A four-hour drive north-west of Townsville, Australia’s best bet for pumped hydro, Genex Power’s $777 million Kidston project, is being drilled 220 metres under an old gold mine.
Water from a giant reservoir will drain into a lower one – passing through two massive turbines – generating eight hours of firmed renewable power, the holy grail of Australia’s energy transition to net zero by 2050.
“This projects ticks all the boxes. Beautiful rock structure [granodiorite] which the tunnellers love. And the reservoirs are so close. It’s a very compact site,” Genex Power’s chief executive, James Harding, told The Australian Financial Review on a site visit this week.
“We have shown it can be done. That’s one of the benefits of making projects happen is you can learn from it and people can believe it can be done.”
But the fact the Kidston project has taken a decade to reach near completion and require significant taxpayer funding is also a cautionary tale for other pumped hydro projects in the pipeline.
This includes two new mega projects proposed in Queensland – one near Gympie in south-east Queensland and the other in the Burdekin in North Queensland – as well as Snowy 2.0 in NSW, which is over-time and over-budget.
Pumped hydro is an ideal candidate to help replace coal-fired power, especially early in the evening and first thing in the morning when renewable energy output is at its lowest. It can also provide more storage than big batteries, such as the Hornsdale 150MW battery which can only discharge power continuously for 77 minutes.
The Kidston project, when operational in 2025, will offer eight hours of rapid response power – when water is released from the upper reservoir to the lower reservoir – most likely in the early evening and early morning when there is a dearth of renewable energy from wind and solar.
During the day, when cheap, renewable power floods the market, the upper reservoir will be filled again. The twin tunnels connecting the two pits at Kidston are only 340 metres long.
By contrast, the Snowy 2.0 pumped hydro project will provide seven days’ worth of storage because of its much bigger storage capacity, but it’s a lot more complex.
It has 40 kilometres of tunnels connecting the two reservoirs and is in the middle of Kosciuszko National Park – factors that have contributed to a blow-out in cost from $5.9 billion to at least $10 billion.
The two mega-pumped hydro projects proposed by Queensland’s Palaszczuk government – the 2 gigawatt Borumba project near Gympie and the 5GW Pioneer-Burdekin in North Queensland – will cost a staggering $30 billion, but provide 24 hours’ continuous storage to help the state close down its coal-fired power stations by 2035.
But energy experts remain sceptical about whether the two pumped hydro projects – which already have drawn local opposition – will be ready in 12 years’ time.
In April, Genex founder Simon Kidston admitted the Kidston project took “10 years of a lot of focus and commitment. A lot of people don’t have the stamina”.
It has also required a big chunk of taxpayer funding, including a $610 million loan from the Northern Australia Infrastructure Facility and a $47 million grant from the Australian Renewable Energy Agency.
The Queensland government has also stumped up more than half ($147 million) of the new $258 million 275 kilovolt transmission line to connect it to the grid.
Genex Power’s Kidston project is a lot smaller than Snowy 2.0 and the two proposed Queensland mega-projects, but it has had its own troubles.
Late last year, water leaks during tunnel drilling temporarily shut down the project and cost Genex between $10 million and $15 million in contingency funding to fix.
In December, Scott Farquhar’s Skip Capital and infrastructure investor Stonepeak Partners walked away from their joint 25¢-a-share takeover bid for Genex after more than four months of due diligence.
Skip Capital remains a significant shareholder in Genex, with a stake just under 20 per cent.
Genex Power chief financial officer Craig Francis, who will step up to the chief executive’s role next month when Mr Harding stands down, said the water leak problem was resolved and tunnellers chose a more conservative route.
“This was unfortunately one of those risks, but we are really pleased with how everyone has responded to it. We got production up and going within two weeks of the event occurring, which still astounds me,” he said.
“We took the decisive action to take the more costly, but lower risk option to re-route the tunnel away from the feature and get production back up and running, and it’s been smooth sailing ever since.”
On a tour of the Kidston project this week, the Financial Review went 220 metres underground to the “Powerhouse”, or turbine hall, where two reversible 125 MW turbines – currently being shipped from overseas – will be painstakingly transported down the tunnel and constructed next year.
The two turbines will generate electricity when water from the upper reservoir (Wises Pit) is released to the lower reservoir (Eldridge Pit) for up to eight hours continuously each day.
EnergyAustralia has bought an off-take agreement with Genex and will use the deep storage to help complement its own book, and service customers when wind and solar production drops later in the day or early in the morning.
There is also 50MW solar farm adjacent to the pumped hydro project, which commenced operation in 2017, with 540,000 tilted panels pushing power into the grid via the existing 132kV transmission line. The solar off-take is with the Queensland government.
Wind farm in the works
A 258MW wind farm is also planned for the Kidston precinct, but is not due to come online until 2026 – a year after the pumped hydro project is to start operating.
Strangely, the pumped hydro turbines at Kidston will not be powered by the renewable projects next door, but bought from the existing power grid, which could well include electrons produced from coal-fired power.
Harding said originally the company looked at a packaged off-take agreement with the pumped hydro and the existing solar farm, but there was mixed interest from the market.
“It’s to capture the commercial value really. And it’s simpler,” he said.
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“We just didn’t get the value, so we decided to separate them physically, and electron-flow-wise, it’s the same, but commercially we packaged the storage separate from the solar.”
If all goes to plan, the Kidston pumped hydro project will be “energised” late next year before beginning operation in 2025.
Apart from providing low-emissions power in the early evening, the Kidston project will also be able to provide FCAS, or grid stability services, for the Australian Energy Market Operator, another valuable tool.
Representatives of EnergyAustralia also toured the Kidston project this week, keeping an eye on proceedings but also getting some tips for EA’s own pumped hydro project near Lithgow in NSW.