Only politicians could think it's a good idea to spend billions of dollars pumping water uphill to generate electricity in a land with enough coal to last 1,000 years. Yet that is exactly what the federal government is doing.
Flying in by helicopter, donning a leather jacket with snow-capped mountains in the background, former prime minister Malcolm Turnbull revealed his grand nation-building project "Snowy 2.0".
The new Snowy project is essentially an extension of the original Snowy Hydro Scheme, commissioned by the Chifley government in 1949. The original participants were the Commonwealth, NSW and Victorian governments, but in a related move the Commonwealth has recently brought out the two state governments for $6.2 billion, and become sole shareholder.
The aim of Snowy 2.0 is to pump huge amounts of water from an existing Snowy Hydro reservoir through reversible turbines into a new power station to be built 1km under the mountains, then on to another existing reservoir, via 27km of tunnels. What could possibly go wrong?
There are already more problems than there are shovels in the ground.
Firstly, the cost. It was originally claimed that the scheme would cost about $2 billion, but Snowy Hydro Limited acknowledged it could be up to $4.5 billion. The final cost would be anyone's guess.
The feasibility study alone cost $29 million. And having a feasibility study into a government project is like flipping a two-headed coin. There is no way the government's preferred option will lose out.
The second problem is the hypocrisy. The government shows no interest in building and nationalising coal-fired assets, but now wants to run and greatly expand a nationalised hydro-electricity project. If, as is claimed, it is an arms-length commercial venture, then what was the former PM doing in that helicopter, and declaring it a "nation-building project"?
Thirdly, Snowy 2.0 isn't expected to become operational until 2024-25, assuming no delays. A wildly longer lead time than other alternatives.
Fourthly, Snowy 2.0 will be a net user of energy, as it takes more electricity to pump the water than is generated by releasing it. The way in which this has worked commercially in the past is to buy electricity in off-peak times and sell in peak times when prices are higher. However, there is no guarantee the historic size of the difference between peak and off-peak prices will hold into the future, particularly given the massive changes taking place in the energy market.
Meanwhile, Australians are suffering from high energy prices now. Retail electricity prices have risen by more than 120 per cent in real terms over the past decade, while wholesale prices have tripled in the last three years.
These price rises are primarily the result of heavy-handed government interference supporting renewables through the Renewable Energy Target at the expense of more reliable, affordable coal-fired power. Unfortunately, Snowy 2.0 will only give us more government interference, more picking winners, and a greater burden on taxpayers.
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