Truth behind Snowy 2.0 cost blowout buried with Florence, Senate Estimates hears

The full findings of the Snowy 2.0 project review and reset, which in August revealed that the cost of delivering the huge pumped hydro project had ballooned out to $12 billion, are being kept under wraps by the federal government, it has been revealed.

In an appearance before the Senate Estimates committee on Monday, Snowy Hydro chief Dennis Barnes said the beleaguered project was now back on track – 40% complete, and the tunnel boring machine Florence ready to resume work, after its long “pause”, pending the all-clear from the New South Wales government.

Barnes, who took over the reins at Snowy Hydro at the start of the year, kicked off his second appearance before the committee with an apology for his previous underestimations of the complexity of Snowy 2.0’s problems, which have delayed its progress blown out its costs.

“At my last appearance, I’m sorry to have underestimated the time… for the safe restart of [tunnel boring machine] Florence … the work has been far more complex than I personally had anticipated,” Barnes said.

“I can assure you we’ve carried out an incredibly comprehensive process which looks back at the costs and effort to get us to where we are, and then extrapolates that forward with the support of a number of international renowned consultants.”

In that context, Barnes says the company has a “degree of confidence” that Snowy 2.0 can now be delivered on time, December 2028, and within the new budget of $12 billion.

“Mega projects, one can never say never, but there is a degree of confidence by me and the team,” he said.

But this confidence is unlikely to be shared by critics of the project, particularly considering that the vast majority of the detail from the “incredibly complex” report into the bungling of Snowy 2.0 remains buried, just like Florence.

According to the Nationals’ Ross Cadell, a copy of the 110-page Snowy 2.0 reset report requested by the Senator arrived with 44 pages fully redacted and only 14 pages completely unredacted – many of which were press releases that had already been made public.

As Cadell told the hearing on Monday, this seems contrary to the message from federal energy minister Chris Bowen that one of the biggest failures of Snowy 2.0, up until now, has been the lack of public disclosure on delays and blowouts.

“Unlike the previous government, we are committed to being transparent and honest with the Australian people about the challenges and opportunities for Snowy,” Bowen said in August when he shared the headline details from the project review.

“Given that the taxpayers are seeing a more than doubling of the cost, wouldn’t it be prudent to let them know under what basis?” Cadell asked the hearing this week.

“There was an opportunity to put these items on the public record now and now [Bowen’s] not doing that – the department is not doing it.”

The federal government’s assistant energy and climate minister Jenny McAllister told the hearing the material provided to the Senator was accompanied by a letter, setting out the grounds for which some parts had been redacted.

McAllister says those grounds included if the material was deemed out of scope of the request for information or contained the personal information of departmental officials, ministerial staff or Snowy executives.

The text was also redacted or withheld where it contained commercial in confidence material from Snowy Hydro limited and other third party entities it contracts with, the minister said.

The letter accompanying the report goes on to say:

“Release of this material is contrary to the public interest on the basis that its disclosure would disadvantage Snowy Hydro Limited… and diminish Snowy Hydro’s ability to contribute to the security and reliability of the renewable energy market in Australia. And correspondingly detrimentally impact Australian energy consumers.”

Barnes told the hearing that disclosure is also complicated by the fact that Snowy Hydro is still going through the formal approval process with the shareholder – the federal government – for the new contract.

Barnes was then asked by Cadell how the decision to rewrite the project’s contracts had been initiated.

“Well, there was $3.9 billion of claims leveled against Snowy under the existing contract. So that’s a conversation starter.

“And once you start talking about how are we going to resolve this with the objective of making progress you quickly get into a, ‘well what would work?’ conversation. So you would say it was collective.”

Overall, Barnes reaffirmed that the main causes of the delays and huge added costs to Snowy 2.0 had come from a combination of fallout from Covid, design immaturity and adverse geotechnical findings.

But Barnes also told the committee that despite all of the troubles Snowy 2.0 has gone through, thus far, the prospects for long duration storage have only improved over the time it has been delayed.

“[Long duration storage] is one of the hardest parts of a hard transition and the value to the Australian taxpayers is that the project, even on this $12 billion dollar cost base, has a positive net present value of around $3 billion,” he said.

“The market really does need this asset and I think I would characterise it as an investment for the Australian public.”