The Bigger Picture
Why is pumped hydro being proposed for the valley of a small farming community with a small dam that plays a critical role in Tamworth’s water supply?
The reason is Australia’s rapid rollout of a weather-dependent renewable energy system that only generates electricity intermittently. Vast, sprawling wind and solar developments, along with an extensive network of high voltage transmission infrastructure are mapped for the valuable, highly productive farmland and pristine landscapes of the NSW’s New England region. In order to cover the energy shortfall of intermittents (when it is dark or when the wind is not blowing), a second layer of power generation and storage is needed—such as coal, gas, battery and pumped hydro power stations. The location of EDF’s pumped hydro proposal in Ogunbil, at the head of the Dungowan Creek is relatively close to the proposed intermittent projects and hubs on the plateau of the Walcha shire in the New England Renewable Energy Zone (NEREZ).
So, what’s the difference between pumped hydro and conventional hydro?
Conventional Hydropower generates electricity from the natural flow of water. Using either natural river flow and elevation drop, or a dam or run of river system channelled through turbines. It generates continuously as long as water is flowing.
Pumped Storage Hydropower works like a giant rechargeable battery to store energy from the grid. It has two reservoirs: one high, one low. When electricity is cheap or excess is available, water is pumped uphill (storing energy). When electricity is needed, water is released downhill through turbines to generate electricity.
The government has created strong incentives for renewable-energy proponents. Since these facilities only operate intermittently and cannot recoup their substantial infrastructure costs through market returns, the tax payer offsets the shortfall with significant subsidies.
So conventional hydropower relies on the potential of the water that is already running downhill. It is an efficient way to produce electricity. It harnesses the awesome power of nature. In contrast, pumped hydro has to use vast amounts of electricity to push the water back up the hill to “recharge its battery”. This makes it an incredibly inefficient way to make electricity. In fact, pumped hydro consumes more power than it generates.
Why subsidise an inefficient technology?
Governments have created strong incentives to accelerate investment in renewable generation and storage. Since solar and wind only operate intermittently, many projects rely on increased consumer bills and taxpayer-funded subsidies and grants to reduce risk, recoup substantial infrastructure costs and provide revenue certainty.
Taking a look at EDF’s experience in America, where many federal renewable-energy subsidies have been withdrawn: companies like EDF’s U.S. business becomes far less viable. Proponents depend on stable government support to make capital-intensive wind, solar and storage projects financially workable, and without those subsidies the economics rapidly deteriorate. As a result, EDF has recorded major losses on U.S. projects, faced sharply reduced investment prospects, and is now considering selling part or even all of its American renewables division. In short, ending subsidies has made EDF’s U.S. renewable operations unprofitable, unstable, and strategically expendable. Economics dictate this experience will be repeated here in Australia. Is there a risk that our beautiful valley and productive farmlands will be sacrificed for infrastructure that may one day stand as a derelict reminder of the misguided energy policies of our time?
Relating this infrastructure to the proposed location on Dungowan Creek: EDF Australia has stated that it wants to get the water to fill and top up its two reservoirs by tapping into the pipeline that delivers essential drinking water from Dungowan Dam to the city of Tamworth. Residents who have endured the traumatic effects of drought are highly sensitive about their access to water. If EDF connects to the drinking water pipeline, the next dry period could fuel the perception that the pumped hydro is prioritising its own needs over those of the community—profiting from the diversion of essential drinking water away from rural and regional communities.
Furthermore, the NSW government has indicated that in a drought, when EDF’s pumped-hydro facility is unable to operate at full capacity or at all, taxpayers might compensate EDF for any loss of revenue. That means Tamworth residents could be on severe water restrictions while still funding infrastructure that delivers little or no electricity and may, in effect, have exacerbated the local water shortages.
The pumped hydro business model is essentially parasitic.
The plant connects to the grid, buys electricity when prices are low to pump water to the upper reservoir, and then sells power back to the grid when intermittent sources aren’t operating and prices are highest. To recover the enormous costs of building this infrastructure, the proponent has to charge astronomical rates for the electricity it supplies. Power storage plants like pumped hydro and batteries will push power bills even higher. And power is not just an input into the economy. It IS the economy. Already the price of everything in the economy has been pushed up, actively driving inflation, does this mean foreign companies like EDF will contribute to even higher cost of living in Australia? They sit pretty making a profit at our expense.
Pumped hydro is around 70% efficient. It buys electricity cheap and sells it high. For example, If a pumped-hydro plant buys 100 units of electricity from the grid to pump water uphill, it will only be able to sell back 70–80 units later.
The other 20–30 units are lost as heat, friction, and mechanical losses. So pumped hydro always loses energy overall.
It only stays profitable if the selling price is much higher than the buying price.
So, what does this inefficiency imply?
It implies:
Pumped hydro consumes more energy than it produces; it is an energy storage device, not a source; it cannot generate net new energy.
It only works financially if price gaps are large. It needs:
—very cheap electricity to buy, and
—very expensive electricity to sellThe grid pays the difference one way or another, the extra cost shows up as:
—higher retail electricity prices
—tax payer subsidies, or
—higher market volatility