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Snowy 2.0 adds welcome flex to energy system

"Today's announcement that the Commonwealth will go ahead with the Snowy 2.0 project is a necessary and welcome step in the long term interests of energy users,” Australian Industry Group Chief Executive Innes Willox said today.

"The National Electricity Market faces high prices and risks to supply. Cheap renewables are growing fast and will increasingly dominate supply. But renewables need to be complemented by more dispatchable, flexible capacity, particularly as old coal plants wear out and retire. Most of our current flex comes from gas generation, that has become very expensive. Pumped hydro projects of the scale of Snowy 2.0 are clearly going to be needed to deliver that necessary dispatchable power. The Government's responsible decision puts an essential building block in place for the future energy system.

"There are some complications to manage which will require careful juggling of impacts on competition and investment.

"Today's announcement brings important clarity, lifting some of the uncertainty which has been impacting negatively on investment decisions, allowing other market participants to plan for the reality of a very big new player. All sides of politics and all levels of government need to be careful to ensure that their future investments in the electricity system do not undermine the environment for necessary private investment.

"The Commonwealth will have sole ownership of a huge asset with potentially substantial power in electricity markets. It will need to act responsibly as an owner and as a player in regulatory debates. Maintaining and increasing effective competition in electricity markets is essential to energy users' long term interests.

"Finally, there are many important aspects of Snowy 2.0 that have not yet been decided – including how the transmission lines to connect the project will be paid for. The cost and risk worn by energy users needs to be fair and reasonable. It may be that the costs will be minimised with greater development of other new generation assets along the way.

"Snowy 2.0 is a strong step towards policy catching up with energy users' needs," Mr Willox said.

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