Anthony Albanese has labelled the federal government’s $5bn spend on the Snowy Hydro 2.0 project in New South Wales as one of the most significant announcements he will make as prime minister.
On Wednesday Albanese and Dominic Perrottet formally announced the almost $8bn joint-funding deal with the NSW government on poles and wires to connect the Snowy scheme to the electricity grid.
The funding – which followed the NSW premier’s commitment to a coal price cap previously agreed to at national cabinet – will also see the federal government fund the connection of several of the state’s renewable energy zones to the electricity grid.
Albanese said the deal, struck in return for the NSW government’s support for the coal and gas price cap, is part of a “medium and long term” transition to a renewable energy market.
“This is one of the biggest announcements that will be made in my prime ministership … or Dom’s premiership,” he said.
“This is a very big deal of putting transmission into the 21st century.”
It came as the NSW parliament on Wednesday passed a $125 per tonne temporary cap on the price of coal used for domestic electricity consumption.
Asked on Wednesday whether the cap – which will allow the government to set the wholesale coal and gas price for the next 12 months – went against the Coalition leader’s “free market” ideals, Perrottet said he was “practical” about finding a short-term solution to soaring energy costs.
“I’m a free market guy but I’m also a practical guy too [and] the reality is we stand with households and families across NSW,” he said.
“No one foresaw an illegal invasion of Ukraine [and] our families in NSW, our businesses in NSW, are under extreme pressure.”
The NSW government expects to lose about $150m in royalties as a result of the caps, but Perrottet has insisted his support for the package – which has been opposed by resource companies – was not contingent on compensation.
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Instead, the NSW government says the cap will result in an estimated average saving of about $230 for household energy bills next year.
The legislation was passed with MPs forced to meet in a committee room while the parliament undergoes renovations during the Christmas break.
On a relatively short sitting day, the NSW Labor opposition and Greens unsuccessfully sought to move separate bills banning rent bidding and imposing a rental price cap.
It came after the opposition leader, Chris Minns, earlier suggested he was open to considering Victoria’s move to re-enter the electricity market through the revival of the State Electricity Commission, decades after its privatisation.
But the funding for the Snow Hydro 2.0 scheme has not been unanimously welcomed.
Beset by problems since it was first announced by the former prime minister Malcolm Turnbull in 2017, the project has faced cost blowouts and fallen behind schedule and industry figures have questioned whether it played a role in the spike in wholesale prices in recent months.
Craig Memery, a senior energy adviser at the Public Interest Advocacy Centre, said the Snowy project’s “market disruption and unrealistic project timelines” were already costing consumers.
“With Snowy 2.0, the Albanese Government has inherited a bad deal for consumers,” he said.
“They might not be able to walk away from the project, but as the owner of Snowy Hydro they can prevent NSW energy consumers from being burdened with Snowy 2’s multi-billion dollar transmission cost.”
But the state’s treasurer, Matt Kean, said the deal would “ensure NSW gets the cheapest electricity, the most reliable electricity and also the cleanest electricity”.
“That’s great for households but it’s even better for businesses in the industry, particularly heavy industry that will be relying on that clean, cheap, reliable electricity to produce the products [that] the rest of the world is demanding right now,” he said.
The federal government’s funding for the Snowy project follows previous commitments in both Victoria and Tasmania.