Auditor-general slams management of Snowy 2.0 as more delays loom and project costs blow out

The federal auditor-general has slammed the management of Australia’s biggest renewable energy project, Snowy 2.0, citing multiple failures and pointing to yet more delays for the project that is already vastly over budget.

The report by the A-G, released on Thursday, is the first to be completed since Snowy Hydro announced a project “re-set” in 2023 that conceded the costs of the huge pumped hydro facility had blown out to $12 billion, and faced yet more delays, pushing the expected completion date out from May, 2026, to the end of 2028.

The project costs appear set to blow out once again to around $20 billion, and some argue that the total costs including interest and transmission is closer to $40 billion. The full extent will be revealed soon after an intensive none-month, line by line analysis of project costs.

The A-G report is critical of the actions of both the board and the management since the re-set.

“Since then, (management) has not effectively held the contractors to account for delivery, has not effectively implemented measures that were intended to manage project risks, and does not have access to quality data that would allow it to appropriately monitor the project,” the report says.

On the board oversight, it writes: “While the board challenged information provided to it by management, sufficient board consideration of the project reset risks was not demonstrated.”

Snowy Hydro has been prepping the public for the latest blowout in costs, producing reports that justify the project’s importance to the green energy transition, and inviting media and influencers to publish favourable reports about its importance to grid security and reliability.

But it has also hinted at yet more delays beyond the current deadline of late 2028. CEO Dennis Barnes told the AFR last month that the company was “not feeling that comfortable” about meeting the deadline.

The A-G report highlights why, noting that “line of sight” calculations suggest commercial operations will not be achieved until September, 2029, and as at July last year was 262 days behind the December, 2028 schedule.

In fact, the project had not been on that schedule since late 2023, although the number of days behind schedule had reduced from 453 in December, 2023, but increased considerably from 114 in December, 2024.

The costs of Snowy 2.0 have blown out ten-fold since the original $2 billion claim made when the project was first announced in early 2017.

Later that year, a feasibility report suggested a cost of between $3.8 billion and $4.5 billion, before this was lifted to $6.1 billion in 2018 when the first major contracts were signed and the final investment decision was reached.

That cost then doubled again to $12 billion after the 2023 reset, and the A-G report says most of this had already been spent by May this year. It now seems destined to leap to around $20 billion – on project costs alone – in the latest review.

Previous A-G reports have highlighted multiple failings by Snowy Hydro, including its failure to properly assess the geological conditions that have proved problematic and been a major cause of delays and cost blowouts.

The latest A-G report said significant deficiencies in Snowy Hydro’s project management include the following.

• – Key quality controls have not been effectively implemented.
• – There is no agreed baseline schedule for the project.
• – Snowy Hydro has reported that productivity gains assumed at reset are proving difficult to realise.
• – Snowy Hydro does not have a robust understanding of the forecast cost to complete of the project.
• – The incentive framework is not working as intended.
• – Snowy Hydro does not have adequate arrangements to monitor the impact of adjustments on value for money.

The A-G report made five recommendations, mostly around improving its project management skills. Snowy Hydro agree to four of these recommendations, but only partially agreed to a fifth that related to the need to develop regular public reports on project schedule that includes information on project progress against published targets.

“Public reporting and internal management forecasting serve different purposes and utilise different methodologies appropriate to those functions,” the company said in its response.

“Internal risk-adjusted and critical path forecasting tools are used to support project management and assurance activities but are not typically adopted for external reporting due to commercial sensitivities.”

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