Snowy Hydro has directed its principal contractor on the Snowy 2.0 pumped hydro scheme, Future Generation Joint Venture (FGJV), to undertake a comprehensive reassessment of its costings for the controversial project, with its budget reportedly set to blow out by 900%.
Snowy 2.0 was originally pitched to cost $2 billion but a project reset in 2023 saw the budget blow out to $12 billion. Now, experts say the total cost could reach $20 billion.
“At 67% complete, Snowy Hydro believes material cost pressures mean now is the time to oversee FGJV as it carries out the cost reassessment which is expected to take up to nine months to complete. Independent construction cost experts have been engaged to verify the principal contractor’s reassessment,” Snowy Hydro said in a statement.
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Snowy Hydro says the most significant sources of cost pressure for Snowy 2.0 since the reset include:
- Costs associated with contractor productivity targets not realised: While the 2023 reset succeeded in substantially increasing productivity, there remain challenges. This is due to a combination of factors, including delays from tunnel boring machine (TBM) stoppages in 2024, work stoppages associated with safety concerns and general productivity underperformance. The reassessment will examine past productivity performance and our future productivity requirements.
- Costs of de-risking challenging geology no longer being able to be absorbed: A fourth TBM will be used to derisk challenging geological conditions through the Long Plain Fault Zone and help protect the project’s schedule. The initial assessment was that the cost to purchase, deploy and operate would be covered within the project costs, however, cost pressures have meant this is no longer possible.
- Supply chain cost increases: FGJV has identified unforeseen supply chain cost increases to significant, bespoke procurement, including major offshore purchases associated with Snowy 2.0’s underground power station.
Snowy Hydro CEO Dennis Barnes said while the need to reassess Snowy 2.0’s cost was “disappointing”, the critical importance of the project to electricity users across the network had not changed.
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“Snowy 2.0 will be a cornerstone of Australia’s transition to renewable energy, providing more than half of the long-duration storage the grid needs by 2050,” he said.
“It will enable the introduction of more wind and solar by acting like a giant battery, storing and delivering enough excess energy to power around 3 million homes for a week.
“Snowy 2.0 is being built to operate for 150 years. It is as important to Australia now as the original Snowy Scheme was decades ago.
“Like the original scheme, which still helps underpin electricity reliability today, the benefits of Snowy 2.0 will be felt for generations.”
