Renewable energy project has 500 percent cost overrun

Renewable energy project has 500 percent cost overrun
Kangaroos fight in Australia. Image from YouTube.

A much heralded renewable energy project will cost at least six times as much as its sponsors claimed — leading to a 500% cost overrun, notes economist Chris Edwards. And it could end up costing ten times as much as projected:

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….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.”

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.

In addition to being costly, renewable energy projects take many years to complete, making it unfeasible to shut down power plants powered by fossil fuels as progressives sometimes do. As the liberal Brookings Institution notes, wind and solar projects can take over a decade to complete: “The dizzying array of permits and other regulatory obstacles to renewable energy projects can create extremely long delays. Reports of 10-year or longer timelines for transmission lines are not uncommon, and both solar and wind projects face long permitting delays.” As a result, “Most wind energy projects in the pipeline are stuck in the permitting phase, with just 21% of planned projects currently under construction…..Each of the federal permits [required] may take months or years to be approved.”

In the U.S., energy plans designed to fight climate change carry enormous risks and costs. “Costly and counterproductive energy restrictions introduced by the Biden administration” are likely to cause blackouts in the future, says the National Review; “modeling at American Experiment found these strict regulations would cause massive rolling blackouts in America’s heartland by forcing reliable, abundant forms of traditional U.S. energy — like coal and natural gas — out of use. On top of blackouts, these regulations will also result in higher power bills and greater dependence on hostile foreign energy sources.”

As old power plants close, America’s power grid has become increasingly unreliable, according the Wall Street Journal. The U.S. faces the risk of of blackouts in the summer and during winter cold waves. Yet, President Biden has called for getting rid of coal plants, saying, “We’re going to be shutting these plants down all across America.” That could cause blackouts that kill hundreds or even thousands of people, as energy runs short. Blackouts already killed 200 people in 2021, as freezing people were left without power.

“Large swaths of North America may face blackouts and other energy emergencies during bouts of extreme cold,” reported Bloomberg News last year. “Severe weather may stress grids by causing demand to soar while supplies of natural gas, coal and back-up fuel oil are all tight, leaving little room for error.”

LU Staff

LU Staff

Promoting and defending liberty, as defined by the nation’s founders, requires both facts and philosophical thought, transcending all elements of our culture, from partisan politics to social issues, the workings of government, and entertainment and off-duty interests. Liberty Unyielding is committed to bringing together voices that will fuel the flame of liberty, with a dialogue that is lively and informative.

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