solar has more than offset the reduction in wholesale demand.
These trends are now long established in the NEM and are testament to the underlying economics of solar power and its ubiquitous availability in Australia. Fundamentally, any roof in Australia is a potential power station and the year round availability of sunlight across most of Australia makes rooftop solar at the load an economic proposition compared with remote solar collectors and the associated high cost of transmission, land acquisition, environmental approval and First Nations authorisation.
In addition to the local site advantage, the compelling advantage of rooftop solar is that it has captive demand and that fact has already eliminated considerable potential demand of grid scale solar. There is a real prospect that grid scale solar farms will not generate sufficient revenue to cover their costs in Q3 2026 because their demand continues to be taken by rooftop solar and revenue is invariably lowest in Q3 of any year.
Both grid scale solar and wind are now operating on very tight margins with no prospect of the situation improving. The current price of LGCs is $7.25/MWh and LGCs will not be created beyond 2030. So the grid wind and solar are being priced out of the market by rooftops, due to having captive demand, and coal plants that have limited capacity to reduce day-time generation so will accept high negative prices to stay producing so they take advantage of evening peak demand.
The recent 10-fold increase of the SRES limit to 1MW will dramatically boost the uptake of rooftop solar to larger commercial and industrial premises over the next two years or so before the SRES benefit declines to zero in 2030.
There is no prospect of the declining trend in the wholesale market reversing. Heavy industry in Australia relies on low cost electricity produced from intensive, coal fired generators. The demise of the Whyalla steel works is recent proof of that fact. All surviving heavy industry now has tax payer supported electricity deals to remain viable but their ultimate demise is now sealed because they will be starved of capital before being shut down.
Household Batteries
It took a decade for the fundamental economics of solar power in Australia to become obvious and make grid solar farms stranded assets. It took less than a year for the Cheaper Home Batteries Program to ruin the business case for grid scale batteries and pumped hydro.
The CHBP commenced in July 2025 to encourage households to install batteries to better utilise their collected solar energy. The scheme has enjoyed enormous support and it took less than one year for the installed energy capacity of household batteries to overtake the installed energy of grid scale batteries. The market impact is clear in Image 2; also extracted from the AEMO Q2 2026 report. The volume weighted arbitrage for battery generation dropped from an impressive $386/MWh in 2025 to a much less impressive $60/MWh in 2026. Batteries also generate income in the FCAS market but that has also suffered a dramatic decline because of the growing number of grid scale batteries and is now a negligible component of their income.
The CHBP has also struck a deadly blow to the economics of pumped hydro. Volume weighted arbitrage fell from $237/MWh in 2025 to just $78/MWh in 2026.
The prospect of the unit revenue for pumped hydro to increase in the longer term is low because households continue to install batteries while the reducing price of LGCs means the prospect of being paid to absorb electricity will diminish to zero. Negative price excursions will be rare to non-existent after 2030.
Snowy 2.0 Potential
There is a now an established trend in declining opportunity for pumped storage to generate revenue as shown in Image 3, also extracted from the AEMO Q3 2026 report.
In the last quarter, the existing pumped hydro achieved a capacity factor of 12.5% and it is unlikely that Snowy 2.0 will ever exceed this factor on an annual basis as more rooftop solar is installed; more home batteries are installed; more wind farms are built and more grid batteries are installed. The existing 810MW of pumped storage generated net revenue of $10.1M in Q2 2026. On a pro rata basis, the potential quarterly income for 2,000MW pumped storage is $24.9M; equating to $99.7M annually.
The average utilisation of the pumped storage was only 12.5%. On that basis, the average daily output of Snowy 2.0 will likely be three hours (12.5% of 24) at rated output; equating to 6,000MWh per day
So putting Snowy 2.0 in perspective, it is equivalent to a 6,000MWh battery that can be cycled daily. Households have been installing just under 1,000MWh of battery capacity every month so far in 2026. So Snowy 2 offers no more usable capacity to generate income than households are installing every 6 months.
Potential Costs
Latest reports indicate that TBM Florence is suffering from weld induced stress cracking in the TBM head. Inevitably, any weld repairs are temporary at best and the cycle of weld repair evolves to dominate the production schedule of the machine (Ref 3&4). So there is every prospect of TBM progress being even slower than present.
