Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Investing

Massive Cost Overrun on Renewable Energy Project

by November 15, 2023
November 15, 2023
Massive Cost Overrun on Renewable Energy Project

Chris Edwards and Krit Chanwong

Government infrastructure projects often go far over budget. Around the world, the costs of transit systems, energy developments, and other projects frequently soar above what was promised. One cause is the low‐​balling of initial cost projections to help secure public support.

A massive Australian energy project is an exemplar of runaway costs. The budget of the Snowy 2.0 power dam and energy storage project has exploded from $2 billion in 2017 to $12 billion today. The project is a reminder that taxpayers should be skeptical when governments propose large and complex construction schemes.

In the 1970s, Australia completed a system of 16 dams, seven power stations, and miles of tunnels called the Snowy Scheme. The project produces electricity and provides water for irrigated farming. It took 25 years to complete and cost $820 million, or about $8 billion in today’s Australian dollars.

In 2017, the Australian government announced Snowy 2.0, which will add tunnels, generation capacity, and large‐​scale power storage to the Snowy Scheme. Once completed, Snowy 2.0 is supposed to “provide an additional 2,200 megawatts of dispatchable, on‐​demand generating capacity and approximately 350,000 megawatt hours of large‐​scale storage to the National Electricity Market.”

The energy storage plan is to pump water uphill in periods of excess supply and then use the water to generate power when other supply sources—such as solar and wind—ebb. The project was “sold as a nation‐​building project for a low‐​carbon future.”

When Snowy 2.0 was announced in 2017, the government claimed it would cost $2 billion and be open in 2024. Government‐​owned Snowy Hydro pushed for approval saying it had completed “two years of rigorous due diligence.” But some experts warned at the time that the cost estimates were low‐​balled.

Over the years, the project has suffered major technical difficulties and delays. One of the project’s large tunneling machines advanced much slower than planned, created a giant sinkhole, and got stuck in soft ground for months.

Snowy Hydro announced in August 2023 that 2.0 would now cost $12 billion and be completed no earlier than 2028. If we add the costs needed to connect 2.0’s generation to the grid, the total cost could be $20 billion. An Australian dollar is about 65 cents of a US dollar.

Government dam projects are particularly prone to cost overruns. A 2014 study of 245 large dam projects found, “Large dams built in every region of the world suffer systematic cost overruns,” and the final costs of the sample projects “were on average 96% higher than estimated costs.” Snowy 2.0’s cost overrun of at least 500 percent is an extreme case but fits a common pattern.

Experts have questioned other aspects of Snowy 2.0 in addition to the soaring costs. Pumping water uphill for storage requires electric power from other sources, which in Australia includes large amounts of coal‐​fueled power. In the near term, Snowy 2.0 may increase the demand for coal‐​fueled power. Also, Snowy 2.0 will account for just a tiny fraction of Australia’s energy storage needs if the country were to fully transition to renewables. Furthermore, building vast infrastructure in a forest and re‐​plumbing river systems is not green. Finally, Australian regulators have sounded the alarm over Snowy’s monopoly power and rising electricity prices.

This critique of Snowy 2.0 focuses on the problems of large‐​scale energy projects. American policymakers would do well to heed the conclusion: “Given the pace of change, it would seem sensible to make the most of cheaper solutions which can be built quickly and don’t lock us in or out to technologies for the long term.”

0
FacebookTwitterGoogle +Pinterest
previous post
SSE to increase clean energy investment by £2.5bn after profits rise
next post
Breaking Down Taiwan’s Arms Backlog, Part 3: Comparing the Trump and Biden Administrations

You may also like

Scope Creep: Mandating Disclosure of Scope 3 Emissions...

December 11, 2023

The HALT Fentanyl Act Doubles Down on Denialism

May 26, 2023

America in Debt: Remarks at the Coolidge Foundation...

April 1, 2024

High Court Sticks With Flawed Racial‐​Redistricting Standard

June 8, 2023

If You Spend Time in Jail Because the...

February 15, 2024

When “Fairness” Becomes Censorship: The Push to Regulate Social...

April 11, 2025

Title 42 Failed. It Should Not Be Extended...

May 10, 2023

Biden’s Corporate Welfare Bonanza

March 27, 2024

How Common Has Private Currency Been?

August 16, 2022

Americans Remain Worried about Food Prices . ....

May 9, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump ally stands firm against ‘big, beautiful bill’ despite pressure: ‘It’ll completely backfire’

      June 8, 2025
    • Rubio condemns assassination attempt on Colombian presidential candidate Miguel Uribe

      June 8, 2025
    • Obama WH physician says Biden doc should have performed cognitive test

      June 8, 2025
    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved