Last week I posted Part 1 of this two-part examination of mega-projects in the NEM. In that article, I published a history of estimates surrounding the costs, benefits, and delivery dates for Project Energy Connect (PEC).
In Part 2 here, I’ll focus on Snowy 2.0 – a very different mega-project, but similarly, facing delays and other difficulties. I’ll close out this analysis with some bigger-picture takeaways about the history of large-scale construction and investment in the NEM.
Snowy 2.0
The original Snowy Mountains Scheme, ex post facto ‘Snowy 1.0’, was developed between 1949 and 1972. It included the construction of 7 hydro power facilities, 16 dams, 80km of aqueducts and 145km of tunnels to divert water from the Snowy and Tumut rivers. It is considered the largest engineering project completed in the history of Australia.
Plans to connect two dams from the original scheme – Tantangara and Talbingo – had been discussed in the decades after, as the 680m difference in elevation between the two dams represented a gross head difference ideal for a pumped hydro facility. The main complexity with the project undertaking was the 20+ km of tunnelling and deep cavern needed, spanning varying geological conditions (originally surveyed as twelve main rock types and eight faults).
Geological, geotechnical and hydrological conditions for Snowy 2.0
Source: Snowy 2.0 Feasibility Study
The project was eventually dubbed ‘Snowy 2.0’, and was officially announced by Malcolm Turnbull in March 2017.
Below is a tabulated timeline of major milestones and events since that announcement.
|
Date |
Event |
| 2017-03-16 | Then-Prime Minister Malcolm Turnbull announced that the government would fund and proceed with the Snowy 2.0 project. Whilst no feasibility study had yet taken place, it was widely reported that the government’s initial estimate of cost was $2b, with an expected four-year delivery timeline.
Source: AP, Alex Ellinghausen |
| 2017-12-20 | The official feasibility study was published. The base case estimate of final cost is projected to be $3.8 to $4.5b. The full cost and economic modelling sections of the report are omitted from the public release, but the executive summary states “work confirms that the benefits of the Project exceed the expected cost of the Project by a substantial margin.” |
| 2018-03-02 | The Federal Government purchased the New South Wales government’s 58% stake, and the Victorian government’s 29% stake in Snowy Hydro – for a combined sum of $6.2b. |
| 2018-12-12 | The Snowy Hydro board formally approved the Snowy 2.0 project, confirming a Final Investment Decision to proceed. |
| 2019-01-18 | Snowy Hydro appointed preferred tenderers, including Clough Engineering, Future Generation and Salini Impregilo (later renamed Webuild). |
| 2019-02-28 | Scott Morrison announced that the project had been approved for commonwealth funding, early works began shortly after this announcement. |
| 2020-06-30 | Snowy 2.0 received environmental approval, the last major part of the project’s approval process. |
| 2021-03-19 | The first of three Tunnel Boring Machines (TBM), nicknamed ‘Lady Eileen Hudson’ was commissioned. It is expected to bore the main access and tailrace tunnel (a total of 7.9km). |
| 2021-12-06 | The second TBM, nicknamed ‘Kirsten’, was commissioned. It is expected to bore the emergency, cable and ventilation tunnel, inclined pressure shaft and a section of the headrace tunnel (a total of 6.7km).
Source: Snowy Hydro |
| 2022-03-22 | The third TBM, nicknamed ‘Florence’, was commissioned. It is expected to bore the headrace tunnel (a total of 14.9km). |
| 2022-08-21 | The Australian reported $2.2b worth of cost variation claims from several Snowy 2.0 contractors. The COVID-19 pandemic and surges in material costs are cited as reasons for the claims. |
| 2022-10-11 | Snowy Hydro announced that TBM Lady Eileen Hudson had now completed the 2.9km main access tunnel (the first tunnel of the scheme completed). |
| 2022-11-08 | The Federal Government confirmed final approval for the 330kV double-circuit transmission lines to the power station. |
| 2022-12-06 | Major contractor, Clough Engineering, was placed in voluntary administration. The company was eventually acquired by Webuild in February 2023. |
| 2023-02-12 | A surface hole appeared above TBM Florence. Some media outlets report that Florence was stuck, whilst the then-Interim CEO, Roger Whitby, later stated that the machine was not physically stuck in rock, but rather was idle whilst structural reinforcing works were needed.
Satellite images later revealed that Florence had only completed 150m of its 14.9km planned journey when movement was halted.