When the project is ever completed, there will be significant assets to maintain. These are the storage lakes with road access; the water control valves; the rotating machinery; the electrical switch gear and control systems, electrical transmission lines and large rock excavations. All this requires considerable expertise along with the expertise to operate the plant safely and reliably. A value of 1% per year of the capital outlay is not unreasonable for a large infrastructure project. Taking current estimate of $12,000,000,000, the O&M cost will be of the order of $120M per year.
Does Not Make Sense
With a likely annual O&M of $120M and best case potential revenue of $99.7M, it is immediately apparent this project does not make sense.
Recommendations
- Wind down the Snowy 2 project now. This is the only economically prudent outcome for any current assessment of the Snowy 2 project.
- Add an additional year to the CHBP to more than offset the loss of usable storage capacity from stopping Snowy 2.0. There is a much faster return to taxpayers by further lowering wholesale electricity price and significant longer term benefits to householders taking up the offer.
Final Notes
It is acknowledge that the storage capacity of Snowy 2 is much greater than 6,000MWh however the extra capacity has limited ability to earn income or offer value to the electricity market. Even a fully “renewables” grid with the current mix of grid scale wind and solar has a cost optimised storage requirement of 16 hours duration on the highest demand day. At 16 hour duration, Snowy 2.0 offers 32,000MWh capacity. This capacity would only be useful on a few days a year if there were no other firm sources like gas turbines or other hydro.
The Author is willing to provide further detail on this submission and technical advice on mechanical excavation of hard rock.
References
- AEMO Quarterly Energy Dynamics Q2 2026 –
- Open Electricity –
- Mechanical Excavation of Hard Rock
- Geomechanics Victorian State Group Presentation
Postscript
As of 7th October 2026, this is the only submission recorded on the enquiry web site:
Submissions – Parliament of Australia
Closing date for submissions is 9th October 2026.
The Author
Richard Willoughby is a retired electrical engineer having spent the majority of his working career in the Australian mining industry. In the early-mid 1990s he represented large customers on the first Systems Working Group for the national grid operating system. That involvement followed his contributions to the development of the national grid during Treasurer Keating’s Productivity Commission enquiries into the mining and energy sectors in Australia. Willoughby spent the last decade of his working career employed as an engineering risk consultant, employed by the largest global industrial insurance underwriter where he assessed engineering risk at large industrial and construction sites across the globe including major tunnelling projects due to his relevant experience in hard rock mechanical excavation.
Looks like a money pit ….
taken from gullible serfs ….
There are multiple money pits, but they don’t ask the serfs before taking and wasting their money, they just do it and woe to any who even think to oppose it.
Another scheme that’s falling apart is the Western Renewables Link, a AUD$1.5 billion transmission line project for Western Victoria, a state that is utterly bankrupt from years of radical left wing and massively corrupt (e.g. $13 billion in corruption just in Melbourne “Big Build” infrastructure projects).
As a Victorian, can I reply?
We are not utterly bankrupt – just the usual socialist bankrupt.
The difference is that we will recover; with a change of government.
Then, of course, we will have the usual Royal Commission – which will go nowhere, of course. Maybe a few headlines.
Then the state will be rebuilt, usually by the conservatives and this will take a few years.
A measure of prosperity will then come along.
Until the next socialist disaster!
This has been Victoria’s pattern for most of my life.
“You can’t know whether it will work unless you build it” – the Nancy Pelosi method; then when it doesn’t work, pretend you never had a position, ignore it, and let the media cover for you.
Bad ideas seldom improve over time. Snowy 2 is a good example.
Breakeven never.
Thank you, Richard, for this excellent summary. I suspect it will be ignored.
Barnaby Joyce is on the committee and he is now a member of One Nation. It is One Nation policy to can the project and get back into coal/lignite.
Also Susan Ley, the dumped Liberal leader, has been placed on the SH board by Bowen. If the board ultimately decide to can the project, her presence would shift the blame away from Labor. It was an LNP government under Turnbull that started this boondoggle. Bowen could argue that Labor gave it their best shot but it was Turnbull’s government that failed to prepare a proper business case.
I am still the only submission and they close tomorrow. The fact that it was published on the government site gives me a little encouragement that it might get more people appreciating the extravagant waste. I believe the project wants another $8bn to keep it going. Any other country could build a 2GW lignite fired power station for less than that.
Close to 30% of Australian voters are fed up and plan to vote One Nation. There is possibly another 20% who are fed up with woke and the UN anti-social agenda who could preference One Nation.
