Joint media release: Snowy Hydro Corporate Plan update
The Hon Chris Bowen MP, Minister for Climate Change and Energy
Senator the Hon Katy Gallagher, Minister for Finance, Minister for Women, Minister for the Public Service
The Albanese Government has today made public the updated advice it received this week in relation to Snowy 2.0.
When the Albanese Government was elected, we were advised of serious problems with the Snowy 2.0 project which had not been made public by the previous Government.
When the new CEO of Snowy Hydro Dennis Barnes informed the Government that delivery would be delayed until December 2029, the Government immediately made this public and asked Mr Barnes to conduct a major project review and reset.
The Government received the updated Snowy Hydro Corporate Plan and results of the project review two days ago.
It is being made public today.
In short, the review finds:
- the total project costs are expected to be $12 billion
- the cost escalation is partly due to “design immaturity at FID” and “site conditions and geology” – which should have been known at the time
- Full power is now expected in December 2028
- Snowy 2.0 will now deliver an extra 200MW or 10 per cent of power, bringing its total generation to 2.2GW
- Despite the cost blowout, the project still has a net present value of around $3 billion.
Like other major energy and infrastructure projects around the world, Snowy 2.0 faces inflationary and supply chain pressures post COVID-19. Snowy 2.0 is one of the most complex engineering projects in the world, and is subject to the same challenges as all major construction projects.
However Snowy’s advice to Government points directly to “design immaturity at FID” and “site conditions and geology” – which should have been known at the time – as causes of cost escalations.
For example, the fact that tunnel boring machine Florence would encounter soft ground should not have come as a surprise, but has significantly impacted the project.
Snowy 2.0 is a critical project to Australia’s energy future - providing enough renewable energy and storage to power three million homes for a week. The update makes clear that despite the increase in costs, the value of the project to the National Electricity Market has materially increased, and a 10 per cent increase to the capacity of Snowy 2.0 has been negotiated.
AEMO has today confirmed that Snowy 2.0 is crucial to maintain reliability in the NEM, CEO Daniel Westerman said this morning, “Snowy 2.0 has a huge role to play”.
Importantly, under the Snowy 2.0 reset there will be a new model of working with the venture partners and contractors. This new approach will mean that if contractors deliver on time and to budget while respecting safety and environmental obligations they will benefit financially, while if the opposite happens they will suffer financially.
Crucially, Snowy Hydro has advised Government that if this contractual change is not made, it would lead to further cost escalation and delays.
Unlike the previous Government, we are committed to being transparent and honest with the Australian people about the challenges and opportunities for Snowy.
The previous Government hid an 18-month delay to Snowy 2.0 from the Australian people, states and territories, and AEMO – which relies on timely and accurate information to keep the lights on.
The Albanese Government will continue to focus on delivering this important project and will continue to provide full and transparent updates to the Australian people as we do so, including working with Snowy Hydro to develop an appropriate capital structure to support the cost escalation.