Australia’s Snowy Hydro Ltd has today flagged a renewed and deeper cost blowout risk at its flagship pumped-hydro project, Snowy 2.0, ordering its principal contractors to carry out a “line-by-line” reassessment of project costs amid mounting technical and productivity pressures.
The utility said shortcomings in expected productivity gains and escalating geological challenges mean the scope for absorbing further cost pressure is now exhausted. The line-by-line review is being overseen by independent experts and could take up to nine months to complete. Analysts expect it may lead to a material upward revision of the project’s capital budget.
Chief executive Dennis Barnes, while noting that the project is now 67% complete and stressing that staying on track remains critical, admitted that “productivity uplift hasn’t been to the degree we needed”. The company did not provide a revised cost estimate, stating only that maintaining delivery timelines is now the company’s priority.
First costed at about A$2 billion when it was announced in 2017, Snowy 2.0 has already seen successive cost escalations. Following subsequent revisions and a major “reset” in 2023, the project’s budget was revised to about A$12 billion, with full commercial operation targeted for December 2028. The reset also included a 10% increase in dispatchable capacity to 2,200 megawatts and an energy storage goal of 350,000 megawatt-hours (160 hours of full dispatch).
The project has faced repeated technical and safety setbacks. Earlier this year tunnelling works were halted amid worker safety concerns related to underground “refuge chambers,” and a separate incident saw a ventilation fan implode, sending metal debris through a tunnel and triggering safety audits
Despite these challenges, Snowy Hydro has noted that work has continued on non-tunnelling fronts: excavation of the power station caverns is over a third complete, and tunnelling machines are advancing on other shafts.
However, the fresh review raises fresh execution risk. Observers warn a further upward budget revision could stretch Commonwealth backing, draw political scrutiny, and force trade-offs in delivery timing. Any delay or escalation beyond investor expectations could ripple through the energy sector as Australia contends with a tight transition window in its power grid.