Residential rooftop solar seems to make a lot of sense for most of Australia, batteries should be required and the rooftop system should never be connected to the grid. A substantial fleet of fossil fuel and nuclear should be the mainstay for business, commercial, industrial and residential who prefer the grid. Which ever route you choose solar or the grid you need to pay your own way, no subsidies, tax preferences or mandates for either choice.
Solar panels and home batteries are a short-term solution and will soon produce mountains of waste, nor are they any use for powering industry.
Get ready for lots of houses burning down as these home batteries age and switches in the management systems become sticky resulting in thermal rinaway.
EVs are an even greater danger, as they age and have done many kilometers over corrugations, potholes, dust heat and cold one of their thousands of potential failure points will fail resulting in the car going full Chernobyl on the road or in your garage.
The grid prices in Australia are now at a level where going off-grid on a new build is close to the lowest cost option. Properties that do not have a street grid are often economic to instal solar/battery rather than paying the high cost of getting the grid to the property.
If there is an existing grid connection, the most economic option is a solar/battery system designed to operate off solar/battery about 80% of the time. Building a system that can work 100% of the time is much more expensive but now around the same as being on the grid without solar or battery.
I was looking at an outdoor mounted off-grid ‘system in a box’ solution this week.
It was scalable, starting at 25kWH, then 50 and ultimately 100kWH of storage. All electronics were in the box, (looked like an all weather steel cabinet, sized as required).
My quick calculations showed that the cost was about 5-10 times the cost of the electricity usage per year, based on draining the installed battery down 50% each day.
When you add in the daily charges for being on the grid, then this return period gets shorter and likely shortened again if the Oz power suppliers get their way, (and raise the daily charge).
So yes, off grid is getting more cost effective all the time. It’s no longer IF, it’s when.
I recently looked at batteries … AI is great to do the legwork … I only have 3kW of rooftop panels. The AI examined my electricity bills for the past 12 months and this is the recommendation that I received taking into account the limited rooftop panels, “Best value, perfect size” :
BYD HVS 5.1 + GoodWe ES/EM — No backup — Cost $7,500–$9,000
Essentially just reduces peak demand.
The most expensive option was:
Tesla Powerwall 2 — Whole‑home backup — Cost $14,000–$16,500
Batterries are expensive even with the subsidies which are hoovered up by the supplier/installers and it would be unlikely that I’d recoup my costs within the period of a decade by which time I’d need to start all over again.
I’m off grid, I would never suggest that anyone look into a proprietary battery inverter combination, (eg Sigenergy), if a component fails you may have to throw the whole lot away. Much better to look at independent battery and inverter systems.
I also recommend that you stay away from the high voltage batteries, especially like Sigenergy, they are basically a 48V battery, (or similar), with a high voltage DC/DC converter in each module, (with the inverter on top that just chops that DC into a wave that approximates an AC sinewave), these systems have complex electronics in with the battery, one more thing that can go wrong.
Given a choice I’d go for a rack mounted, 48V system and accept that the cables will be bigger but also be able to swap out one or more batteries for another brand, (with the same voltage of course), or have several different brand of inverter and not be tied to any one supplier that can go broke.
With regard to your solar, 3kWp is not going to do much for your household demand. You should be looking for solar panels that output the following: –
Output = (5 to 10x)x(average household demand)/(day length in winter)
For example, in Winter, the day length may be only 8 hours. An average demand on a rainy day in winter may be 10kW. So you would need 5 or 10 times 10/8, or 6kWp through to 12kWp. The storage will be inversely proportional to the 5 or 10x multiplier that you used for the panels. eg 5 days storage for 10x multiplier OR 10 days storage for 5x multiplier. Storage = daily usage multiplied by 5 or 10, (Tesla batteries in your note above are no where near this energy volume for $14-16k).
As you note, batteries are dear, so better to over do the panels and lessen the battery capital costs.
If I’d known that submissions were invited, I’d have lodged mine, viz –
“Make it make sense.
FFS.”
Like any others not considered supportive, you might as well save time and money – lodge it yourself in the nearest “circular filing cabinet” (also known as a wastebasket).
The system works roughly like this – Ministers seek advice from their Departments. The head of the Department is appointed by the Governor-General, on the recommendation of the Prime Minister, who also recommends Ministerial appointments to the Governor-General. Presumably, the Prime Minister seeks the advice of his appointed Minister as to whom to recommend as the Minister’s Secretary (Departmental Head).
