Impossible expectations,dashed by fundamental project flaws,multiple delays and skyrocketing costs.
Let’s have a quick look at Snowy 2.0’s seventh year,undoubtedly its worst. Even Snowy Hydro Limited’s usually upbeat conceded that “the delivery of Snowy 2.0 in FY23 fell well short of Board expectations”.
By last August,its predicament had become so dire that,with government endorsement,had to “reset” the entire project with a brand-new cost,completion target and main works contract.
The cost was doubled from $5.9 billion to $12 billion (the fifth blowout),with lamenting,“obviously[we’re] very disappointed in the cost increase and of course we apologise for that”. Project completion was adjusted (for the seventh time) to December 2028. While $2 billion of outstanding contractor claims were settled,the centrepiece fixed-price contract for the “main works” was as “no longer fit for purpose” and replaced with an “incentivised target cost” contract. That,effectively,makes it a cost-plus contract. So good luck with the $12 billion estimate.
Snowy Hydro’s nominated shareholders,Climate Change and Energy Minister Chris Bowen and Finance Minister Katy Gallagher, the lack of transparency,the hiding of delays,“the design immaturity” and “the[difficult] site conditions and geology that should have been known at the time”. They promised transparency and honesty in the future,though have refused to provide any public details of the reset beyond a.
In the absence of any financial details,one can only assume the $12 billion estimate follows previous practice and excludes numerous project costs such as financing and capitalised interest (more than $4 billion),production of the tunnel concrete lining segments ($500 million) and transmission lines through Kosciuszko ($300 million),adding a further or more.
Also,there is no recognition of the 1000 kilometres of transmission lines needed to connect Snowy 2.0 to Sydney and Melbourne,costing some,of which Snowy 2.0’s share should be more than half. So,the all-up costs associated with Snowy 2.0 could now be more like $25 billion.
Florence,Snowy 2.0’s now-infamous tunnel-boring machine,was “paused” for practically all of 2023 under a sinkhole she caused,just 150 metres from the start of the 16-kilometre headrace tunnel. By then,remember,the entire project should have been completed on the original schedule. Florence has recently recommenced boring but will take six or so years to complete the tunnel,assuming she matches her sister boring machines’ pace at seven metres a day. And there are any number of contingencies that will further delay such a large,complex project.
Snowy 2.0’s environmental performance,meanwhile,has been with increasing pollution notices,warning letters and. When two pollution breaches in April last year,an exasperated NSW Environment Protection Authority reprimanded Snowy Hydro,saying:“these incidents simply should not have occurred. Every industry has a role to play in reducing their impact,but your role is even more critical when you’re based in one of our state’s most pristine environments.”
Snowy 2.0 is advertised as “Australia’s largest renewable energy project”. Unquestionably,it is Australia’s largest energy project,and by far the most expensive,but it won’t produce renewable energy as does a conventional hydro power station. Snowy 2.0 will be no different from any other battery,except being far more wasteful,losing over 30 per cent of energy in the pumping/generation cycle and transmission.
How can the government justify spending considerably more on a 2200-megawatt battery than the of Snowy Hydro Limited,which already has 5500 megawatts of generators and two retail businesses? Already,some $5 billion has been sunk into Snowy 2.0,but another $20 billion or so is yet to be squandered.
Without question,substantial storage is needed for the transition to renewable energy,but Snowy 2.0 would have to be the worst project in the worst location. It never stacked up economically,technically or environmentally.
On March 15,44BC,Caesar should have heeded the seer’s warning to “beware the ides of March”,as immortalised by Shakespeare. Likewise,this ides of March the government should heed the seers’ warnings on Snowy 2.0. The first step is to immediately commission a comprehensive independent review of Snowy 2.0 and alternatives,as energy experts have been for years,before forking out further untold billions.
And what of the dramatis personae in this Aussie Shakespearean tragedy? still Snowy 2.0 as his finest legacy;successive prime ministers and ministers blindly follow his script;Snowy directors watch from their royal circle box;Snowy executives receive or a golden handshake;the orchestra (bureaucrats,market operators,regulators) plays on;the Roman contractors rake in enormous riches;the seers are ignored;the national park stage is trashed;and we,the audience,are fleeced.
Ted Woodley is a former managing director of PowerNet,GasNet,EnergyAustralia and China Light&Power Systems (Hong Kong),and an executive member of the National Parks Association of NSW.