The White Elephant Award goes to...Snowy Hydro 2.0
Q: How does Malcolm Turnbull turn $2 billion into $10 billion?
A: Snowy Hydro 2.0
This month’s White Elephant Award goes to the Snowy Hydro 2.0 project after another reported cost blow out of $2.2 billion dollars, with further delays expected to add the current 18 months the project is behind schedule. These delays have already pushed the start date well beyond the original 2025 date. Adding further drama to the project has been the sudden resignation of CEO Paul Broad.
Just to remind readers - white elephant projects are those that cost more than promised, deliver less benefits than projected, and continue to be a drain on the public purse.
Malcolm’s Grand Plan
Snowy 2.0 was announced in 2017 by then Prime Minister Malcolm Turnbull as the cornerstone project to enable Australia to transition to a renewable (wind and solar) future, while promising to deliver a more affordable and reliable energy system, generate jobs and grow the economy. It would be the ‘battery’ for the National Energy Market (NEM).
It was spruiked at the time as a great nation-building project, that evoked the nostalgia of the original Snowy Hydro Scheme that took 23 years to complete from 1949 to 1974.
The trouble is, whenever that term “nation-building” is used in the Australian context - a term that rolls off the tongue far too easily for many a politician- it is somewhat hard not to just yell “white elephant”. Sometimes reality can really feel like an episode of Utopia.
What is Snowy 2.0?
In essence, Snowy 2.0 is a pumped-hydro project that revives an old plan to connect two reservoirs in the northern part of the Kosciuszko National Park - Tantangara and Talbingo. Using excess electricity generated from solar and wind, water will be pumped from Talbingo to Tantangara. Then in times of less wind or solar availability, water will be released from Tantangara down the range, passing through hydroelectric turbines to generate electricity.
As stated on the Snowy 2.0 website:
Snowy 2.0 will provide an additional 2,000 megawatts of dispatchable, on-demand generating capacity and approximately 350,000 megawatt hours of large-scale storage to the National Electricity Market. To provide context, this is enough energy storage to power three million homes over the course of a week.
Simple, right? But as always, the devil is in the detail.
The difficulty is that the two reservoirs are a fair distance apart, requiring 27 km of pipelines to link the two. To add further complexity, the power station will need to be installed 850m underground within the mountain range, requiring tonnes upon tonnes of earth and rock to be excavated. Not to mention the upgrading of transmission that is required.
This is where engineering complexity meets economic realities.
Costs, costs and more costs
That the whole Snowy 2.0 project was decided upon in about two weeks as revealed in Senate estimates in 2018 - from Snowy Hydro pitching the concept to the then Prime Minister’s Office, to it being announced two weeks later by Turnbull - was never going to bode well for the project. Rushed decision making is one of the prerequisites for white elephant projects to occur.
Snowy 2.0 was originally announced in 2017 with an estimated $2 billion price tag by PM Turnbull and with a completion timeframe of 4 years.
This was in addition to the $6 billion the Commonwealth spent to take full ownership of Snowy Hydro Limited buying out the shares of the New South Wales and Victorian Governments.
The initial feasibility study provided a base range of $3.8 billion to $4.5 billion, though the economic analysis had been excluded from the public facing document.
Then in 2019 it was revealed by the winning contractor that Snowy 2.0’s official cost came in at $5.1 billion, covering tunnel and power station construction costs. This did not include costs for upgrading existing and building new transmission infrastructure.
Currently, the total cost of Snowy 2.0 is expected to exceed an eyewatering $10 billion for construction and transmission infrastructure. And is expected to be completed in the late 2020s, at the earliest.
There is no doubt that the project will end up costing billions upon billions more than that. And it will most likely face further delays.
Where to from here?
Further delays to the project are set to have implications for the future of the NEM and its ability to absorb greater amounts of renewable wind and solar generation in the years ahead. That could prove problematic for a Commonwealth government promising to achieve 82 per renewable share of the NEM by 2030. The Australian Energy Market Operator (AEMO) is already warning of future supply constraints should there be more delays, adding further pressure as aging coal-fired generators like Eraring exit the market before the end of the decade.
Like the original Snowy Hydro Scheme, there remains questions over the feasibility of the project and its ultimate benefits - both economic and environmental - that have never been adequately addressed.
Indeed, the original Snowy Hydro Scheme is seen by some like Dr Richard Evans as Australia’s Great White Elephant - an epic engineering feat, but a white elephant nevertheless. And it seems Snowy 2.0 is well on its way on achieving such epic status - perhaps Australia’s Great White Elephant 2.0.
And on that note, here is a clip from the above-mentioned TV show Utopia. Enjoy!
Look out for the forthcoming book White Elephant Stampede - Case Studies in Policy and Project Management Failures edited by David Gration, Bruce Kingston and Scott Prasser and published by Connor Court Publishing. It is due to be released in September 2022.
Scott...white elephants in Commonwealth & State govts ....it is like shooting fish in a barrel.
Maybe you would like to look at this -- the My Health Record....$2.5bn and counting.
Just this year.....$100m to a Big 4 acct firm
https://medicalrepublic.com.au/scales-of-failure-covidsafe-vs-my-health-record/75713
As regards MHR, there must be some persons or organisation within or with influence over Governments who think MHR is a great idea and that MHR will produce massive benefits – and, for $2.5 billion, one must be expecting a lot of benefits. Technology in medicine can offer us a lot but this level of benefit or, frankly, any meaningful level of benefit from MHR is not obvious to me. However, when you have already spent $2.5 billion on a project, it is pretty hard to admit failure. Unquestionably, $2.5 billion could have been far better spent in other areas of technology in medicine.