Underneath the alpine peaks of Kosciuszko National Park, a tunnel boring machine is grinding slowly through hard rock.

After about a year marooned in soft ground, the machine named Florence is on the move again.

It’s a relief to Snowy Hydro, which is relying on Florence to carve the longest tunnel in its trouble-plagued Snowy 2.0 hydropower project.

But the dog days are not over.

Florence is cutting through 2 metres of rock at a time, with a ring of nine concrete segments then installed to line the tunnel before the complex system of borer, conveyor belt, electricity supply, ventilation pipes and a myriad of other equipment is inched forward to start the cycle over again.

Since it has been back up and running, Florence has been making enough progress for three rings a day to be installed. One day this week, it managed six rings in a day.

There are 7,500 rings to go. And there may be more geological trouble ahead.

Florence may be back on the move, but she’s not moving fast enough.

Over time and over budget

The Snowy 2.0 project involves a network of underground tunnels linking Tantangara Dam high up in the Snowy Mountains to Talbingo Reservoir lower down.

Water will flow from Tantangara to Talbingo via a massive underground power station, providing 2,200 megawatts of power that can be fired up on demand to support the variable contributions of other renewable energy sources to the power grid. When electricity prices are low, water will be pumped back in the opposite direction to “charge” what is essentially a giant water battery.

Construction has been underway for about 5 years and a number of problems have beset the project.

Most infamously, in December 2022, Florence became bogged when it struck soft earth, creating a sinkhole at ground level and halting progress.

With the cost blowing out by billions of dollars and the time frame falling further and further behind schedule, Snowy Hydro “reset” its contract terms with joint venture partner Future Generation.

The original fixed-price contract was scrapped, with both Snowy Hydro and Future Generation sharing the cost of completing the project, which is now expected to total $12 billion.

Not boring enough

But to meet the new time frame of delivering its first power by late 2027, something needs to be done about Florence’s lumbering progress.

Three tunnel boring machines were purchased to help dig the tunnels needed for Snowy 2.0.

Florence, named in honour of Australia’s first female electrical engineer, Florence Violet McKenzie, was tasked with boring the 16-kilometre section that links Tantangara dam to the underground power station, known as the headrace.

It’s the longest and most geologically difficult ground of the whole project.

With only 440 metres of the headrace tunnelled so far, and another tricky section known as the Long Plain fault line still to be traversed, Snowy Hydro and Future Generation are looking at options to work at both ends of the headrace at the same time.

“The reality is we have to hit 12m a day on average. We’re not doing that now [though] we expect to in the next couple of months,” explained Snowy Hydro CEO Dennis Barnes.

Even if Florence picks up the pace, it still won’t be enough to meet the project’s timelines.

“We’ll make a decision in the next month or two… that’s looking pretty certain that we do need to do something,” he said.

It could mean purchasing a fourth tunnel boring machine or using the “drill and blast” technique at the other end.

Financial engineers required

Fixing the problems associated with Florence will be emblematic of the efforts being made to get Snowy 2.0 completed.

“Florence not moving was a lightning rod for the project having its difficulties,” said Mr Barnes, who points to the broader changes that have been introduced to turn the project around.

Under the previous arrangements, the joint venture partner bore most of the risk, having committed to a fixed-price contract.

“All of the things that affected the project meant that the contractor was going to lose money. That just isn’t a great place for anybody,” said Mr Barnes.

The reset with an “incentivised target cost” approach means both Snowy Hydro and Future Generation now share the risks of cost overruns.

“Well, I mean, sharing in so much as Snowy [Hydro] bears most of the risk,” Mr Barnes noted dryly. But he is adamant the change to contract terms has revitalised the Snowy 2.0 project.

“The biggest change is the cultural shift that’s come as a result of there being true collaboration about the project, rather than there being a commercial negotiation on every front.”

Company insiders also discreetly mention the change at the top as being critical, too, with Mr Barnes joining Snowy Hydro in February 2023.

Former CEO Paul Broad was instrumental in getting the project off the ground, but his pugnacious approach was seen as a poor fit for managing the stresses of a joint venture project.

Sinkholes and sunk costs

The sunk costs of Snowy 2.0 are significant in many ways.

The project was initially estimated to cost around $2 billion when it was first announced by then-prime minister Malcolm Turnbull. The Albanese government is now overseeing a project costing six times that much. The Commonwealth government, as the sole shareholder of Snowy Hydro, has committed more financial support, though exactly how much has not been finalised.

The extent of construction work undertaken within Kosciuszko National Park, as well as the expectations of the energy market in having the scheme’s 2,200 megawatts coming online this decade, are other factors that make Snowy 2.0 virtually impossible to walk away from.

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For Dennis Barnes, the project is as viable — economically, environmentally and systemically — as ever.

“The project has a 7.4 per cent return and a $3 billion net present value on a $12 billion cost,” he said.

“The good thing is we’re now ahead of the risks, so we’re thinking about risks that are coming, rather than reacting.

“We’re 51-52 per cent of the way in, but the more you do, the more confident you get.”