Source: Peter Anderson |
| 2023-04-22 | The AFR and ABC report that on-site work was temporarily halted due to the death of a subcontract worker. The man’s truck crashed, rolled and caught fire on the Snowy Mountains Highway whilst transporting cement. |
| 2023-08-23 | ABC aired an episode of Four Corners that claimed Snowy 2.0 workers were exposed to toxic gas in July 2023, identified as isocyanate, and that the company did not disclose this to the public at the time.
Source: ABC |
| 2023-08-31 | In a lengthy project update, Snowy Hydro announced a revised $12b cost, a 200MW increase in final capacity, and a new expected completion date of December 2028. |
| 2023-12-13 | After roughly 12 months without movement, Florence resumed tunnelling works. |
| 2024-01-05 | Snowy Hydro announced that excavation work had been completed on the 223m transformer hall cavern crown. |
| 2024-05-04 | ABC reported of a partial collapse of the Main Access Tunnel (which completed boring in October 2022) due to drill and blast operations in the main cavern. Snowy Hydro later clarified that the collapse was expected, but occurred earlier than planned.
Source: ABC |
| 2024-05-16 | The cutting head for Florence had become wedged in hard rock whilst navigating a curve. High-pressure water jets had been brought in to remove rock pinching on the machine’s shield.
Florence had completed approximately 850m of the 14.9km headrace tunnel at this update. |
| 2024-07-11 | After seven weeks without movement, Snowy Hydro announced that Florence had restarted excavation. |
Table 1: Timeline of major events and disruptions to Snowy 2.0
The next table lists the estimated cost and completion date for Snowy 2.0 from official sources, as they have evolved since the project was first announced.
| Date | Expected Capital Cost | Expected Completion | Note, Source(s) |
| 2017-03-16 | $2b | December 2021 | Federal Government Project Announcement (Pre-Feasibility), Prime Minister’s Office, SMH, ABC |
| 2017-12-21 | $4.5b | December 2025 | Feasibility Study, ARENA |
| 2019-04-09 | $5.1b | December 2025 | EPC Contractor Announcement, ABC |
| 2022-11-07 | $5.9b | December 2026 | Federal Senate Estimates Hearing (Snowy CEO), Parliament of Australia Estimates Hearing Transcript |
| 2023-05-03 | – | December 2029 | Project Update, Snowy Hydro |
| 2023-08-31 | $12b | December 2028 | Project Update, Snowy Hydro |
Notes: Technical design specifications have changed upon project progress. Where an estimated cost or delivery time was given as a range, the upper estimate is shown in the table. Expected capital cost does not include related transmission upgrades.
Table 2: Changes to official estimates of cost and completion.
The NEM and mega-projects
PEC and Snowy 2.0 are very different projects.
PEC went through the RIT-T process, and the project is complex in terms of the physical length of the transmission path, and the need to coordinate the project through two jurisdictions. Meanwhile, Snowy 2.0 was a captain’s call by the Turnbull government, and is a very complex project from a geological engineering standpoint.
Despite this, there are commonalities, and they go beyond just these two projects. For example:
- Basslink was first proposed to be operational by late 2003 at a cost of $500m, as records from the Tasmanian treasury show. The project eventually came in at a cost of $877m, and was connected in December 2005. Basslink underperformed financial expectations and eventually, the cable’s ownership company was placed into voluntary administration in November 2021.
- Not in the NEM, but close to home – Mike Cannon-Brookes’ proposed SunCable was originally projected to begin construction in 2023, be energised by 2026, and deliver $8b in benefits to the NT economy. The project has faced its own internal tug-of-war, and now the most recent company statement hopes for FID in 2027, and energisation in the early 2030s.
- The Borumba Pumped Hydro Project announced by the Queensland state government in September 2022, is proposed to be one of the largest PHES facilities in the world. It was originally expected to be completed by June 2030, but as of the latest ESOO update, had already seen a 15-month delay.
Basslink: Modelled benefits in the final business case vs Measured benefits between FY 2006 to FY 2011.
Key Takeaways, and Further Reading
Large-scale government-initiated projects unlock many smaller privately-funded projects. In the case of transmission, this can be in terms of actual project approvals – but in a more holistic sense, many of these mega-projects eventually play a role in enhancing investor appetite and ensuring long-term confidence in reliability.
This is just one reason why projected benefits for these projects are difficult to measure and model. This is a fact that is often ignored by those who criticise these large undertakings. And, immeasurable benefits may also be a contributing factor as to why governments consistently underestimate costs in order to get proposals over the line.
