Snowy 2.0 fiasco – déjà vu, all over again, for the umpteenth time 

The Snowy 2.0 debacle keeps getting worse and worse, with last Friday’s news release from the government-owned Snowy Hydro signalling yet another cost blowout – ‘Cost Reassessment underway for On-Schedule Snowy 2.0’.

When unveiled in 2017, Snowy 2.0 was to be completed in four years (2021) for an indicative cost of $2 billion, with no government funding required.

Over the ensuing years there were multiple setbacks and re-estimates, but the 2023 review and ‘reset’ was heralded for getting the project back on track with a new contract and an absolutely final cost of $12 billion (main plant) and completion date of December 2028.

Now, two years later, the company’s news release reveals that yet another reset is coming, but we are going to have to wait, inexplicably, for up to nine months to know the outcome! 

Snowy 2.0’s total cost is likely to be approaching $30 billion when all project components are included, especially financing (by the government) and Snowy 2.0’s fair share of the cost of transmission connections.

This is an absurd amount for a 2,200 MW pumped hydro station, dwarfing the $7.8 billion market value of Snowy Hydro itself (with its 5,500 MW of generation, including the 1,800 MW Tumut 3 pumped hydro station, and two retail companies). 

And based on progress to date Snowy 2.0 is unlikely to be completed till sometime next decade, despite assurances that it remains ‘on-schedule’ for December 2028.

Even now, with around $7 billion sunk, canning Snowy 2.0 would probably have a least bad outcome than soldiering on and doggedly trying to complete it, ignoring the risk of further blowouts.

The Government has already kicked in $8.5 billion for the project, as well as $7.8 billion to purchase Snowy Hydro (from state governments) to facilitate Snowy 2.0’s construction, with more to come after the forthcoming reset. 

At the very least the government must commission an independent expert assessment, something that critics have been advocating for years.

This latest announcement perpetuates Snowy Hydro’s unblemished record of getting every estimate and claim wrong, substantially so, for over eight years. This next reset will be the sixth cost estimate.

Once again Snowy Hydro’s news release contains many questionable assertions as it tries to put a positive spin on the fiasco.

In line with Snowy Hydro’s direction to its principal contractor Future Generation Joint Venture (FGJV) “to undertake a comprehensive line-by-line reassessment of its costs to deliver Snowy 2.0”, I thought it might be useful to undertake a line-by-line assessment of Snowy Hydro’s news release.

Below, Snowy Hydro’s words in its News Release are in bold followed by my comments in italics.

NEWS

COST REASSESSMENT UNDERWAY FOR ON-SCHEDULE SNOWY 2.0

03/10/2025

Snowy Hydro has directed Snowy 2.0 principal contractor Future Generation Joint Venture (FGJV) to undertake a comprehensive line-by-line reassessment of its costs to deliver Snowy 2.0, as the project’s delivery remains set for its December 2028 completion. 

Is it not a little brazen to claim Snowy 2.0 remains on-schedule, when December 2028 is the seventh scheduled completion date – previously 2021, 2023, 2025, 2026, 2027, 2029, 2028? 

To achieve completion by December 2028 would require commissioning of the first generator/pump to commence by mid-2027, as it will take 12 – 18 months to progressively commission all six units according to Snowy Hydro. It is simply impossible to have all the water works and other critical components of the project ready for initial unit testing and first power generation in less than two years from now. 

The current schedule will inevitably be delayed; I expect to sometime next decade.

At 67 percent 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. 

There is no information on how the 67% completion figure has been derived, but it seems to be substantially exaggerated when:

• Only about half of the 35 kilometres of tunnels have been excavated, after four years of tunnelling by three tunnel boring machines – a fourth TBM has yet to be installed
• The two huge underground caverns for the power station are just over half excavated, after two years of digging
• installation of the massively complex mechanical and electrical equipment for the power station cannot start until the caverns are completed

Why does Snowy Hydro believe now is the right time to start overseeing FGJV? Surely Snowy Hydro should have been overseeing all aspects of FGJV’s work for the past 6½ years since signing the $5.1bn ‘fixed-price contract’ in April 2019.

Why will it take up to nine months to complete the reassessment, an inordinately long time to come up with a revised cost and timetable for a project supposedly 67% complete? Surely Snowy Hydro and FGJV have been constantly updating the project’s cost and time schedule. And why hasn’t Snowy Hydro engaged independent experts in the past to regularly verify FGJV’s estimates, given the contractor’s unsatisfactory performance according to Snowy Hydro?

This time the assessment needs to include all project costs, not just the main plant, as Snowy Hydro has been doing since the outset. Adding in excluded costs, especially financing (by the government) and transmission, doubles the current $12bn (main plant only) estimate to about $25bn. That figure will blow out further with the next reset, potentially to around $30bn – an absurd amount for a 2200 MW pumped hydro station, and far more that the $7.8bn market value of the existing Snowy Hydro business, agreed when the NSW and Victorian governments sold their shares to facilitate the construction of Snowy 2.0. Snowy Hydro has 5500 MW of generation, including the similarly sized 1800 MW Tumut 3 pumped hydro station, and two retail companies, and is many times more valuable than Snowy 2.0 will be.

More importantly, why hasn’t the government engaged its own independent experts, as critics have been advocating ever since the project was announced. Snowy Hydro has failed to provide one accurate estimate or claim. The Government has relied solely and unquestioningly on Snowy Hydro’s advice for over eight years. When will the government undertake its own independent due diligence?

