Auditors reveal management failures and further delays for the $12 billion project
Updated ,first published
Auditors say the $12 billion Snowy 2.0 plan will avoid further cost and timeline blowouts, but the project is beset by management failures and the state-owned company delivering the project cannot yet say how much it will cost and how long it will take.
The findings of a possible multi-billion-dollar implosion of the country’s largest renewable energy development project pose a significant challenge to the federal government, which is under pressure from One Nation and the Opposition over the cost of ambitious emissions reduction targets.
The government and Snowy’s chief executive denied blame for the explosions and said they had been working to address failures under the previous Morrison government since taking control of the project, starting with the election of the Albanian government in 2022.
But Snowy Hydro told the auditor there were “extreme” risks to the taxpayer-funded cost of the project, as well as geotechnical tunneling work and other complications on construction efficiency.
The cost of Snowy 2.0 has already increased from an initial estimate of $2 billion to over $12 billion.
Auditors found that Snowy management “lacked a solid understanding of the cost of completing the project,” failed to develop adequate governance to control explosions, was overly reliant on its contractors’ inadequate cost estimating systems, and significantly underestimated the costs of a wage agreement with its workforce.
Despite the complexity of the project and the cost risks associated with massive underground excavations, Snowy did not carry out quality control inspections for its construction contractor, Italian company Webuild, from mid-2023 to November 2024, the auditor said.
This masthead posted videos last month: Water gushing from a tunnel and cave This revealed the obstacles the multibillion-dollar project faces beneath Kosciuszko National Park and away from the public eye.
A source familiar with the project said the high-pressure flow of water should not come as a surprise, given that contractors insisted on drilling in an area where they said they could tap significant amounts of groundwater.
A government spokesman highlighted auditor findings that Snowy warned the Morrison government about cost blowouts from January 2020.
“When the Albanian government was elected, we inherited a number of large, poorly managed infrastructure projects that were subject to huge cost pressures,” the spokesman said.
It’s a good thing that Snowy Hydro has agreed to implement the ANAO’s sensible recommendations; Snowy Board has a responsibility to maintain the highest standards.
Opposition energy spokesman Dan Tehan said the report was a “diabolical assessment” of the project under Bowen’s watch and demanded he commit to full disclosure on progress, including regular public updates on costs and deadlines.
Snowy Hydro is conducting an internal audit that is expected to measure cost increases by the end of the year.
Located beneath a national park in a sensitive mountain environment, the physical challenges of building Snowy 2.0 are shaped by the fate of a tunnel boring machine. It spent most of 2023 stranded in soft ground below 100 meters during its 15-kilometer mission. He was released and became stuck in solid rock while digging a bend in the tunnel on May 16. A team of contractors using high-pressure water jets seven weeks to blast for free.
Adding additional costs to Snowy 2.0, tunnel workers contracted with the project in September and received a 26.5 percent increase in wages over four years, pushing their annual salaries to more than $300,000.
Chief executive Dennis Barnes took the reins of Snowy in early 2023 and announced an overhaul of Snowy 2.0, including a reset of what the auditor called the construction contractor’s “claims culture”.
The auditor said the project was severely impacted by the contractor’s demands for upfront payments to limit the project’s commercial exposure to harsh elements such as tunneling.
Snowy chief Barnes did not comply with the frequent updates the inspector insisted on, saying the completion timeline changed frequently depending on daily challenges.
“We think we can do better, but we won’t go as far as airing a weekly version of the show.”
Snowy 2.0 can provide on-demand power when the grid needs it most, supporting renewable energy sources when the wind isn’t blowing and the sun isn’t shining.
The project will support intermittent wind and solar power by using excess electricity to pump up from a reservoir at the bottom of a hill, from where it is released to flow down and spin turbines.
Snowy 2.0 is a major upgrade to the existing Snowy plan; It would increase total storage capacity to 375,000 megawatt hours, enough to power 3 million homes for a week.
Former prime minister Malcolm Turnbull commissioned Snowy 2.0 in 2017 and announced a completion date of 2021. However, the price tag of $2 billion was announced before the feasibility study was completed. After the report came, it was determined that the cost was 6 billion dollars.
The official price tag was changed to $12 billion in 2023 and the deadline was extended to 2028.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
