A project envisioned to save Australians money on energy bills could now cost up to 12 times more than originally planned, the government has revealed.

Snowy Hydro 2.0, priced at $2 billion in 2017 when first announced, could cost as much as $25 billion as its builder grapples with higher labour costs and geological challenges.

Tunnelling is 65 per cent done, but the scheme’s original 2021 completion date has blown out to late 2029, according to the update released by Energy Minister Chris Bowen and Finance Minister Katy Gallagher on Friday.

Snowy 2.0 is expected to play a key role in Australia’s clean energy transition by helping store excess power generated by wind and solar, with Labor determined to press on amid growing calls to throw in the towel.

“You never say never on these things,” Snowy Hydro chief executive Dennis Barnes told ABC Radio on Friday.

“Renewables, solar and wind, backed by pumped hydro, gas, and batteries, is the cheapest grid of the future … it’s sort of inconceivable to me to picture a grid without Snowy 2.0.

“I’m disappointed that we’re here today with this cost blowout, but I’m totally committed to seeing this project through.”

Friday’s update comes after a reassessment undertaken because of “persistent and material cost pressures emanating from the project’s original ‘design immaturity’,” which the ministers’ statement pinned on the previous government.

The scheme was the brainchild of former Coalition prime minister Malcolm Turnbull.

Barnes took over the scheme in a “reset” in 2023, when the government renegotiated its agreement with Italian contractor WeBuild and its estimated cost first leapt up to $12 billion. He said despite the disappointing cost increases, the reset had been good for Snowy 2.0’s progress.

“In 2023, we were achieving in the order of 0.2 per cent of progress a month, and we’re now achieving 1 per cent of progress a month, and that’s the big difference,” Barnes said.

He also defended a $2.8 billion margin of error baked into Snowy 2.0’s latest price tag.

“The ability to estimate the size of this project has been challenging, given the complexity and the scale of it, so we have now allowed what I believe to be a reasonable contingency,” he said.

“Forty kilometres of tunnels, caverns that can fit the [Sydney] Opera House in one kilometre underground in the national park – it’s incredibly complex.”

Potential additional project oversight to ensure it was value for money was also flagged in Friday’s update.

“Completing Snowy 2.0 remains the responsible course … abandoning the project would undermine grid reliability, scrap 5,000 jobs and lead to higher bills,” ministers Bowen and Gallagher said.

-AAP