Snowy Hydro CEO Dennis Barnes said Snowy 2.0 has made good progress since the 2023 project reset. Delivery rates have almost doubled in the past two years, with the average monthly progress of 0.57 percent increasing to 0.91 percent, and August 2025 hitting 0.98 percent delivery. This is despite pressures that reflect cost and productivity challenges currently being experienced across countless major infrastructure projects. 

“Since the reset, the project has generally been progressing well and is now 67 percent complete,” said Mr Barnes. 

“Despite disruption, including work stoppages due to safety concerns and continuing challenges with geology, we’ve been able to recover that time and get us to where we need to be in terms of schedule.”

Snowy Hydro’s previously published progress figures indicate a marked decline rather than improvement in the past 1½ years. A 17% increase in completion for the 9 months from August 2023 to May 2024 has been followed by a 10% increase for the 17 months to now:

• 31 August 2023 – “Construction of Snowy 2.0 is now approximately 40% complete and solid progress continues to be made.” 2023 Reset
• 24 May 2024 – “Snowy 2.0 is 57% complete, with a workforce of 3,000 achieving good progress across the construction worksites.” Updated Business Case
• 1 November 2024 – ““Overall the project is around 60 percent complete and there’s a strong sense of momentum” Snowy 2.0 update
• 3 October 2025 – “Since the reset, the project has generally been progressing well and is now 67 percent complete.” Cost Reassessment News Release

“The reset was about getting Snowy 2.0 moving again by creating a more collaborative relationship with the principal contractor and achieving safe progress. We’ve done both, but the productivity uplift hasn’t been to the degree we needed.”

How can the reset have resulted in a more collaborative relationship with FGJV and achieve safe progress when in February 2025 Snowy Hydro became so frustrated with FGJV and multiple safety incidents that it called for a safety audit and leadership sackings – ’Snowy 2.0 Safety Incident’:

“Following a serious safety incident at Snowy 2.0, Snowy Hydro will seek an immediate independent safety review and audit, and will require changes to principal contractor FGJV leadership on the project.

Recent safety concerns at Snowy 2.0 have made it clear that as the client, our assurance role over FGJV’s activities requires this intervention.”

Eight months later and Snowy Hydro has yet to release results of the safety audit or changes in FGJV’s leadership.

Some of 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 TBM stoppages in 2024, work stoppages associated with safety concerns and general productivity underperformance. Our 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: Our contractor has identified unforeseen supply chain cost increases to significant, bespoke procurement, including major offshore purchases associated with Snowy 2.0’s underground power station. 

How did the 2023 reset succeed in substantially increasing productivity when Snowy Hydro’s progress figures show otherwise and “contractor productivity targets have not been realised”? Surely the work stoppages due to safety concerns were legitimate, and should not have occurred in the first place, as an exasperated Snowy Hydro highlighted in its February 2025 News Release. 

Why has FGJV been underperforming Snowy Hydro’s productivity expectations, especially when it now has no cost concerns because of its new cost-price contract wherein Snowy Hydro is bearing all the financial risks? Surely the reassessment doesn’t need to examine past productivity performance and future requirements – these should already be well documented.

How could there have been substantial unforeseen supply chain cost increases since the 2023 reset, when the orders for most major items, especially long-lead time offshore purchases (except TBM4), would have been placed well before? 

Mr Barnes said while the need to reassess Snowy 2.0’s cost is disappointing, the critical importance of the project to electricity users across the network has not changed.

The ever-increasing cost blowouts are not just disappointing, they render the project totally uneconomic, as was predicted by many energy experts at the outset. 

It is noted that there is no mention of the consequent reduction in the project’s claimed benefits, which were (wildly overestimated to be) $3bn at the previous reset. Possibly Snowy Hydro will repeat previous claims whenever Snowy 2.0’s cost has increased that, miraculously, the benefits have increased even more.

“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.

Rather than being a cornerstone, Snowy 2.0 is a millstone for every Australian taxpayer. The government has already kicked in $8.5bn (on top of Snowy Hydro’s $7.8bn purchase price) and considerably more financial support will now be needed for the forthcoming reset. 

Also, electricity consumers will be paying for Snowy 2.0’s transmission connections to Sydney and Melbourne costing around $20bn – HumeLink ($5bn), Sydney Ring South ($2bn), VNI-West ($7.5 – $11bn) and WRL ($4bn). HumeLink is one third longer than it need have been but for a 100 km dog-leg deviation to connect Snowy 2.0. Whilst these circuits are not for Snowy 2.0’s exclusive use, Snowy 2.0 would be stranded without them and so a proportionate amount should be recognised as part of the project’s cost. 

“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.”

Who can foresee more than a couple of years into the future and claim that Snowy 2.0 will be of value till 2175. Batteries are already outcompeting pumped hydro, being far more efficient and flexible, and getting bigger and cheaper. The Snowy 2.0 debacle is a salutary lesson for any other proponent of a pumped hydro project.

Yes, Snowy 2.0 “will be felt for generations”, in the pockets of taxpayers and electricity consumers. And across 30 kilometres of pristine sub-alpine bush in Kosciuszko National Park, the headwaters of the Murrumbidgee, Murray, Snowy and Tumut Rivers, and more than a thousand kilometres of transmission corridors and adjoining areas traversing NSW and Victoria.