Snowy Hydro plans contract reset amid $12 billion cost blowout

Share

Federal government-owned utility Snowy Hydro has confirmed that the total cost of the Snowy 2.0 pumped hydro storage project has escalated to six times the amount originally budgeted for, with full commercial operation not expected to commence until December 2028.

The expansion of the existing 4.1 GW Snowy pumped hydro scheme, originally forecast to provide 2 GW of on-demand generation and 350 GWh of long-duration energy storage to the National Electricity Market (NEM), was initially due to be operational by 2021 and was expected to cost about $2 billion.

Earlier this year that had blown out to $5.9 billion and a 2029 deadline and a new internal review shows that the costs have continued to escalate while the target date for commercial operation of all units is now December 2028.

The review attributes the cost blowout and delays to factors including higher wages, inflation, and price increases and supply chain disruptions triggered by the Covid-19 pandemic.

The report also highlights “design immaturity at final investment decision” and “site conditions and geology” as causes of the cost escalations and construction delays.

Snowy Hydro Chief Executive Officer Dennis Barnes said the utility is already working on a project reset with the principal contractor for the project, Future Generation Joint Venture (FGJV), overseen by Italy’s Webuild.

Barnes said the terms of the contract with FGJV are being finalised to move to an incentivised target cost contract model, which will mean that if contractors deliver on time and to budget they will benefit financially, while if the opposite happens they will suffer financially.

“Moving to an incentivised target model with FGJV will result in closer collaboration, stronger oversight and alignment of interests between Snowy Hydro and FGJV,” he said.

Barnes said the project reset will allow the commercially sustainable and successful delivery of the project.

“Snowy 2.0 is being engineered to deliver clean and reliable storage and electricity generation for Australians for the next 150 years,” he said.

“It is a truly transformative national project that is generating jobs and significant investment in regional areas.”

“It will deliver benefits immediately following its completion and will continue to do so for many future generations of Australians.”

Snowy Hydro said through the reset process, it has worked with FGJV and hydro technology contractor Voith Hydro to increase the capacity of the project by 10% with Snowy 2.0 to now deliver dispatchable generation capacity of 2,2 GW.

Despite the challenges outlined, Snowy Hydro said construction of the Snowy 2.0 project is now approximately 40% complete and solid progress continues to be made.

First power is expected to be delivered in the second half of 2027 with commercial operation of all units expected in December 2028.

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.

Popular content

Battery technology promises less than ten minutes fast charge for industrial vehicles
06 December 2024 United Kingdom-headquartered battery supplier Echion Technologies has collaborated with Perth-based electric vehicle services company Switch Technolog...