Commonwealth-owned Snowy Hydro has announced the updated target cost to complete Snowy 2.0 is an eye-watering $22.2 billion, with an allowance for a cost scenario of $25 billion, following a comprehensive cost reassessment by principal contractor Future Generation Joint Venture (FGJV).
The Snowy 2.0 expansion project was originally costed at $2 billion when it was announced in 2017 and a target cost reset of $12 billion was announced in 2023. The updated target cost of $22.2 billion represents a figure 11 times the original cost of the project.
The new target completion date for Snowy 2.0 is late 2029.
Snowy Hydro said the higher cost scenario reflected Snowy 2.0’s “uniqueness, risk, and technical complexity”, as well as “FGJV’s cost estimation challenges”.
Related article: Work begins on Snowy 2.0 underground power station
Snowy Hydro CEO Dennis Barnes said he was “incredibly disappointed” with the cost update.
“We had a project that was stalled and had billions of dollars of claims on the table in 2023,” he told the ABC.
“I’m pleased we’ve got progress—progress doubled in the first year after the reset. What I’m disappointed about is obviously the resultant costs of the progress we’re making.
“I have no doubt that moving from a fixed price contract, which was never suitable for such scale, uniqueness and complexity, has protected the project from an even greater cost increase.
“It’s also likely that under a fixed price contract, the project would again be stopped under the weight of billions of dollars of claims from the contractor, as it was prior to the reset.”
The cost reassessment found the primary reasons for the increased project cost were:
- Detailed technical analysis continuing to identify the scale and nature of the design immaturity of the project when the final investment decision was made.
- Construction complexities contributing to principal contractor FGJV not meeting productivity targets.
- Cost and planning underperformance by FGJV leading to previous underestimating of the delivery scope.
- Global cost escalation for equipment, services and people exceeding allowances made at the 2023 contract reset.
Snowy Hydro said it had taken action to strengthen the project’s delivery and cost performance, including:
- Directing FGJV to establish a project control office with enhanced data and analytics to drive productivity and identify emerging risks early, which is now operational.
- Embedding independent infrastructure delivery and cost experts in the project to bolster delivery oversight.
- Establishing a new board oversight committee including external megaproject advisors to monitor and take action on progress and risk.
- Driving changes in FGJV’s leadership on the project, including a new project director, responsible for daily cost and schedule performance on the ground, and a broad uplift with more senior, globally experienced megaproject leaders.
Barnes said the long-term value of Snowy 2.0 to Australia’s energy reliability was “stronger than ever”.
“The scale of Snowy 2.0’s energy storage is world-leading. More than half of the total energy storage the grid needs by 2050 will come from Snowy 2.0 alone,” he said.
“Like the original Snowy Scheme, which still underpins energy reliability more than 70 years on, Snowy 2.0 is a generational investment in our energy sovereignty and a national asset owned by all Australians.”
The pumped hydro expansion of the Snowy Scheme will provide 350,000MWh of storage, equivalent to around 26 million home batteries.
“Snowy 2.0’s massive, long-duration storage will be the grid’s insurance policy against multi-day wind and solar droughts, helping to prevent blackouts and control price spikes that would otherwise flow through to household electricity bills,” Barnes said.
“We’re now much further through the project than at the 2023 reset, meaning we’ve learned more and more risk is behind us.
Related article: Cost reassessment for Snowy 2.0 amid budget blowout
“At the reset, only 44% of the construction design had been completed, now it’s 96%. While there are still risks to manage, the project is in its strongest position yet.”
There are more than 5,000 people currently working on Snowy 2.0. Progress this year has included:
- Underground power station construction has started, marking a new phase of Snowy 2.0’s development.
- Decommissioning tunnel boring machine (TBM) Lady Eileen Hudson has started, after completing its second tunnel, following 8.6km of tunnelling.
- TBM Florence is almost at the halfway point of its 15km tunnelling journey.
