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Hydro could push down power prices: study

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October 11, 2017

Malcolm Turnbull's plan for more hydro storage could push down electricity prices, a new study says.

Pumped hydro power storage such as the proposed Snowy 2.0 could lower power prices while speeding up the exit of coal and gas from the energy market, a new study shows.

Energy analysts RepuTex says high gas prices could see energy storage investment, such as hydro and batteries, displace gas as Australia seeks to reduce its emissions while still keeping the lights on at an affordable price.

As energy company AGL weighs up whether to keep its ageing Liddell power station operating beyond its shutdown date, the study shows keeping the NSW coal-fired plant online would increase the cost of power.

RepuTex head of research Bret Harper said the long-run cost of recovering any new investment in Liddell could be well over $100-120 per MWh, while large-scale solar with storage could provide similar dispatchable capacity for $80-120 per MWh.

As well, the signal sent by keeping a coal plant operating could undermine planned wind and solar investment, making NSW increasingly dependent on more expensive gas and leading to higher wholesale prices.

"Modelling this scenario suggests average wholesale prices will grow above $100 per MWh with Liddell in play, instead of low-cost renewables," Mr Harper said.

With Snowy 2.0 in the mix, RepuTex modelling indicates less dependence on gas in NSW, with wholesale prices falling towards $80 per MWh, while coal power could be allowed to close with less impact on reliability.

RepuTex's outlook is for gas prices to remain above $7.50 per GJ, while the cost of competing energy storage technologies is anticipated to fall.

"Given the current domestic gas price outlook, it would be brave to bet that gas investment will out-compete pumped hydro as the primary transition fuel in Australia," Mr Harper said.

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