Photography: Lukas Coch/AAP
The multi-billion pound Snowy Hydro 2.0 development, seen as vital to support the transformation of Australia’s east coast power grid, will be delayed for up to two years and face yet another cost increase.
A series of problems with the development follows, including a tunnel boring machine which has stalled some 70m below the surface, the collapse of one of the project’s contractors and delays related to Covid-19.
In a statement on Wednesday, the federally owned company said its management team was “working to reset the delivery timeline and budget” for the pumped hydroelectric project. It expected a delay of one to two years, moving the first start date to the second half of 2028 and completing all units at the end of 2029.
Related: A 70m-deep hole has opened following the collapse in the Snowy Hydro tunnel, officials confirm
The statement did not include an updated cost. The projected bill for the project had already risen from $2 billion when it was announced by then Prime Minister Malcolm Turnbull in 2017 to $5.9 billion before the latest postponement.
Snowy Hydro’s new chief executive Dennis Barnes said he was focused on ensuring the company’s major projects were “positioned on a realistic and sustainable footing while maintaining construction progress”.
“I am committed to being transparent about our progress and how we are proactively handling the inevitable issues and challenges that arise in a complex project like this,” he said.
Snowy 2.0 promises to deliver 2 gigawatts of capacity and approximately 350,000 megawatt hours of large-scale storage to the national electricity market to help sustain a system increasingly dominated by solar and wind energy. The finished design would pump water to the topmost reservoir in a connected system during times of cheap electricity and release it when required.
Climate and Energy Minister Chris Bowen confirmed the delay could extend from late 2028 to at least December 2029 before Snowy 2.0 starts operations.
“Obviously we hope to have some early progress before then,” he said at the Smart Energy Council conference in Sydney. “Obviously they are working very, very hard to make the first part of it [range].
“They will provide further advice to the government later in the year on how they have fared.”
He added that both Barnes and chairman David Knox had recently been to Italy “to reinstate the contract with the joint venture partners.”
The delay is likely to raise fresh concerns that the national electricity market will have sufficient capacity to secure electricity supplies and keep electricity prices affordable as several aging coal-fired power plants cease operations. functioning by the end of this decade.
There is an ongoing debate over whether to extend the life of the giant Eraring coal-fired power plant in New South Wales beyond its scheduled closure in August 2025. The Albanian government has promised that the national grid, which supplies the five eastern states and ACT, will continue to run on 82% renewable energy by 2030.
New South Wales Premier Chris Minns has expressed concern about the implications of the delay for future energy supplies, adding that his government is working with the federal government, the energy regulator and Eraring’s owner, Origin Energy.
“Snowy Hydro’s two-year delay is an impediment to ensuring we have an efficient dispatchable energy supply [as] we’re making our way through the renewable energy revolution,” Minns said. “It’s a difficult transition. We never let it go.
“It is one of the main reasons why, during the election campaign, we kept the door open to ensure Eraring was available to energy consumers in NSW.
“Everyone has an interest in keeping the lights on. We’ve made it clear that it’s a priority for us.”
Work on Snowy 2.0 halted last year after a tunnel collapsed when a driller, nicknamed Florence, struck unexpectedly soft rock near the Tantangara site in the Snowy Mountains.
Barnes told ABC’s RN Breakfast that the machine’s progress was “still at 1 percent,” but progress was expected in “weeks, not months.”
Snowy Hydro said it expects more details on the cost of the “project recovery” by July.
A spokesperson for the Australian Energy Market Operator said the agency’s recent reliability outlook (the 2022 ESOO and February 2023 update) included previously recommended timings and patterns for various delays on Snowy 2.0.
“Today’s announcement is consistent with the range of modeling carried out and has no material impact on the predicted reliability results due to transmission restrictions within NSW,” he said.