The federal government’s under-construction Snowy 2.0 pumped hydro project in NSW, the biggest renewable energy project in the country, is designed to last for up to a week.

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However, building pumped hydro projects can be difficult, and can often take years. Because they require significant height differentials over short distances, suitable geographic sites – such as steep mountain ranges, which are often in heavily bushed, remote and complex terrain – can be hard to secure. They also present significant challenges and costs in terms of construction and connectivity to the grid.

Snowy 2.0, for example, has faced billions of dollars in budget blowouts and years of delays. Originally planned to be operational by 2024, it is now not expected to be completed until 2028.

With typical lead times of more than five years for pumped hydro projects, power supplier Alinta Energy said the scheme did not “leave any leeway” in the tender process, regulatory approvals, supply chain issues, or for unforeseen issues such as those experienced by Snowy 2.0.

“Whilst the timeframe may align with the current setting of the Australian government’s financial budget caps, it also poses a risk of limiting the capacity investment scheme to only promoting short-term storage,” said Graeme Hamilton, Alinta’s head of government and regulatory affairs.

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“This is inefficient and will ultimately impose additional long-term costs on the consumers and potentially fail to achieve the reliability levels required for a stable grid.”

The Albanese government says the capacity investment scheme is based on independent expert advice to deliver an increase in green energy’s share of the grid to 82 per cent by 2030 and ensure Australians “have the power we need when we need it”.

A spokesperson for Energy Minister Chris Bowen said the scheme was open to long-duration storage, including pumped hydro. The government is also investing directly in pumped hydro through Snowy 2.0 and the Marinus Link project in Tasmania.

“Our practical plan will ensure an extra 32 gigawatts of cheap, clean, reliable renewables to fill the gap from expected coal closures over the next decade,” the spokesperson said.

The electricity industry has widely supported the rationale behind the Albanese government’s ambitious underwriting scheme and its aim of accelerating the deployment of new projects, particularly following a worrying 80 per cent drop in financial commitments in grid-scale projects from $6.5 billion in 2022 to $1.5 billion in 2023.

The government will be running competitive tenders and agree to “floor” and “ceiling” revenue for successful projects, which will provide minimum returns guaranteed by the government and a cap on what they can earn in a given year. If the ceiling is exceeded, a share will be returned to the government.

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