News & Media

Australians were shocked when the budget triggered a big fall in dwelling prices, a credit squeeze and employment cut backs.

But another big shock is on the pre 2028 election horizon – the NSW and Victorian Snowy 2.0 linked renewables scheme. The disaster incorporates crazy time targets, money guarantee rorts and now the latest addition, the incorporation of “CFMEU rules” into the most difficult engineering project Australia has attempted.

The addition of the CFMEU locks in a $1 trillion network charge bill that will hit all power users. To escape the looming exorbitant network charges Australians who invested large sums in roof top solar and batteries will need to consider diesel generating back up even though that will increase the burden on everyone else.

Liberals leader Angus Taylor should and could take advantage of the looming network price crisis, but because as a former Energy Minister, he was involved in the early stages of the scheme, he has hesitated.

One Nation’s Pauline Hanson and Barnaby Joyce are in an ideal position to be the winners. Exposing the government’s biggest secret will require relentless parliamentary questioning.

Anthony Albanese now understands the weakness of Jim Chalmers. The revelation of the mistakes in the base Snowy 2.0 hydro battery will expose the scandals in the rest of the scheme and uncover the weaknesses of his Energy Minster Chris Bowen.

Back in February, I revealed that the Snowy 2.0 part of the project was set to cost $40bn compared to Malcolm Turnbull’s original estimate of $2bn and the $4bn estimate as the project started.

Wonderful extra work has been undertaken by The Australian’s Tansy Harcourt and other commentators revealing the depth of the Snowy 2.0 crisis in the “high country”.

But now that $40bn cost is set to explode because the project developers have signed an agreement with the CFMEU and linked unions to embrace very similar provisions to those planned for the Victorian Suburban Rail Link.

Not only are there huge pay rises but effectively the CFMEU people will be joint managers of one of the most complex tunnelling projects ever attempted in Australia. Governance goes out the window.

Snowy 2.0 is a giant, pumped-hydro battery. Its electricity will come from as far away as western Victoria, eastern South Australia, and western NSW.

To transmit the electricity over these huge distances, around 2000 towers — often 60 to 70 metres high or almost the height of the Sydney Harbour Bridge pylons — must be erected on Australia’s prime farming land. That power then drives water up to a giant dam in the “high country”.

When required, the water falls through a tunnel system to a lower dam. A huge. 17km tunnel is being drilled. The drill from the top got stuck and a new drill has been brought in to drill from the bottom with the aim of connecting the two tunnels. It is high risk engineering.

Sadly, the wonderful engineering talent established in the original Snowy scheme has been scattered around the world, increasing the risk. The main Snowy 2.0 contractor, Italian based Webuild, started with a fixed priced contract but when losses exploded WeBuild was awarded a cost-plus contract approved by Chris Bowen.

The combination of a cost plus contract and CFMEU wanting to show its authority is scary for the nation because it will flow into the total project which is much larger than the actual Snowy 2.0 battery.

The scheme’s wind and solar power generation farms are spread over widespread regions. When the power leaves the tunnel generators it must be transmitted to Sydney and Melbourne. It was always going to be high cost but those costs will now explode.

Measured over 35 years, the financing cost will be more than double construction costs because the Australian government undertook a series of secret very generous guaranteed return contracts with private developers and investors. This means that the developers have limited incentive to keep costs down.

The government will fight to keep these guaranteed return contracts secret because some involve rorts guaranteeing 10 per cent plus investment returns.

The precedents created via union management and the locked in returns will take the total outlay for the project past $1 trillion – greater than the national debt.

The calculation of the $1 trillion is not a guess but comes from extrapolating recently revealed cost data.

In April,I collaborated with the Centre of Independent Studies Hayden Morrison to estimate the cost of the project (including the dams and tunnels of Snowy 2.0) at $375bn – $160bn for the generators (fromCSIRO estimates) and $215bn for the remainder of the project, which can be calculated from data from two components, ProjectEnergyConnect and the Central-West Orana Renewable Energy Zone.

We have seen how CFMEU rules boost infrastructure costs in Melbourne’s big projects. The cost-boosting techniques have beenenshrined in the Suburban Rail Loop. They have now been transferred to Snowy 2.0 and from there they go to the remainder ofthe scheme’s construction projects. They will boost the $375bn original construction cost estimates well above $450bn. Accordingly,Australians will be landed with power network bills inflated by the Victorian Suburban Rail Loop which, ironically, has survivedbecause of federal funding. And we have to hope that the Snowy-linked projects won’t be infiltrated by organised crime as occurred in Melbourne infrastructureand is earmarked for the Suburban Rail Loop.

The higher construction costs then boost the cost of the return guarantees. It is a repeat of the Webuild disaster in the high country. The $1 trillion plus cost of the scheme will be added to network costs.

The burden on consumers and industry will be boosted because the government has guaranteed to subsidise aluminium smelters and other projects by providing power at way below the real costs.

When those householders with rooftop solar and batteries realise the extent of the network disaster may will seek to leave the network by installing diesel generators that cut in as soon as the battery reaches a certain level.

The government may use the subsidies they gave to help fund rooftop power and batteries to lock people into the high cost network. The entire project needs to be stopped before its too late.