Alinta Energy has withdrawn plans to build a USD 1.8 billion pumped hydro energy storage project in northern NSW, becoming the second large-scale renewable energy project in the state to be scrapped this month.

Project withdrawal confirmed

The 900-megawatt Oven Mountain Pumped Hydro Energy Storage scheme was one of the largest projects within the Armidale Renewable Energy Zone. In a statement, an Alinta Energy spokesperson said "economic and timing challenges on key elements, including a critical transmission line" made the project unviable.

The decision follows Origin Energy's abandonment of the proposed 870 megawatt Skye Ridge Wind Farm near Walcha in northern NSW earlier this month. The project was listed for consideration as a state significant development and was progressing through assessment phases with NSW Planning.

"This decision follows years of technical studies, planning, stakeholder engagement, and project development activities," the Alinta spokesperson said. "We sincerely thank traditional owners, landholders, MPs and council representatives, suppliers, key agencies, and many other key stakeholders who have contributed their time, knowledge, and feedback throughout the development process."

How the scheme would have worked

A pumped hydro energy storage system works by moving water between two dams, one at the top of a hill and another at the bottom, through a turbine. Energy stored during the day is then released during peak electricity usage at night to maximise profit.

The Oven Mountain project was planned for a site near Georges Junction at the rural hamlet of Carrai, 60 kilometres southeast of Armidale and 75 kilometres northwest of Kempsey. When it was first announced, it was identified as being critical to state infrastructure.

The site is located in the steep, forested country of the Great Dividing Range and is home to Thunggutti Indigenous people.

Local shock and concern over planning hurdles

Armidale Shire Mayor Sam Coupland said the decision to scrap the project had left him in shock, with the council only finding out about the decision on the morning of the announcement. Cr Coupland questioned whether state and federal planning regulations had become too onerous.

"It seems there are too many environmental hoops to jump through," he said. "That seems to be killing important projects, whether it's this, other renewable energy projects [or] inland rail, take your pick. There just seem to be too many hurdles to get through that are imposing a cost that makes these things unviable."

Cr Coupland said the council had worked with Alinta Energy for several years to plan roadworks to support the project, including the Kempsey-to-Armidale Road restoration, which he described as the biggest engineering project ever undertaken by any council in NSW.

The state member for the coastal electorate of Oxley, Michael Kemp, said the decision was a "poor result for the community." "It's a loss for the community on the mid north coast," he said. "This project would have provided significant trades jobs, not only during the construction but also ongoing."

Kempsey deputy mayor and Thunggutti Local Aboriginal Land Council chief executive Arthur Bain said there would be mixed feelings about the loss of the project.

"If we think about the site of Oven Mountain, it's perfect for pumped hydro because it is very steep gorge country and it's got the natural falls to generate the electricity," he said. "On the other hand, its location also makes it unviable economically because it is so isolated."

Cr Bain noted that a previous hydro project proposed for the site had failed in the 1980s. "You've really got to go out there and put your boots on the ground and see what that country was like. [It's hard] to imagine just getting machinery out there," he said.

Battery costs squeeze pumped hydro economics

Energy experts warn that construction costs are rising as battery storage prices plunge, leading to once-critical pumped hydro projects becoming unviable. Tristan Edis, a director with consultancy group Green Energy Markets, said plummeting battery storage costs had put many large renewable energy projects at risk.

"What happened to battery storage is that it got a lot cheaper really quickly," he said. Mr. Edis said pumped hydro is a civil construction project, and that civil construction costs have gone up quite a bit. While pumped hydro has the advantage of being able to run between eight and 24 hours a day, the building costs are significantly higher, and the cost-benefit balance has shifted toward battery storage.

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