Snowy Hydro 2.0: the mother of all energy boondoggles

In 2017, former Liberal Prime Minister Malcolm Turnbull unveiled Snowy Hydro 2.0, an ambitious pumped hydro project that was initially projected to cost $2 billion and generate 2 megawatts of power on demand, with the capacity to store 350,000 megawatt-hours by 2021. However, the project has faced numerous delays since its inception.

The most recent significant review, conducted in 2023, estimated expenditures to skyrocket to $12 billion. As a result, the contract for the project, initially set under a "Webuild" agreement, has been revised to an "incentivised target cost model" for Snowy 2.0. This new arrangement incorporates cost-plus-margin payments, coupled with performance incentives for meeting targets and penalties for failing to reach predetermined thresholds.

According to The Australian newspaper, the Albanese Government is set to disclose additional cost escalations for the Snowy 2.0 pumped hydro project following a comprehensive cost assessment conducted in June. For those interested in the full scope of this article, access is available to subscribers of MacroBusiness.