The multibillion-dollar Snowy Hydro 2.0 development, billed as vital to support the transformation of Australia’s east coast electricity grid, will be delayed by up to two years and face another cost blowout.
It follows a series of problems with the development, including a tunnel-boring machine becoming stuck about 70 metres below the surface, the collapse of one of the project’s contractors and delays related to Covid-19.
In a statement on Wednesday, the federal government-owned company said its management team was “working towards resetting the delivery timeline and budget” for the pumped hydro project. It expected a delay of one or two years, pushing the earliest start date to the second half of 2028 and the completion of all units to the end of 2029.
The statement did not include an updated cost. The expected bill for the project had already blown out from $2bn when it was announced by then prime minister Malcolm Turnbull in 2017 to $5.9bn before the latest delay.
Snowy Hydro’s new chief executive, Dennis Barnes, said he was focused on ensuring the company’s major projects were “placed on a realistic and sustainable footing, while maintaining construction progress”.
“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,” he said.
Snowy 2.0 is promised to provide 2 gigawatts of capacity and about 350,000 megawatt hours of large-scale storage to the national electricity market to help backup a system increasingly dominated by solar and wind energy. The finished project would pump water to the highest reservoir in a linked system during periods of cheap electricity and release it when required.
The climate and energy minister, Chris Bowen, confirmed that the delay could stretch to from the end of 2028 to at least December 2029 before Snowy 2.0 begins operations.
“Of course we would hope to have some early progress before then,” he told the Smart Energy Council conference in Sydney. “Of course they’re working very, very hard to make it the earlier part of that [range].
“They’ll be providing further advice to the government later in the year about how they’ve gone.”
He added that both Barnes and chairman David Knox had been in Italy recently “resetting the contract with the joint venture partners”.
The delay is likely to spark fresh concerns about whether the national electricity market will have enough capacity in place to ensure electricity supply and keep power prices at an affordable level when several ageing coal-fired power plants are due to stop operating later this decade.
There is ongoing debate over whether the giant Eraring coal plant in New South Wales should have its life extended beyond its scheduled closure in August 2025. The Albanese government has promised the national grid, which supplies the five eastern states and ACT, will be running on 82% renewable energy by 2030.
The New South Wales premier, Chris Minns, expressed concerns about the implications of the delay for future energy supplies, adding his government was working with the federal government, the energy regulator and Eraring’s owner, Origin Energy.
“The delay of Snowy Hydro by two years is an impediment to making sure that we’ve got an efficient dispatchable supply of power [as] we work our way through the renewable energy revolution,” Minns said. “It’s a difficult transition. We’ve never pretended anything otherwise.
“It’s one of the leading reasons why, during the election campaign, we kept the door open to ensuring that Eraring is available to the consumers of energy in NSW.
“Everybody’s got an interest in keeping the lights on. We’ve made it clear that’s a priority for us.”
Work on Snowy 2.0 stopped last year after a tunnel collapsed as a boring machine, nicknamed Florence, hit unexpectedly soft rock near Tantangara site in the Snowy Mountains.
Barnes told the ABC’s RN Breakfast that the machine’s progress was “still at 1%”, but progress was expected in “weeks, not months”.
Snowy Hydro said it expected further details on the cost of the “project reset” would be known by about July.
A spokesman for the Australian Energy Market Operator said the agency’s recent reliability outlook (the 2022 ESOO and February 2023 update) included previously advised timing and modelling for various delays on Snowy 2.0.
“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 NSW,” he said.
