It seems that the dire predictions of a truly massive blowout in the costs of the controversial Snowy 2.0 pumped hydro project must be close to the mark.
Snowy Hydro has huffed and puffed about the speculation, and expressed its outrage that analysts and critics should throw in cumulative interest and transmission costs. But it is clearly feeling the pinch, so much so that it now has invested in expensive advice to provide an answer to a question that no one is really asking.
What now seems clear is that a project once touted by former prime minister Malcolm Turnbull as a $2 billion no-brainer investment has now blown out to around $20 billion ($40 billion if you add in the interest and transmission costs), precisely because not enough brain power was applied to the details of such a vanity project at the start.
The costs have already blown out once to $5 billion, which Snowy Hydro has argued should be the starting point because it is when the construction contract was signed, and then in 2023 it blew out to $12 billion after a “reset” under the new management team.
Last October, it announced it faced another big blowout in costs, but said it needed nine months to get its contractor to go through the project, line by line, to find out exactly how much.
That nine months timeframe is coming up in a few weeks, so Snowy Hydro has clearly decided to get on the front foot and try and minimise the damage.
On Thursday it released the findings of a report it had commissioned from energy advisory firm Baringa to outline the benefits of Snowy 2.0’s deep storage, particularly in times of wind and solar droughts when it says that big batteries simply don’t have the storage length to fill in week-long downturns in the production of wind and solar.
Which is fine, but no one is really asking that question – in the same way that no one is really suggesting that we turn off all the coal and gas power stations today. But people are happy to give you an answer.
There is no real debate in energy circles about the need for deep storage, just a question of how much, where, and at what cost. And no one really doubts that Snowy 2.0 – once delivered, albeit massively over budget and very very late – will be a useful addition to the grid and fill important gaps.
It’s just that many will argue that there were many much smarter and considerably cheaper options, and ones that wouldn’t have done the reputational damage to the green energy transition that Snowy 2.0 has achieved.
What’s done is done. It really is too late to turn back the clock on Snowy 2.0, although there are some who argue passionately that it should cut its losses, so the board of Snowy wants to get on the front foot and make a silk purse out of a sow’s ear.
The Baringa report, Snowy CEO Dennis Barnes tells us, confirms that Snowy 2.0 is “indispensable”, which is more powerful message, I guess, than ever-present.
And at least Snowy has moved on from comparing itself with 7 million Tesla Powerwall home batteries, and is now looking at the four and eight hour batteries that are having such a profound impact on the grid.
“Short-term batteries are the sprint-runners, vital for daily balancing, but only Snowy 2.0 can run the marathon,” Barnes writes.
“Batteries are the best value way of providing short-duration storage, but they cannot see the grid through the multi-day wind droughts that Australia has seen before and will inevitably see again.”
But it’s worth noting the highly regarded and much-watched weekly simulations by Windlab engineer David Osmond, who has been plotting how much storage might be needed in a high renewable grid, using the daily weather, supply and demand outcomes over the last four years.
His simulation found that 24 GW and 125 GWh of storage – mostly provided by a fleet of 4-hour and 8-hour batteries (which can be one and the same thing in reality) averaged 98.5 per cent renewable electricity on Australia’s main grid over the last four years.
The remaining 1.5% is met by “Other”, rarely from September to March each year, but regularly from April to August. The average supply from “other” was 358 MW but reached a maximum value of 10,186 MW on June 12, 2025.
Osmond’s says his simulation has only used short-term storage. But long-term storage options like the 2.2 GW / 350 GWh Snowy 2.0 could reduce ‘Other’ from 1.5% to 0.9% of supply. Other can also come from flexible gas generators – and everyone seems to forget demand management and energy efficiency.
Which gets us back to Barnes, and his testimony last week to the Senate estimates committee, and his response to questions about the speculation that the project costs had ballooned to $20 billion, and the add-ons to double that.
“It’s highly unusual for a generation project to include the whole transmission costs of the east coast of Australia in its estimate. We are not responsible for those transmission costs,” he said. (It should be noted that the Hume Link and VNI West used to be known as Snowy link north and Snowy link south).
But when pushed to provide alternative figures to counter the speculation of the $20 billion number, Barnes could only offer up various versions of the same response:
“If I were to give you a number – which I don’t have, by the way – on the cost of the [Enterprise Bargaining Agreement], I would be commercially prejudicing our position with the contractor,” he said.
Maybe it’s $19 billion.
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