Government says Snowy 2.0 still viable despite cost blowout

One of the four tunnel boring machines for Snowy 2.0 (breakthrough)
One of the four tunnel boring machines for Snowy 2.0 (Image: Snowy Hydro)

The total cost of the Snowy 2.0 pumped hydro project has ballooned to $12 billion, with Snowy Hydro blaming rising labour and material costs, and unforeseen boring problems.

Despite the cost blowout, the government says the updated Snowy Hydro Corporate Plan shows ​​​​Snowy 2.0 will now deliver an extra 200MW or 10% of power, bringing its total generation to 2.2GW. Full power is now expected in December 2028.

“Despite the cost blowout, the project still has a net present value of around $3 billion,” the government said in a statement.

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“Like other major energy and infrastructure projects around the world, Snowy 2.0 faces inflationary and supply chain pressures post COVID-19. Snowy 2.0 is one of the most complex engineering projects in the world, and is subject to the same challenges as all major construction projects.”

The government did, however, point out that many of the cost escalations relate directly to “design immaturity at FID” and “site conditions and geology which should have been known at the time”.

“For example, the fact that tunnel boring machine Florence would encounter soft ground should not have come as a surprise, but has significantly impacted the project,” the government said.

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“AEMO has confirmed that Snowy 2.0 is crucial to maintain reliability in the NEM. Importantly, under the Snowy 2.0 reset there will be a new model of working with the venture partners and contractors. This new approach will mean that if contractors deliver on time and to budget while respecting safety and environmental obligations they will benefit financially, while if the opposite happens they will suffer financially.

“Crucially, Snowy Hydro has advised government that if this contractual change is not made, it would lead to further cost escalation and delays.

“Unlike the previous Government, we are committed to being transparent and honest with the Australian people about the challenges and opportunities for Snowy.”

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