Snowy productivity, sixfold budget, three years late

Not content with being a poster child for everything that can go wrong with the nation’s renewable energy transition, the trouble-plagued Snowy Hydro 2.0 pumped hydro-electricity project is gearing up to set new standards for disturbance in industrial relations as well. Costs for the project, first conceived by Malcolm Turnbull, have blown out from $2bn to $12bn, with taxpayers on the hook for a cost-plus contract as problems continue to mount.

The complex civil engineering project being developed by the federal government-owned Snowy Hydro has been taken over by international company Webuild, a junior partner in the project until main contractor Clough collapsed in December 2022 as costs blew out. Originally anticipated to be completed in 2024, Snowy 2.0 is not expected to begin operations until 2027 at the earliest.

As we report on Thursday, Snowy 2.0 now faces the threat of strike action by unions in support of a 6 per cent a year wage increase, 15 per cent superannuation as well as increased travel and productivity allowances. The irony of this is had the project met reasonable productivity benchmarks there would be no need to consider strike action in the first place. The tunnel work was supposed to be finished before the current enterprise agreement expired but delays on the project meant a new agreement had to be negotiated to include higher wages and better conditions. The Fair Work Commission has given approval for protected industrial action after workers rejected a 23 per cent pay rise offer across four years. Action could include 24-hour strikes or unlimited stoppages.

Delays to the Snowy Hydro 2.0 project have been many but best remembered is when giant tunnel boring machine “Florence” got stuck at the start of its 17km mission, stopping work in its tracks for months. More recently the project has been beset by safety issues; in January, workers walked off the job over the project’s refuge chambers, which are last-resort areas where trapped workers can shelter in the event that primary safety systems are compromised and evacuation routes blocked. In February, underground work was halted after an industrial-sized ventilation fan malfunctioned, sending metal shrapnel flying. SafeWork NSW issued six prohibition notices to cease the use of unsafe ventilation fans as inspections showed others in various states of disrepair, including missing and loose bolts.

As the pumped hydro project has limped along, controversy has raged over the cost and feasibility of the transmission line needed to connect it to the grid. There have been concerns over the environmental impact of the project in the protected Kosciuszko National Park, most notably because of land clearing necessary for the controversial $4.8bn HumeLink electricity transmission project that must be fully paid for by electricity users in NSW. Workplace morale on the Snowy Hydro project has slumped and it still will be years before it can start work as a backstop for intermittent renewable energy projects. By the time it is finally commissioned, Snowy Hydro 2.0 will be able to supply only a small fraction of the backup that is required.

It all adds to the challenge for climate change and energy minister Chris Bowen, who reportedly is about to take on a new role of international climate diplomat-in-chief if the Albanese government is successful in its bid to host a UN Framework Convention on Climate Change Conference of Parties in co-operation with Pacific Island nations in 2026. With Donald Trump reassessing the US foreign aid spend, including in the Pacific, the Albanese government has been left exposed in its bid for a COP as geostrategic tensions in the region continue to mount. Against the usual protocol, no decision was made at COP29 in 2024 about where COP31 would be held in two years. Rival Turkey says it is still determined to proceed with its bid. A successful bid for COP31 would heap pressure on Australia to increase its ambition on climate action, possibly beyond the 70 per cent cuts being advocated by the Labor Environment Action Network, Labor’s environment wing.

But problems at Snowy Hydro are only a part of the bigger energy transition challenge. With the election defeat of the Coalition, the renewable energy industry now has the clear air it says it wants without the threat of competition from nuclear. But power authorities seem no closer to having a workable plan. Anthony Albanese promised during the election campaign that if successful in the bid to host COP31, the meeting would be held in Adelaide. Nowhere are the issues of grid instability as a result of high levels of renewable energy more acute. One thing is clear, strike or no strike, Snowy 2.0 will not be there to help.