Now any permanent public servant who has the temerity to point out to his Departmental Secretary (appointed on the recommendation of a politician), that the Minister is not the brightest bulb in the box, is likely to find himself given an office and an impressive title, there to while away the hours waiting for retirement or change of Government.
The system seems to stagger along, but also seems to be getting more staggery as time goes on. A recent example in one Australian state, promises of vast new road projects costing billions, while money for repairing potholes to existing decaying roads is in short supply. At least one death, and many vehicles immobilised with severe damage has resulted from recent lack of road maintenance.
Some of us are going to live in interesting times, I suspect.
[end of rant]
Well done Rick.
It would be kind of nice to pretend that those who pretend to be managing the project would already have the entirety of your submission already in their front of mind thereby not requiring submissions at all.
It would be kind of nice to pretend that those who pretend to be reviewing the management of the project would have already posed the sorts of questions you raise.
It would be kind of nice to pretend that that somebody in the entire management and review process would actually read and understand what you have written leading to a bureaucratic epiphany.
We can all dream!
I am a little hopeful for reasons I stated a few comments above. The fact that it has been published on the government web site is at least encouraging.
Renewables competing with renewables. How ’bout that! And market forces controlling price, who would have thought. The really scary thing is the worst-case scenario that will occur when we have a real wind drought in the dead of winter, with only a maximum of 8 hours per day of recharge available, and every house switches to the grid and we haven’t got enough baseload generation available. Peak power is most important, not total energy.
The NEM gets tested a few times each year.
The worst last year was the last week of the year when there was not enough load to keep the connected coal plants above minimum. There was high risk of grid instability and need to take some coal plant out of service. There are more batteries now but they need to be at a state of discharge with headroom to add demand.
The second test was more isolated to Victoria in February this year when a storm front come through in the afternoon of a warm day. The household batteries were all out by 6pm after running air-conditions from about 3pm when the sun disappeared. The wind farms shut down on high wind. So the Victorian grid lost wind farms and solar in less than an hour and hit the coal plants hard as batteries went flat. So hard that one of the lines tripped. They dropped 100k customers to avoid complete shutdown. I remember it will because the local transformer lost a phase when the power was restored after 2 hours due to the high air-conditioning demand that hit as soon as power was restored. I was on the phase that stayed down. It was restored after 16 hours. I used the off-grid system to keep essential loads powered up.
One of the emerging problems with household batteries is the distributer losing a feel for the connected load. They do not have any idea of the connected load until the batteries are flat at night.
At this time of year I am essentially invisible to the grid on a reasonably sunny day apart from a little export usually in the afternoon.
Very few people understand that critical need and have no comprehension of effective load carry capacity at high intermittent grid penetration.
Nice article but missing a glossary for us Yanks.
AEMO = Aussie Energy Market Operator
NEM = National Electricity Market
LGC = Large-scale Generation Certificate
SRES = Small-scale Renewable Energy Scheme
FCAS = Frequency Control Ancillary Services
btw: Gemini AI also says the SRES solar subsidies are $850 – $2500 depending on the kW capacity and the battery subsidy of 30% of the cost.
All correct – well done.
The SRES subsidy reduces every year till 2030 when it is phased out. So businesses have a window of about two years to get real benefit from the subsidy. That subsidy falls on the poorer people who do not own a roof so cannot benefit from the subsidy – it is all penalty for them.
The new subsidy for grid scale wind, solar and batteries only applies to the select few who get guaranteed ROI at taxpayer expense under the capacity investment scheme. And it is all secret men’s business not open to public scrutiny. Australia has become a full blown kleptocracy where the select few get rewarded for supporting the UN ant-social agenda.
Thanks, Zipperer…I was only familiar with AEMO and NEM.
Some research project in Australia produced a more efficient electrolysis system….gets rid of the bubbles which hurt efficiency. So, instead of batteries – you produce H2 which you use at night to produce electricity…..solar during the day….H2 at night.
H2…. oops …..
BOOM!
At what point did Australia say “hey guys let’s have a vote on committing economic suicide?” They morons that run that country have destroyed it in less than 10 years.
I’ve long thought that detached home roofs are one of the best locations for solar panels, because the space is not being used for anything else. However, in order to maximise the efficiency of the solar panels and minimise the installation costs, the house should be designed to accommodate the installation of solar panels during its construction.
For example, designing a single mono-pitched roof to face true North (in Australia) with an optimal 10° to 15° tilt, maximizes output without adding any significant structural costs.
