- Target cost following contractor reassessment is $22.2 billion, with Snowy allowing for a cost scenario of $25 billion.
- The project is now targeting to be fully commissioned in late 2029.
- Machine tunnelling is 65% complete and cavern excavation 90% complete, with work to build the underground power station underway.
- Snowy Hydro continues to strengthen oversight, controls and leadership to drive contractor productivity and cost performance, while prioritising safety.
- Snowy Scheme expansion to provide long-duration energy storage equivalent to around 26 million home batteries, enough to power 3 million homes for a week.
- GHD analysis shows substantial economic benefit, including the project adding $18.3 billion to the Australian economy.
- Snowy 2.0’s long-term asset life means it is predicted to reduce wholesale electricity prices by more than $7 billion to 2075.
Snowy Hydro today announced the updated target cost to complete Snowy 2.0 is $22.2 billion, with an allowance for a cost scenario of $25 billion, following a comprehensive cost reassessment by principal contractor Future Generation Joint Venture (FGJV).
The higher cost scenario reflects Snowy 2.0’s uniqueness, risk and technical complexity, as well as FGJV’s cost estimation challenges.
Snowy Hydro CEO Dennis Barnes said the cost reassessment, which was subject to rigorous scrutiny and assurance by multiple layers of engineering cost experts, also updated the project’s schedule.
The new target completion date for Snowy 2.0 is late 2029.
The $22.2 billion target cost is not the amount that will have to be funded by taxpayers.
At the previous $12 billion cost estimate, around one-third or $4 billion, was Commonwealth investment in the company that Snowy Hydro did not need to repay.
The majority was funded by government and bank loans that as a profit-making business, Snowy must repay with interest, as well as Snowy’s own cashflows.
Work is underway on the Commonwealth’s preferred capital strategy at the new cost.
Mr Barnes said that while the cost increase is disappointing, the actions taken during the 2023 reset have protected the project from an even larger budget increase.
“I have no doubt that moving from a fixed price contract, which was never suitable for such scale, uniqueness and complexity, has protected the project from an even greater cost increase,” he said.
“It’s also likely that under a fixed price contract, the project would again be stopped under the weight of billions of dollars of claims from the contractor, as it was prior to the reset.”
Mr Barnes said the long term value of Snowy 2.0 to Australia’s energy reliability is stronger than ever.
“The scale of Snowy 2.0’s energy storage is world-leading. More than half of the total energy storage the grid needs by 2050 will come from Snowy 2.0 alone,” he said.
“Like the original Snowy Scheme, which still underpins energy reliability more than 70 years on, Snowy 2.0 is a generational investment in our energy sovereignty and a national asset owned by all Australians.”
The pumped hydro expansion of the Snowy Scheme will provide 350,000 megawatt-hours of storage, equivalent to around 26 million home batteries.
“Snowy 2.0’s massive, long-duration storage will be the grid’s insurance policy against multi-day wind and solar droughts, helping to prevent blackouts and control price spikes that would otherwise flow through to household electricity bills,” he said.
- Generating significant economic activity, with around 80% of the project’s budget being spent in Australia.
- Contributing $18.3 billion to the Australian economy during the delivery phase alone.
- Reducing wholesale electricity costs by more than $7 billion to 2075.
The cost reassessment found the primary reasons for the increased project cost were:
- Detailed technical analysis continuing to identify the scale and nature of the design immaturity of the project when the final investment decision was made.
- Construction complexities contributing to principal contractor FGJV not meeting productivity targets.
- Cost and planning underperformance by FGJV leading to previous underestimating of the delivery scope.
- Global cost escalation for equipment, services and people exceeding allowances made at the 2023 contract reset.
Snowy Hydro has taken action to strengthen the project’s delivery and cost performance, including:
- Directing FGJV to establish a project control office with enhanced data and analytics to drive productivity and identify emerging risks early, which is now operational.
- Embedding independent infrastructure delivery and cost experts in the project to bolster delivery oversight.
- Establishing a new board oversight committee including external megaproject advisors to monitor and take action on progress and risk.
- Driving changes in FGJV’s leadership on the project, including a new Project Director, responsible for daily cost and schedule performance on the ground, and a broad uplift with more senior, globally experienced megaproject leaders.
The contract established at the 2023 reset has strong provisions that motivate FGJV to manage cost and program, and meet criteria relating to safety, environment and quality.
Snowy Hydro will use these mechanisms to drive the best project outcomes and value for money.
“We’re now much further through the project than at the 2023 reset, meaning we’ve learned more and more risk is behind us,” Mr Barnes said.
“At the reset, only 44% of the construction design had been completed, now it’s 96%.
“While there are still risks to manage, the project is in its strongest position yet.”
With more than 5,000 people currently working on the project, this year:
- Underground power station construction has started, marking a new phase of Snowy 2.0’s development.
- Decommissioning tunnel boring machine (TBM) Lady Eileen Hudson has started, after completing its second tunnel, following 8.6-kilometres of tunnelling.
- TBM Florence is almost at the halfway point of its 15-kilometre tunnelling journey.
| Work front | Current progress | Progress at reset |
| Drill and blast tunnels | 95% | 20% |
| TBM tunnels | 65% | 19% |
| Power station complex excavation | 90% | 2% |
| Construction design | 96% | 44% |