Unfortunately, Snowy 2.0 is not an isolated case. Earlier this year, Deloitte found the cost of 13 publicly funded road, rail and energy projects had blown out by A0 billion more than their initial estimates.
So Victorians should insist on a more transparent, independent cost-benefit analysis of the phase 2 expansion.
Once completed, it will be able to generate up to 2,200 megawatts of power, the equivalent of about 26 million household batteries: enough to power three million homes for a week.
What this latest report reveals
In response, the opposition argues the Albanese government has been in power long enough to be held responsible for this latest cost blowout. The opposition has also criticised a change in 2023 in how this project is being funded, which meant the government – and taxpayers – took on more of the project’s cost risks.
The original billion price tag and timeframe for Snowy 2.0, announced by the Turnbull government in 2017, was never realistic.
The federal government’s High Speed Rail Authority published a business case for the project. But key costings details were redacted, or blanked out, making it impossible for the public to judge its value for themselves.
The system is broken
However, the Victorian auditor general warned in August it “is unlikely to be delivered on budget and on time”.
A final decision on whether to proceed with construction is expected in 2028.
Snowy 2.0 also won’t be completed until late 2029. This is eight years after the initial projection announced by then-Prime Minister Malcolm Turnbull in 2017. Its anticipated price tag was just billion then, though there was no business case to back that up at the time.
Australia needs a better system to appraise, select and independently validate the cost estimates of other megaprojects, too.
Read more:
The Suburban Rail Loop will play a major role in the 2026 Victorian election. Why is it so controversial?
Snowy 2.0 is intended to work like a giant battery, using renewable electricity to pump water from one dam to another higher one in the Snowy Mountains, then releasing it back down to generate electricity when demand is high.
What we still don’t know
Earlier this year, the federal government announced it will spend nearly 0 million over the next two years to develop the investment case to build a high-speed rail line from Newcastle to Sydney. If built and extended to Western Sydney’s international airport, it’s now expected to cost at least billion.
Yet it’s not an isolated case. The entire 90-kilometre Suburban Rail Loop in Melbourne was announced at billion by a Labor state government in 2018 – years before it got around to producing an economic business case for it.
Australia’s biggest renewable energy project, the “Snowy 2.0” hydro scheme in New South Wales, is now expected to cost up to A billion – more than 12 times the original figure, an official new report has confirmed.
Read more:
To avoid future road, rail and renewable blowouts costing billions, Australia needs these 3 big fixes
Billions at stake if history repeats
The federal government has responded to this new report by pledging to finish Snowy 2.0, while criticising the Turnbull government for not doing due diligence before construction started.
And in the future, federal and state governments should only commit to multibillion-dollar projects like this after they’ve actually done the work on the design, risks, costs and delivery challenges.
The first phase of the project, the 26km Suburban Rail Loop East, has already gone ahead. It’s expected to cost at least billion.
It’s also still unclear how much more taxpayers will end up paying for this cost blowout, versus what the contractor might cover.
Read more:
Snowy 2.0 was never going to be cheap. But it will be much cheaper than relying on batteries for storage
As recently as three years ago, its price tag was revised up from billion to billion. Yet this latest report shows that the billion estimate was based on incomplete construction designs.
This latest news about Snowy 2.0 should be raising red flags not just about this project, but the likelihood of rising costs for other multi-billion-dollar infrastructure projects, such as the national billion High Speed Rail project and Melbourne’s Suburban Rail Loop.
Lessons we need to learn
And if we want to avoid future cost blowouts on big projects, we need much greater transparency about likely costs versus benefits.
But the problem here is not either Liberal or Labor. It is approving projects before we fully understand the risks and true costs.
But a project can be strategically necessary, yet still be poorly managed.
The Albanese government is committed to going ahead with Snowy 2.0. And it is right to warn if we cancelled the project now, Australia could be left with a major gap in electricity generation and storage.
All of those criticisms are right.
With Snowy 2.0, the only way to be sure the Albanese government is making the right call by proceeding would be with a detailed, independent, cost-benefit assessment. This should then be shared with the public.
How? Australia should set up a truly independent statutory authority with real power – more than Infrastructure Australia has now – to oversee major projects.
Even now, after the publication of a new “project benefits analysis”, we still don’t have a complete picture of the costs versus benefits of Snowy 2.0.
Australia has a terrible record under both parties for failing to deliver megaprojects on time and on budget.
The same goes for High Speed Rail, before any delivery contracts are signed.