Modern metal roofs (like Colorbond) natively handle the ~1,500 kg distributed load of 80 solar panels without requiring upgraded engineering rafters.
I checked Google AI for some facts and costs related to the most effective installations.
Here’s what I found.
For the average 190 m² single-storey Brisbane house, a mono-pitched roof (including eaves and a mild 10° tilt) provides roughly 210 to 220 m² of physical roof surface.
However, local building codes require structural edge clearance constraints (typically 200mm to 500mm from the gutters and ridges) for wind loading protection, so the average usuable roof space for solar panels would be around 160 m², which would accommodate 80 standard 2m x 1m panels rated at 440W each.
The average Annual Daily Generation of such a system would be approximately 148 to 158 kWh per day.
A family of four in such a home, with all appliances electrical, and a BEV which is entirely charged at home, will use an average of 28 to 42 kWh of electricity per day. In other words, such a designed home will produce more than 3 times the amount of electricity that is used in the home, on average.
The additional cost of installing those solar panels, during the construction of the house, is estimated at $25,000 to $36,500, according to AI.
The average electricity bill for a family of four with no solar panels (in Brisbane) is estimated at $2,700 to $3,500 per year.
What to do with this huge amount of surplus electricity, and how to profit from it, is another discussion.
The system needs to be optimised for winter input. At 27S (Brisbane), the optimum tilt would be 50 degrees. It is not the average or maximum power that you design for. You need to design for the minimum sunlight on consecutive days.
I agree with RickWill that the output is more constrained than that. I just completed a detailed cost/benefit for Central Alberta for someone who already 14 kW of panels and some storage. There is a restriction on what one is allowed to connect to the grid – no more than 105% of your average demand is allowed. Basically you can put into the grid and take out (it is metered) at the same price of about CAD0.10 / KWH. However in order for the system to take him off grid, he has to install enough panels to work on cloudy days in mid-January. That is about 3.5 times the apparent demand. In summer it would put out huge amounts of power the grid operator doesn’t want or need because everyone else has the same issue.
The government allows the summer/winter excess/draw but that doesn’t make the system stable. There is far too much power in summer and far too little in winter. So they limit the problem by limiting what you can install – 105% of your annual average demand.
Going off-grid means investing in far more panels and far more storage. But get this. If you choose to go off grid, the grid operator says, “Fine! You don’t want us, we remove your wires. Not only that, they take out the pole that supports your wire and charge your CAD15,000 for the work. So add to the off grid cost the cost of disconnecting. If you want to reconnect, they charge another CAD15,000 and ban you from connecting your “over-sized” system as a feed-in.
Ultimately we realized that with all the rules and charges and expenses, there is literally no way to save money with a solar PV system. It never pays for itself and it is not big enough to make a profit. It definitely saves money, perhaps CAD400 per year, but that won’t pay for the 14 kW system. So he bought his wife a new SUV instead.
There are American carpetbaggers working the phones in Alberta offering to install “free’ the limit allowed at CAD8.00 per Watt. For 14 kW, they install it ‘free” but you own the CAD112,000 debt. Your bill remains what it is now, and over 30 years you save 50%, if nothing needs maintenance for 30 years. There are takers! PT Barnum was right.
Oops. Is this one renewable scheme (Cheaper Home Batteries Program – CHBP) disrupting another renewable scheme (Snowy 2.x – cute name though, eh)? Ans: Apparently.
And both (all) of the renewable schemes are totally unnecessary – As I understand it from an online source, Australia has approximately 149.5 billion metric tons of proven coal reserves, ranking it fourth in the world and accounting for about 12.8% of the global total. These Australian reserves are expected to last for about 337 years at current production levels. (don’t know if this includes their coal exports to China, etc.).
Prudent Australian leaders would have protected the interest of its own citizens and stayed with the power sources that developed Australia into its own viable free country with its own viable heavy industry. But NO! Those leaders reaction to COVID, for example, demonstrate how they are too easily swayed by <substitute your own perception here>.
Summary: leadership is apparently the problem; of which it could be then be said the voter’s own discernment is the real problem. -OR-, like here in America, the wrong party has a decade or so ago, figured out how to steal the elections – ref obama and biden Admins, and California.
Was it last year that three retail providers in the Sydney area said to their customers, “If your rooftop panels put any power into the grid between 11AM and 2PM we will charge you for that power.” Seems over production was a problem.