The soaring costs of Snowy 2.0 have reached eye-watering new heights, with reports that the already bloated bill for the federal government-owned vanity pumped hydro project in New South Wales has doubled, yet again, to nearly $12 billion.
The controversial 2GW project has suffered huge delays and a series of cost blowouts since its inception, when it was projected to cost about $2 billion and be up and running well ahead of the state’s planned coal plant retirements, on this side of 2025.
But Snowy 2.0’s completion date was earlier this year pushed out – again – to as late as December 2029, due to what Snowy Hydro’s then new CEO Dennis Barnes described as a combination of delays across five major work fronts.
This included delays caused by the “paused” boring machine called Florence, and an uncooperative area of “soft ground” that had brought to a halt efforts to to dig a 27km tunnel.
These ongoing tunnelling problems and the ripple effects from Covid have also fuelled speculation that the costs of the project could run well over the recently revised budget of $5.9 billion.
This speculation is now all but confirmed, with reports emerging on Wednesday morning that $12 billion is the figure from the latest update from Snowy management about costs – a figure that appears to have been leaked to media ahead of its public release.
“I received the costings update yesterday, together with the other shareholding (finance )minister …. Gallagher. We will take a little bit of time to work through it, but we’ll release it publicly and imminently,” federal energy minister Chris Bowen told reporters on Tuesday.
And while Bowen wouldn’t confirm that the $12 billion figure is official, he did confirm that the beleaguered project is now, essentially, too big to fail.
“Yeah,” was the minister’s response to a reporter who asked whether the Albanese government would remain committed to the pumped hydro project and to the company behind it, Snowy Hydro, no matter what?
“Yeah. And part of that update will also look at the benefits and the changes to Snowy. And we’ll be upfront about that. And I can tell you it’s still a vital project for the grid, vital project for the grid and represents an important return.”
But according to Ted Woodley, an energy industry veteran and long-time critic of Snowy 2.0, the reported new bill for the pumped hydro project well and truly eclipses any financial returns it promises to deliver.
This includes the $4.3 – $6.6 billion estimate put forward in the feasibility study; a number Woodley and others say was highly inflated.
“So now we have a situation where even the inflated benefits in the feasibility study have been just blown out of the water,” he told RenewEconomy, noting that the latest cost for Snowy 2.0 also well exceeds the value of the whole of Snowy Hydro ($7.8 billion in 2018).
Woodley is also highly sceptical that the unofficial $12 billion figure includes all of the project’s costs, in their entirety, as he says has been Snowy Hydro’s practice to date.
These costs inlcued capitalised interest and suppressed dividends during construction, hedging, insurance, exploratory and other works, design, project management, owner’s costs, the segment factory, environmental offsets – which Woodley says add up to many billions.
He now calls it the “$25 billion water battery”, once the 1,000km of new transmission lines to Sydney and Melbourne, costing another $10 billion or so, are added in.
“It never stacked up economically, technically or environmentally … I think it’s Australia’s biggest engineering debacle.
“Surely the government will undertake a comprehensive independent review, something that experts have been urging for years, and not continue to rely on Snowy Hydro’s advice,” Woodley added.
“A few billion has been sunk, but there are many more billions of taxpayer funds that can be saved and put to far better use than a $25 billion water battery.”
In a statement emailed to RenewEconomy on Tuesday afternoon, Snowy Hydro did not confirm or deny the $12 billion figure, saying only that it would not comment on speculation.
“In May, Snowy Hydro indicated it was working towards a reset of the delivery timeline and budget for the Snowy 2.0 national energy storage project, with its principal contractor, Future Generation Joint Venture,” a company spokesperson said.
“The process in relation to the budget reset is advanced, but ongoing.
“We understand that there is a high level of interest in the project given its critical role in energy storage and the future of the national electricity grid,” the statement says.
“It is not appropriate for us to comment on speculation. We will provide a full and transparent update at the appropriate time.”
