Snowy 2.0 project pushed back to late 2029, costs to blow out again

The federal government owned Snowy Hydro has revealed another big delay of up to two years in the controversial Snowy 2.0 pumped hydro project, saying it may not reach full commercial operation until December, 2029.

The latest update is just the latest in a series of disastrous announcements for a project that is already heavily delayed and running billions of dollars over budget. The full catastrophe of the latest blowout beyond the latest official number of $5.9 billion will not be revealed until July.

The latest update released on Wednesday morning blames covid, supply chain issues, design changes due to the complexity of the project, and problems with their massive drilling machines which have become stuck in soft soil.

“Snowy Hydro anticipates that the timeline for full commercial operation is delayed by a further 12-24 months from the current publicly released dates,” the company said in a statement.

“Snowy Hydro expects more detail on the budget implications of the project reset around July 2023, and this will be clearly communicated with key project stakeholders.”

Some critics of the project fear that the total cost of the project could blow out to $10 billion, not including the transmission infrastructure required to transport its output to various parts of the grid.

It could mean that the company will need another cash injection from its federal government owner. Federal energy minister Chris Bowen told RenewEconomy on Wednesday he was waiting for advice from the company later this year.

“Obviously when a project takes longer, it will cost more,” Bowen said. “How much that is and how much Snowy Hydro can absorb as opposed to the federal government is a work in progress.”

Bowen said it will partly depend on negotiations with the project contractors, who have reportedly already put in claims for another two years It will partly depend on the contract renegotiation

The other big question is the potential impact on the pace and scale of Australia’s green energy transition and if that will impact on the timing of coal closures. Bowen says he has talked with AEMO boss Daniel Westerman and will await further advice from that organisation.

In a later statement, AEMO said that its most recent modelling, including a Fbbruary update to its Electricity Statement of Opportunities, included previously advised timing and modelling for various delays on the Snowy 2.0 hydro project.

“Today’s announcement is consistent with the range of modelling carried out and does not have a material impact on forecast reliability outcomes due to transmission limitations within New South Wales,” it said.

In other words, Snowy’s absence may not be noticed much because there is not enough transmission capacity to deliver its services in any case.

Also, AEMO is comforted by the solidity of the strong pipeline of proposed generation and storage projects in NSW, and planned transmission upgrades.

Snowy 2.0 was never needed or expected to fill lost capacity from the closure of Eraring in 2025, but some in the market say it could affect the closure dates of coal plants such as Vales Point, currently scheduled for 2029. If a 1.5°C outcome is met, then all coal generators need to be gone by that date.

The recently appointed  Snowy Hydro CEO Dennis Barnes said it was important that the project had a “safe, efficient and realistically achievable timeframe to enable orderly planning for all our stakeholders.

“I am committed to being transparent about our progress and how we are proactively managing the inevitable issues and challenges that arise in a complex project like this.

“While many other major infrastructure projects have been impacted by the same challenges, Snowy 2.0 continues to make positive progress.”

The continued delays will frustrate and anger the projects many critics, and could have an impact on the pace of the energy transition away from coal because authorities had bet the house on this so called “vanity” project.

It has caused many other storage projects to be put on hold because of its sheer size, and it could have big implications for the future of other smaller pumped hydro projects because it will be more difficult to obtain finance.

Battery storage projects, as revealed in this week’s NSW tender, are already competitive on long duration storage, but deeper seasonal storage is still likely to be required as coal generators exit the grid and are replaced by wind and solar.

Bowen said earlier in a speech that he welcomed the new “honesty” and “frankness” of the new management team at Snowy, saying that it was “inexcusable” that earlier delays had been hidden from the market operator and the public by the board and then energy minister Angus Taylor.

“I was informed yesterday by Snowy of these delays, and I encouraged them to inform the market today … because we have to bring the australian people with us on this journey, and that means being open about the challenges and opportunities.,” he told the Smart Energy Council conference in Sydney.

Bowen confirmed that tunnel boring machine had been “experiencing difficulties” due to soft ground. The Snowy statement gave few more details about its problems or its progress, but admitted delays.