Snowy Hydro 2.0 Cost Blows Out to $25bn as Completion Slips to 2029
New company projections put the Kosciuszko pumped hydro project at at least $22.2bn, with contingency for $25bn, and the chief executive says it ‘could have been worse’
By AXY Energy Desk ·
Key points
- Snowy Hydro 2.0 is now projected to cost at least $22.2bn, with contingency for a further increase to $25bn, according to new company projections released on Thursday night.
- The project was first touted by the Turnbull government in 2017 with a price tag of $2bn and was revised to almost $13bn in 2023.
- Machine tunnelling is 65% complete, major excavations are in their final stages, and about 5,000 people are working on the project.
- Full completion and commissioning have been pushed back to 2029, after a 2023 target of the end of 2028.
- The Albanese government plans to announce additional oversight and financing structures in the coming weeks, and more taxpayer funds are expected.
The cost of Snowy Hydro 2.0 has blown out to as much as $25bn, and the long-delayed renewable energy project will not be completed and fully commissioned until 2029. New projections released by the Snowy Hydro company on Thursday night put the cost at no less than $22.2bn, with a contingency that could push the figure to $25bn. The chief executive has said the outcome ‘could have been worse’.
That line will land differently depending on where you sit. For taxpayers, the new numbers are a heavy blow, and for the government they raise a fresh political problem. For the crews still working underground, the figures tell a more encouraging story about the physical work. Most of the digging is done, even if the finish line has moved again.
From a $2bn Promise to a $25bn Bill
Snowy Hydro 2.0 was first touted by the Turnbull government in 2017 with a price tag of $2bn. The project is an expansion of the existing Snowy Mountains hydro scheme, which was built in the decades after the Second World War and is one of the best-known engineering works in Australia. The new project is being built in Kosciuszko National Park, in the Snowy Mountains region of New South Wales.
The idea is straightforward, even if the construction is not. Pumped hydro stores electricity by moving water between two reservoirs at different heights. When power is cheap and plentiful, water is pumped uphill. When demand is high, the water is released back down through turbines, which generate electricity. Pumped hydro is one of the few established technologies that can hold large amounts of energy for many hours, which makes it useful for smoothing out the gap between when power is produced and when people need it.
The cost has risen in steps since 2017. In 2023 the project was revised to almost $13bn, with construction then due to be completed by the end of 2028. That completion date has now been abandoned. Measured against the original 2017 figure, the new $25bn ceiling is roughly 12 times the starting estimate, which is the comparison in the headline.
The source material also lists a series of board decisions and estimates tied to the project. A feasibility study put the cost between a $5.4 billion ‘low case’ scenario and a $6.9 billion ‘worst case’. A final investment decision carried a $6.1bn cost estimate. A caption in the material also refers to a completion date expected in 2026-27 under an earlier plan. Taken together, the figures show a project whose budget and timetable have been reset several times.
Why the Price Keeps Rising
The source material does not set out a single reason for the latest increase, and this article does not add one. What the numbers do show is a project that has repeatedly moved its finish line while the scale of the work has grown. A cost that rises from $2bn to a possible $25bn is not usually the result of one bad decision. It reflects many revisions over time.
Underground projects of this kind carry a particular kind of risk. Tunnels and caverns are dug through rock whose strength, fractures and water flow can only be fully understood once the ground has been excavated. Costs can rise when conditions turn out to be different from what was expected, and when the time needed to finish the work stretches out. Every extra year on site means more wages, more equipment hire and more interest on borrowed money.
That is why the latest reset matters beyond the headline figure. Each new estimate has to be trusted by the public and by the parties who will eventually pay for it. Once a project has moved through several budgets, each new number is read with suspicion, and the government has to work harder to show that this one is more reliable than the last.
Tunnelling Is Two-Thirds Done, but the Power Station Is Not Finished
The engineering picture is more encouraging than the budget. Machine tunnelling is now 65% complete, and major excavations are in their final stages. Work to build the new underground power station is under way, and about 5,000 people are working on the project.
