Snowy Hydro Concedes Cost Blowouts as Snowy 2.0 Faces Delays

Snowy Hydro Concedes Costs Will Blow Out for

Snowy 2.0

Snowy Hydro CEO Dennis Barnes has acknowledged that the cost of Snowy 2.0, a massive energy project with a budget blown out from $2 billion to $12 billion, will likely face further increases. The project, designed to pump water between two reservoirs to generate up to 3 million megawatt hours of electricity, is facing delays that may push its completion beyond 2028.

According to a report from Baringa Partners, commissioned by Snowy Hydro, the cost of replacing Snowy 2.0's capacity with large-scale batteries would be over $100 billion. This, coupled with the increased risks of blackouts once coal plants retire, has led Barnes to concede that the project is complex and remote. Moreover, the study found that increasing volumes of energy storage, like Snowy 2.0, will be needed to keep the grid supplied as coal plants reach the end of their life in coming years and renewables take over.

Despite this, Barnes claimed that Snowy 2.0 would fill a gap in the grid that couldn't be plugged with batteries alone. 'I struggle to see how the energy transition is done without it,' he said. 'Our people are doing good work, but it's complex, it's remote, and it's a globally significant scale.'

'Just because some commentators don't like the energy transition or don't like its politics, I've got to ignore all that and showcase the facts about this project,' Barnes said. He also stated that Snowy 2.0 can supply power on demand when the grid needs it most, providing back-up for renewables when the wind isn't blowing and the sun isn't shining.

A hypothetical scenario for a week of the 'dark doldrums' in 2041, when coal power is gone and renewables are in full swing, found that the cost of wholesale electricity in a grid with Snowy 2.0 would be around $7000 a megawatt hour cheaper than a grid powered by large-scale batteries. Specifically, this is due to the unique ability of Snowy 2.0 to supply back-up power during periods of low wind and solar output, reducing the need for costly battery storage.

The project has already faced several safety incidents and delays, with workers on the project predicting that it would be years before it's completed. When asked about the 2028 deadline, Barnes was not optimistic: 'That's what we're targeting, but obviously the productivity challenges that have arisen have not helped make that a comfortable date.' Workers also noted that the project's completion deadline has been extended several times, with the Albanese government committed to an ambitious renewable energy target of 82% clean energy in the grid by 2030.

Snowy 2.0 is a massive upgrade to the existing Snowy scheme, taking total generation capacity to 375,000 megawatt hours. This is enough to power 3 million homes for a week. The project's completion deadline has been extended several times, with former prime minister Malcolm Turnbull commissioning Snowy 2.0 in 2017 and setting a completion deadline of 2021. The official price tag was changed to $12 billion in 2023, and the deadline extended to 2028.

In October last year, Snowy asked its construction contractor Webuild to undertake another cost assessment, leaving many observers expecting another blowout. The possibility of timeline blowouts beyond 2028 is a political risk for the Albanese government, which faces an election that year. Critics argue that Snowy 2.0's budget blowout makes the project uneconomic and that battery technology is more flexible, cost-effective, and better suited to supply rapidly shifting energy demand.

Snowy Hydro uses surplus electricity to pump water from a reservoir at the bottom of a hill to the top. From there, it's released to flow down and spin turbines. The project can supply power on demand when the grid needs it most. It achieves this by providing back-up power for renewables during periods of low wind and solar output.

The 'dark doldrums' refer to rare but inevitable weeks when clear weather combines with cloudy weather, depressing the amount of wind and solar power supplied to the grid. In its study, Baringa Partners found that this is a critical period when energy storage systems like Snowy 2.0 are crucial in keeping the grid supplied.

According to Barnes, every one or two years, you get a three- or four-day lull in wind generation, and batteries run out of juice. Every 10 years or so, you get seven days of renewable lull, and without Snowy 2.0's storage levels, there's an impact on price, and grid reliability's at risk. In fact, the 'dark doldrums' occur with sufficient frequency that they pose a substantial challenge to meeting energy demand.