KIDSTON, Australia (Reuters) - At an abandoned gold mine in Australia’s outback, plans are being laid for a large-scale renewable energy project generating continuous power, but its fate may sway on the outcome of next month’s national election.
A push for cleaner energy to fight global warming versus the need to cut soaring power prices is a hot issue ahead of Australia’s May 18 election, after a decade of climate policy flip-flops that cost three prime ministers their jobs.
Amid the climate wars, one technology winning support is pumped hydro, which acts like a giant battery, pumping water uphill when energy is abundant and releasing it to create power at night or on a windless day.
It is seen as crucial to balance power generation after a string of blackouts in big cities in Australia’s south, and to help soak up excess wind and solar energy.
Australia’s biggest proposed pumped hydro project is Snowy 2.0, a massive 2,000 megawatt expansion of the 70-year-old Snowy Hydro scheme, which the conservative Coalition government has backed with A$1.4 billion ($1 billion).
But a smaller 250 MW project, Kidston pumped hydro, proposed by Genex Power, looking to complete construction by 2022, two years ahead of Snowy 2.0, could be more viable, say experts.
“Of all the pumped hydro projects out there, I think Kidston is in pole position,” said Gero Farruggio, an analyst at consultants Rystad Energy.
Kidston is an abandoned gold mine in northern Queensland with two massive empty pits, just 400 meters apart.
Genex has built a 50 megawatt solar farm at the site and is looking to use that power to pump water from the shallower pit to the deeper one and then release it back to generate electricity when the sun goes down.
When running, water equal to some 270 Olympic-size swimming pools per hour would flow under huge pressure from one pit to the other to drive hydro turbines.
“It enables us to store renewable energy when it’s in surplus and dispatch it at times of peak demand,” said Genex Chairman Simon Kidston, the great great grandson of the former state premier after whom the project and nearby town are named.
The project will be the world’s first to use a mine for the upper and lower reservoir, he said.
The Coalition’s Northern Australia Infrastructure Facility (NAIF) is considering lending up to A$516 million for Kidston, which energy experts see as a template for projects that could be developed all over Australia at old dams and mine sites.
“It’s really important for demonstrating how variable solar and wind can be integrated into the grid in a way that provides reliable baseload power,” said James Pittock, a professor at Australian National University.
Analysts say Labor’s more aggressive targets for renewable energy and cutting carbon emissions - including 50 percent renewable power by 2030 - mean an opposition victory next month could boost the project’s chances.
“If Labor wins, then we’ve got a higher renewable energy target to achieve,” said Farruggio.
However, the project’s fate lies in the hands of EnergyAustralia, the country’s third-largest power company, owned by Hong Kong’s CLP Holdings.
Genex signed up EnergyAustralia as a potential 50 percent partner and is looking to seal a deal to sell the power from the project and secure financing by June.
“We’re on track to do that, we believe,” Kidston told Reuters.
A power purchase agreement (PPA) will be essential to securing debt finance, as lenders including NAIF would be reluctant to back a project exposed to market prices, said an independent energy analyst.
“The project has no chance of getting off the ground without a PPA,” said David Leitch at energy consultancy ITK, pointing to what he said were “modest” profit margins.
EnergyAustralia believes Kidston has good potential, but a spokesman said more work is needed before it can commit to the project.
Analysts say it is still the best of the current crop of pumped hydro power projects on the drawing board.
“If they pull the plug on this, there’s certainly questions if any project will go ahead in Australia,” said Farruggio.
($1 = 1.3945 Australian dollars)
Reporting by Sonali Paul; additional reporting by Melanie Burton; editing by Richard Pullin
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