Those figures matter because tunnelling and excavation are usually among the most uncertain parts of an underground job. Once the largest tunnels are through, the risk of major surprises in the rock falls, although it does not disappear. The project still has to build, install and test the power station equipment. Only after that can the scheme be used to supply power to the grid.
The completion date is the other half of the reset. The project will not be completed and fully commissioned until 2029. Commissioning is the stage when equipment is tested and formally brought into service. It is the point at which the scheme can begin earning its place in the electricity market, so a delay in commissioning delays the benefits that the project was built to provide.
The Government's Oversight and Financing Decision
The Albanese government plans to announce additional project oversight and financing structures for Snowy 2.0 in the coming weeks. That announcement is likely to be the most important political test of the new figures. The project is publicly funded, and another injection of taxpayer funds is expected.
The source material also points to possible private financing components. If private money is brought in, the project could be funded by a mix of public and private capital. That would change who carries the risk if costs rise again, and it could change how much detail the public sees about how the money is spent.
The government has also said it will buy out state government shares in Snowy Hydro Limited. That would give the Commonwealth full ownership of the company that is building the project. It is a significant change in how the scheme is owned and run, and it would put the federal government directly in charge of the company's decisions.
What the 2029 Date Means for Power Bills and the Grid
For households, the practical question is what Snowy 2.0 will mean for power prices and for the reliability of the grid. Pumped hydro is valued because it can supply power when wind and solar output falls, and because it can hold energy for long periods. A working Snowy 2.0 would add a large store of flexible electricity to a grid that is changing quickly as older coal plants close.
That benefit only arrives once the project is finished and running. Every year of delay means the storage the country was promised is still not available, while the money spent on the project keeps climbing. Every extra billion dollars has to be recovered through public budgets, through the energy system, or both. Households and businesses pay for that in one way or another, so the cost question is never far from the power bill question.
There is also a question of trust. A project that has moved from $2bn to a possible $25bn, with its finish date pushed from the end of 2028 to 2029, makes future promises harder to judge. Voters and taxpayers will want to see the detail of the new oversight arrangements and the next set of cost figures before they accept that the numbers have settled.
The Next Tests for Snowy 2.0
The first test is the government's announcement on oversight and financing. It could show whether the project will stay largely in public hands or whether private capital will be brought in to share the burden. Either path will shape how any future cost increases are handled, and who answers for them.
The second test is the engineering timeline. With 65% of tunnelling complete and about 5,000 people on site, progress over the coming months will show whether the 2029 date is realistic. If the remaining work moves smoothly, the revised schedule may hold. If new problems emerge underground, the project could face another reset, and the government would have to explain it.
The chief executive's view that the result ‘could have been worse’ may be accurate in the sense that the project's problems have been managed in some form. It does not change the size of the bill or the wait ahead. For now, the clearest facts are the ones in the company's own projections: at least $22.2bn, contingency to $25bn, tunnelling 65% complete, and full commissioning in 2029.
Questions and answers
How much will Snowy Hydro 2.0 cost?
New projections from the Snowy Hydro company put the cost at no less than $22.2bn, with contingency for a further increase to $25bn. The project was first touted in 2017 with a price tag of $2bn.
When will Snowy Hydro 2.0 be finished?
The project will not be completed and fully commissioned until 2029. A 2023 revision had set completion for the end of 2028.
What is the government doing about the Snowy 2.0 cost?
The Albanese government plans to announce additional project oversight and financing structures in the coming weeks. Another injection of taxpayer funds is expected, along with possible private financing components.
Topics: Snowy Hydro 2.0, Snowy Hydro Limited, Kosciuszko National Park, pumped hydro, Albanese government, Australian energy policy, renewable energy storage
Sources: The Guardian Energy
https://axynewsglobal.com/article/snowy-hydro-2-0-cost-blows-out-to-25bn-as-completion-slips-to-2029