Snowy 2.0 project behind schedule and over budget

snowy 2.0 hero

Snowy Hydro has finally confirmed that the budget for the huge pumped-hydro plant will be $1 billion. The cost of the Snowy 2.0 project is now just under $6 billion, and it is about a year behind schedule.

At a Senate Estimates hearing on Monday, Roger Whitby, the interim CEO of the government-owned generator, said that the overall budget for Snowy 2.0 was “around $5.9 billion.”

This number is a lot higher than previous estimates of the project’s cost going over budget, which were around $5.1 billion or $5.4 billion if already agreed-upon contingencies were added.

The $5.9 billion number doesn’t seem to take into account recent news that Snowy 2.0 has had another $2.2 billion added to its budget because its contractors have made more claims.

Reports said that the $2.2 billion in extra costs were caused by problems with the supply chain and inflation. The Snowy contractor Future Generation, which is a joint venture between Italy’s Webuild, Australia’s Clough, and the US’s Lane Construction, was blamed.

 What has been added to the cost of Snowy?

Monday, Whitby told the Senate Estimates Committee that Snowy was “working through” any valid contractual claims that the contractor might have, but that most of them were not likely to be valid.

“You should expect that the major contractor is under some pressure,” Whitby said. “Any professional contractor will try to make up for any pressure or shortfalls they see.”

“Some of those claims will be valid, and if they’re based on a contract, we’ll gladly pay them.” However, it’s likely that some of them won’t be valid.

Still, Whitby says that “at this point in time,” the costs of Snowy 2.0 are “still within the approved envelope.”

When the Committee asked Whitby to explain what that “envelope” was, he said, “I think the overall budget for Snowy 2 is about $5.9 billion.”

What is the proposed Snowy Hydro

Since former prime minister Malcolm Turnbull announced Snowy in 2017 with an estimated cost of just $2 billion, one of the biggest problems with the project is that the budget has grown too big.

The other big worry is that the project will take much longer than the previous Coalition government and Snowy Hydro said it would.

As part of Snowy 2.0, 27 kilometers of new underground tunnels will be dug to move water between the Tantangara and Talbingo dams. These tunnels will be used to build a new pumped hydro energy storage facility.

Between the two dams, a new 2,000 MW power station will be built to store pumped hydro energy for up to 350,000 megawatt-hours.

At the hearing on Monday, Whitby said that the completion of Snowy 2.0 was about a year behind schedule, depending on how things went with the next major development stage.

This is a better estimate than what federal energy minister Chris Bowen said recently, when he said the delay would be 18 months. But Whitby said over and over again on Monday that there were still a lot of unknowns that could still stop progress.

Key Challenges Ahead for Major Construction Project

“We’ve done more than 40% of the project so far.” Our main contractor, FGJV, is under a lot of stress because… “Right now, we are working proactively with the contractor,” Whitby said.

“There are many key challenges ahead for the program as a whole,” he said. “First of all, the digging of the big cabin complex… It’s huge, and it’s 800 meters below the ground.

“So, the biggest question mark in the program is how fast we can dig in the cabin, and to be honest, we won’t know how fast we can dig until we’re about 30% in.” So, that’s the biggest question mark.

“Right now, if you had to draw a line in the sand, I’d say [the contractor is] about 12 months behind schedule, but they need to speed up, and we’re working with them to figure out how to do that best.”

Snowy Hydro CEO Paul Broad Suddenly Resigns

After nearly ten years on the job, Paul Broad quit as CEO of Snowy Hydro out of the blue in late August. COO Whitby stepped in to fill the void.

At the time, people thought that the current energy minister, Chris Bowen, had tried to get Broad fired because he was close with the Coalition government and the former energy minister, Angus Taylor.

David Knox, who is the head of Snowy Hydro, spoke to the Senate Estimates Committee on Monday. He said that the board of Snowy had been told to improve its communication skills at a meeting with state and federal energy ministers on August 23, three days before Broad’s resignation.

Knox said that it was “very clear” that Bowen needed to see these communications improve because they were not good enough.

And that was another important thing I learned from the meeting. Obviously, this information got back to my CEO, and I thanked him for it.

Then Knox said, “[Broad] wasn’t telling them what he was going to say before he said it in public.”

This was also said by David Fredericks, who is in charge of the federal Department of Climate and Energy.

At the hearing on Monday, Fredericks said, “I talked to Mr. Broad at least twice about that.”

And I was the one who started those talks… For the simple reason—and I’ll be honest with you—this was a problem with how the department communicated. “That’s why I was so worried about it,” he said.