But conversely, these under-estimations eventually have compounding negative impacts on investor confidence and market sentiment when they are delayed (or delivered over-budget), as there are nested effects for the individual projects that hang on their completion.
—
Whilst piecing together this analysis, a member of our team suggested that I read Bent Flyvbjerg and Dan Gardner’s book ‘How Big Things Get Done’, which was released last year.
The authors have collated a database of 16,000+ major engineering projects around the world, and conclude that 92% of these projects were delivered over-budget, or over-schedule, or both. The authors draw observations from their experiences in analysing these projects.
I would recommend others to read the book to form their own opinions, but below are some of my key learnings that may have parallels to the NEM:
- The value of modularity. From their research, the authors find that the least over-budget and least over-schedule project types by a comfortable margin were.. solar farms, followed by.. wind farms. The reasoning they state is that there are less unknowns and less variables in ‘cookie-cutter’ style projects. Some in the NEM expect the same to hold true for big battery projects, but this is yet to be seen.
- Eternal beginner syndrome. The authors state that every summer and winter Olympic games since 1960 has been delivered over-budget. They argue that the four-year Olympic cycle (new host city, new hosting committee, new key decision-makers, etc.) means that the Olympics are “forever planned for by beginners”. I could argue that the same could be said of federal or state government-initiated mega-projects.
- The perils of optimism. This was the main takeaway I stated in Part 1, but the authors have put it in better words than myself “You want the flight attendant, not the pilot, to be an optimist… What you need from your pilot is hard-nosed analysis that sees reality as clearly as possible”.
A major difference in projects cost blow out is whether its govt or private funded. Your statement of solar and wind farms not running over budget is because the estimate is real and there’s little room to keep throwing money in to fund the project. Compare that to govt funded projects where the real price is rarely disclosed, as politicians don’t want to admit the real cost as it will be hard to justify and won’t win votes. Hence cost blow out from original budgets.
Interestingly Snowy timeframe is near a decade, $12Bn in costs + $6Bn in federal buyout of state ownership + Humelink sums to approx $20Bn. This equates to ~$10Bn/GW…. kind of makes the argument against Nuclear null and void.
I’m certain that the masses do not understand the magnitude of the energy storage problem. Pipe dreams like Snowy Two will continue to crop up until the people understand the magnitude of the problem and grasp that even when complete this project will not provide a sensible backup to the wind and solar power grid.
As a simple example. A fuel tank in a typical car may hold 60 litres of petrol. Petrol will have an energy density in the range of 9.3 kWHr/litre. So that tank will hold 558 kWHr of energy.
Lifting one litre of water 680m will provide approximately 6800 Joules of potential energy, which is 1.9 WHr.
So to get the same energy storage as per the petrol in your tank, (ignoring all losses), would require lifting nearly 294 thousand litres of water up the 680 metres of Snowy Two.
Petrol really is an amazing dense fuel. If you want to replace petrol with electric propulsion, how many cars will be allowed to recharge each week on Snowy Two? And remember, you have to RECHARGE the Snowy Two scheme between discharge events.
I’m certain that the politicians who are pushing this scheme either won’t know the above or won’t listen to you if you tried to teach them. If the truth is known, the bubbles bursts.
It doesn’t seem unreasonable at all that 60 litres of petrol can raise 294 tonnes of mass 680m when used efficiently – after all, you don’t expect that driving your 2 tonne car up from Penrith to Hazelbrook will use much of your tank, even when it’s burning that fuel very inefficiently in an internal combustion engine (where the bulk of the energy stored in the fuel is going out the tailpipe and radiator as heat).
If you’re talking about replacing petrol with electric propulsion, you need to take that efficiency difference into account. The petrol vehicle is going to get about 700km out of that tank, so about 800Wh/km, whereas similar sized electric vehicles use about 160Wh/km. So drive the EV as far as the petrol vehicle goes on one tank requires less – only about the energy stored in 58,000 L of raised through the 680m head.
Also 294,000 L sounds like a large amount, but it’s almost exactly what the existing Tumut 3 station can pump uphill *each second* (the downhill generating flow is considerably higher). The Tantangara top reservoir in the Snowy 2.0 scheme holds 800,000 times that quantity when full.
“Large-scale government-initiated projects unlock many smaller privately-funded projects. In the case of transmission, this can be in terms of actual project approvals – but in a more holistic sense, many of these mega-projects eventually play a role in enhancing investor appetite and ensuring long-term confidence in reliability.” Whoa, Dan. And your evidence is ….?