"A NEW Snowy Mountains Scheme" is how Origin Energy's managing director, Grant King, describes his plan to build a multibillion-dollar, 1800MW hydro-electric project con-necting Papua New Guinea to Queensland, with the potential to power 1.8 million homes.
Under a memorandum of co-operation signed between the PNG and Queensland governments, along with Origin and PNG Energy Developments Ltd, a 250-kilometre subsea interconnector, similar to BassLink which connects Tasmania and Victoria, will be built between a hydro power project on PNG's Purari River at Wabo and Daru in the country's south.
Another cable would run for a similar distance under Torres Strait to Bamaga in Cape York, with a further 1000 kilometres of transmission infrastructure providing a link to Weipa and down to Townsville, where it will join the national electricity grid.
The 50:50 venture between Origin and the PNG Sustainable Development Program will be subject to a feasibility study, expected to be completed in 2012, and require regulatory, Commonwealth and native title approvals.
Mr King said the cost of the project and other details would only be known after the completion of the feasibility study.
If the project gets the green light, it could be delivering 1200MW of power to Australia and 600MW to PNG as early as 2018.
But analysts expressed doubts about the project advancing, sending Origin shares down more than 1 per cent against a higher market, losing 17? to $15.48.
Mr King told BusinessDay he didn't believe the project was too ambitious. He said the Purari River flows at Wabo were an "extraordinary resource" and would mean the hydro project would be able to provide renewable base load power.
"I don't think the share price [reaction] is people saying they don't like this. They are saying that there is something new on the table, and [theyd] like to learn a bit more, he said.
The thing about thePurari River at Wabo is that it rains eight metres all year [there] so the river flows are constant.
The annual constant river flow is four times theMurray River system.
It could fillupSydneyHarbour in two days.
Intermsof its potential to be transformative, it is a SnowyMountainsScheme.
It is important to say that while the Snowy schemehas a higher nameplate (capacity) of about 2500 megawatts, it is still only an intermediate and peak provider of energy into the national electricity market. This will providemore energy because it is base load. While there would be losses of about 9 per cent of the power generated during transmission, broadly in line with industry standards,MrKing said thePNGproject was the most efficient way to deliver base load renewable energy.
Whenyoudivide the eventual cost of the project by the amount of energy that will be generated into a unit cost of energy, it will be the cheapest source of base load renewable energy inAustralia, he said.
TheQueenslandPremier, Anna Bligh, said therewere potentially other benefits fromthe massive increase in power into the grid, including powering resource projects.
She said a subsidiary of Chinas Chinalco walked awayfromdeveloping a $3 billion project earlier this year partly because of the high cost of securing electricity.
MrKing said the project was crucial ifAustralia was to meet its target of 20 per cent of renewable energy by 2020. Measures in place will not see us get anywhere near that target. So we need big ideasand big solutions ...
This will be one of the lowest-cost wayswe can help achieve
SWITCHED ON POWER PLAN FOR PAPUA NEW GUINEA
The Purari River project could generate about 1800 megawatts of power.
_ It would use undersea transmission technology similar to BassLink between Tasmania and Victoria.
It would be the first project to deliver year-round baseload renewable power energy into mainland Australia.
Frequently Asked Questions about this Article…
What is Origin Energy's PNG hydro plan and how much power could it produce?
Origin Energy proposes an 1,800MW hydro-electric project on PNG's Purari River that the company says could potentially power about 1.8 million homes. Under Origin's plan the project could deliver around 1,200MW to Australia and 600MW to Papua New Guinea if it proceeds.
Who are the partners and what infrastructure would the PNG–Queensland link require?
The memorandum of co-operation involves the PNG and Queensland governments, Origin Energy and PNG Energy Developments Ltd (and a 50:50 venture with the PNG Sustainable Development Program). The plan would use subsea interconnectors (about 250km to Daru and another under the Torres Strait to Bamaga) plus roughly 1,000km of transmission to link into Weipa and Townsville and join Australia's national grid.
When would the feasibility study be completed and what is the earliest expected delivery date?
Origin expected a feasibility study to be completed in 2012, with the company saying the project could start delivering power as early as 2018 if it received the necessary approvals and the feasibility study supported moving ahead.
What approvals and risks should investors be aware of for the Purari River hydro project?
The project is subject to a feasibility study and would require regulatory approvals, Commonwealth sign‑offs and native title clearances. Analysts expressed doubts about the project advancing, and Origin has cautioned costs and other details won't be known until the feasibility work is finished.
How efficient is the proposed undersea transmission and what are the expected losses?
Origin expects transmission losses of about 9% — broadly in line with industry standards for long-distance undersea and overland transmission — which the company says still makes the PNG project an efficient way to deliver baseload renewable energy.
Could the Purari hydro project lower the cost of renewable baseload energy in Australia?
Origin's managing director said that when the eventual cost is divided by the energy produced, the Purari project would be one of the cheapest sources of baseload renewable energy in Australia. However, the company also notes final cost and unit‑cost figures will only be known after the feasibility study.
What impact did the announcement have on Origin Energy's shares and investor sentiment?
After analysts voiced doubts about the project's chances of advancing, Origin shares fell by more than 1% to about $15.48. The share reaction reflected investors wanting more detail as the plan was a large, novel proposal.
How does Origin describe the Purari River resource and its importance for Australia's renewable targets?
Origin's managing director described the Purari River at Wabo as an 'extraordinary resource' with very consistent flows — he said it rains heavily year‑round and the river could provide steady baseload renewable power. He also argued the project could be important for helping Australia reach a 20% renewable energy target by 2020.
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