sunset behind powerlines

A new report from the Victoria Energy Policy Centre at Victoria University shows major errors in the cost benefit analysis of the proposed multi-billion dollar HumeLink transmission line.

A review of the HumeLink Project Assessment Conclusions Report (PDF) found that when the errors were corrected, it was clear that HumeLink would impose large costs on the NSW economy and NSW electricity consumers in particular.

TransGrid’s HumeLink will be the most expensive transmission development ever undertaken in Australia. TransGrid is seeking to recover the $3.3 billion to $5 billion project costs from regulated charges from NSW energy users.

The report warns that HumeLink will increase NSW consumer energy bills, particularly for large power users, such as businesses, for whom transmission costs are a large part of their bills.

HumeLink has been proposed, in order to provide enough capacity for the new Snowy 2.0 pumped storage generator that is being built by Snowy Hydro in the Kosciuszko National Park.

Professor Bruce Mountain from the Victoria Energy Policy Centre at Victoria University said TransGrid’s cost/benefit analysis for HumeLink counted the benefits of Snowy 2.0 but excluded the costs.

“Omitting the cost of Snowy 2.0 is like doing a cost/benefit analysis of new railway extension but excluding the cost of the new stations,” Professor Mountain said.

After accounting for the cost of Snowy 2.0, Professor Mountain said TransGrid’s modelling found that there were much cheaper ways to source the services that Snowy 2.0 offers, and so the logical and appropriate action for Snowy Hydro was to abandon Snowy 2.0 and for TransGrid not to proceed with HumeLink as they have proposed.

“We do not expect Snowy Hydro or the Commonwealth Government will listen to this. Sadly, we expect that good money will be thrown after bad and HumeLink will likely be rammed through.

“When people wonder how a country so richly endowed with energy can have such ridiculously high electricity prices, it is hard to find an example of policy failure that explains this better than Snowy 2.0 and HumeLink.“

Snowy Hydro’s own modelling shows that NSW electricity prices will rise as a result of Snowy 2.0, even before accounting for HumeLink.

Just 18 months ago, the cost of HumeLink was estimated to be $1.3bn, now it’s at $3.3bn with warnings from TranGrid that it may end up costing $5b.

In 2017, Snowy Hydro’s advice to then Prime Minister Malcolm Turnbull was that Snowy 2.0 would cost $2bn and would be built by 2021. Our latest estimate is that Snowy 2.0 and the transmission needed to make it useful in NSW and Victoria will cost at least $12 billion.

Read Professor Mountain's commentary on HumeLink in the Australian Financial Review (requires subscription).