Submission on Snowy 2.0 Project Management – September 2026

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

Postscript

As of 7^th October 2026, this is the only submission recorded on the enquiry web site:

Submissions – Parliament of Australia

Closing date for submissions is 9^th 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.