Pumped Hydro: Australia's energy future?

DAVID LIPSON, REPORTER: From above Tumut 3 power station in the Snowy Mountains of New South Wales, all looks tranquil. But inside, area manager Guy Boardman is gearing up for a big day. As the mercury climbs and air-conditioners are cranked up along the eastern seaboard, this old workhorse is roaring into life.

So we're inside the power station now, and apart from the noise, the whole place is vibrating. It's a little disconcerting. You can feel it whatever you touch. That's because it's a hot day in Sydney, so there's a lot of demand for electricity and all 6 of these turbines are spinning. This only happens a handful of days every year.

Enough water is now passing through these pipes to fill an Olympic-sized swimming pool every two seconds.

The electricity generated, about 1,500 megawatts, would power close to 300,000 homes on an average day - significantly fewer when demand is high, like today. Crucially, the power it provides helps stabilise the grid.

GUY BOARDMAN, SNOWY HYDRO LIMITED AREA MANAGER: We store our energy in the form of water in Talbingo Dam. When the grid really needs that energy... Electricity is a commodity, so price is dependent on demand. We start the generators up and we supply the grid with that extra energy that it needs.

DAVID LIPSON: But what makes this plant unique is what happens when demand for electricity is low - during mild weather or at night.

GUY BOARDMAN: When the demand is not there and coal-fired power stations are our baseload generators, they're still there, humming away, and they've got this spare capacity, price is lower, we can actually then capture that energy source, which is the water that we've captured here, send it back up the hill. Store it up there as potential energy ready to go again.

DAVID LIPSON: Pumped hydro. It's not new technology. In fact, the basic design of this plant hasn't changed since it was built in 1973.

NEWSREEL VOICE-OVER: The water gushes from the dam to provide the whole of the south-west of New South Wales. Power is produced here in the T1 Hydroelectric station.

DAVID LIPSON: In today's age of high-tech renewables, it's worth noting this plant has been recharging its energy source, water, for almost 50 years, by pumping it back up the hill when electricity is cheap.

GUY BOARDMAN: In a way, we are operating as a big battery. But the key point to note there is that we actually need to use electricity to drive the pumps to get the water back up the hill so that we can reuse it to generate the electricity.

DAVID LIPSON: Currently, the pumping phase at Tumut 3 is powered by coal, but in future, large-scale wind and solar could also be used here and elsewhere. And that's why this form of energy storage has caught the Prime Minister's eye.

MALCOLM TURNBULL, PRIME MINISTER: Energy storage, long neglected in Australia, will also be a priority this year.

ARTHUR SINODINOS, MINISTER FOR INDUSTRY, INNOVATION AND SCIENCE: The Prime Minister is now talking about pumped hydro storage. He's the first Prime Minister to raise that.

BRUCE MOUNTAIN, ENERGY ECONOMIST: Storage is absolutely essential.

DAVID LIPSON: In the midst of an ideological battleground over Australia's energy future, there is near consensus on the need for investment in infrastructure that can store the intermittent energy that's rapidly coming on line.

BRUCE MOUNTAIN: There is no doubt we are transitioning to a cleaner energy future. Solar and wind is the cheapest source of new capacity you can build. Those forces are in train, but they can't produce when the sun isn't shining and the wind isn't blowing, so you need another resource to meet demand.

DAVID LIPSON: Most of the focus has been fixed on large-scale and household batteries, where the rapid advance of technology is bringing down the price. But the Prime Minister also singled out pumped hydro, and has already indicated taxpayer dollars will help fund it.

MALCOLM TURNBULL: It will get more value out of existing base load generation, and it will enhance grid stability. And we're going to get on with it.

TONY WOOD, GRATTAN INSTITUTE ENERGY PROGRAM DIRECTOR: Australia has the challenge of dealing with a fundamental transition in the energy system, A key issue is storage to complement intermittent renewable energy supply. Pumped hydro has the potential to offer part of that solution and, therefore, it is almost certainly a solution worth putting some serious money into.

DAVID LIPSON: Professor Ross Garnaut wrote Kevin Rudd's climate change review in 2008. Now he's one of the chief proponents of pumped hydro.

ROSS GARNAUT, AUSTRALIAN NATIONAL UNIVERSITY ECONOMICS PROFESSOR: Pumped hydro's going to be a very important part of the solutions to grid stability when you've got a high proportion of energy coming from solar and wind.

DAVID LIPSON: He points to North America, Europe and China, where huge capital investments are flowing into pumped hydro.

ROSS GARNAUT: In the last five-year plan, China put in 30 gigawatts of pumped hydro storage. Well, that's roughly the capacity of the whole Australian national electricity market.

DAVID LIPSON: The difference in a dry continent like Australia is that water is a somewhat rare commodity.

ROSS GARNAUT: One of the possibilities is to use salt water, the ocean, as the lower dam where you've got large potential catchment areas on high hills or escarpments or cliffs above the water. Quite a number of sites in Australia where that looks very promising and studies are being undertaken on those.

DAVID LIPSON: Scarcity of water though is not the only challenge.

TONY WOOD: The real challenge is can you make this work economically? Can you find places where there is sufficient height between the source of the water, the lower dam, if you like, or the lower water source, and the top dam to make it worth doing?

Secondly, is that site close enough to a form of renewable energy? And then thirdly, is this facility near enough to transmission lines, so that when you then want to transmit the electricity to the places where you need it, that you can do so efficiently?

DAVID LIPSON: Malcolm Turnbull says Australia's energy future must be built around three things - affordable, reliable power, with low carbon emissions. Now, a plant like this can achieve all three, but anything on this scale requires a huge capital investment.

GUY BOARDMAN: In today's figures, I couldn't even contemplate the financial costs of undertaking something just like Talbingo Dam and Tumut 3 Power Station. It would be quite mind-boggling.

DAVID LIPSON: Could you build a pump hydro system like this on a much smaller scale?

GUY BOARDMAN: Yeah, certainly. You could certainly build it on a smaller scale. But obviously, the output of the power station is in direct relation to the water supply that's feeding it.

DAVID LIPSON: So you don't get the pressure?

GUY BOARDMAN: Yes.

DAVID LIPSON: So you don't get the power?

GUY BOARDMAN: Yeah, smaller dam, less power, less energy.

BRUCE MOUNTAIN: I don't think the economics stacks up.

DAVID LIPSON: For now, without government subsidies, there's little interest from the private sector.

BRUCE MOUNTAIN: There may well be, privately, some entities looking at it. I would be terribly surprised if serious money is going anywhere close to it at the moment. This requires a great deal of planning and capital, and those are two things which are scarce at the moment.

DAVID LIPSON: Professor Garnaut believes the growing political pressures to stabilise the system will force the economics into shape.

ROSS GARNAUT: The economic case has been made by the growing volatility of power prices recently. The market will respond to that. The work's being done now.

DAVID LIPSON: The question for the Government - how much is it worth to keep the lights on?

TONY WOOD: Well, the challenge is so great and need for economic, deliverable storage is so great, that we have to put significant resources into it. Now, it's easy to scoff at pumped hydro, but it's equally easy to say it's going to be perfect. Now I think neither is probably true, but until we actually put some real, focussed effort into it then we won't know, and we need to know.