Snowy Hydro 2.0: A Classic Sunk Cost Fallacy – And Why Curbing High Immigration Would Have Been Far Cheaper, By James Reed

 Australia is currently staring down a $42 billion white elephant in the Snowy Mountains. What began in 2017 as a $2 billion pumped-hydro "nation-building" project under Malcolm Turnbull has spiralled into one of the worst infrastructure disasters in modern Australian history. Independent experts Bruce Mountain and Ted Woodley estimate the true all-up cost — direct construction (~$20B), transmission lines (~$12B), and interest over 15+ years (~$8B) — now sits at $42 billion!

This is a textbook sunk cost fallacy in action: "We've already spent $12–13 billion, so we have to finish it." The rational economic response is different: ignore what's already spent and ask whether the remaining expenditure delivers value. On that test, Snowy 2.0 fails spectacularly.

The Numbers That Should Shock Every Taxpayer

Original promise (2017): $2 billion, online by 2021.

Latest official target before the latest blowout: $12 billion, now admitted as unachievable.

Independent realistic total: $42 billion.

Completion pushed back to at least 2032.

For context, that's a 2,100% cost overrun. The project creates no net new energy — it's pure storage, moving water uphill with excess daytime solar/wind and releasing it later. Yet it requires massive new transmission (HumeLink, VNI West, etc.) that adds billions more. Critics rightly call it "one of the biggest disasters" in Australian infrastructure history.

Even if completed, its net present value is marginal at best. Continuing to pour tens of billions more into it (on top of what's already sunk) crowds out far cheaper, faster alternatives like batteries, demand response, or small-scale storage.

The Immigration-Energy Link That No One in Canberra Wants to Discuss

Here's the deeper policy failure: Australia's breakneck population growth via high net overseas migration (NOM) has supercharged electricity demand, creating the very "need" politicians then use to justify these monstrous projects.

Record NOM in recent years (still running at hundreds of thousands annually even after some moderation) has driven most of Australia's population growth.

This directly feeds record electricity demand: households, new housing, data centres, electrification, and industry.

AEMO and others repeatedly cite population-driven demand as a core reason we "need" massive new generation + storage like Snowy 2.0.

Lower immigration = materially lower demand growth. Every 100,000 fewer net migrants per year means less pressure on housing, infrastructure, and — crucially — the electricity grid. That translates into billions saved in avoided generation, transmission, and storage build-out. No need for as many giant tunnels through national parks, no urgent transmission corridors carving up farmland, and far less fiscal pain.

High-migration advocates always claim migrants "pay their way." But when it comes to capital-intensive infrastructure like energy, the upfront costs fall heavily on existing taxpayers and ratepayers before any long-term fiscal benefits materialise. Snowy 2.0 perfectly illustrates how politicians create a problem with one hand (runaway population growth) and then "solve" it with the other (eye-wateringly expensive projects) while hiding the true costs off-budget.

Alternatives That Were Always Cheaper

Batteries have plummeted in cost and can be deployed in years, not decades. Distributed solar + storage, demand management, and even keeping some gas peakers online for reliability often beat the economics of mega pumped-hydro schemes riddled with geological and tunnelling risks. Snowy 2.0's long-duration storage sounds impressive on paper, but at $42 billion it is no longer competitive.

The opportunity cost is enormous: that money could have gone into genuine productivity-enhancing infrastructure, cost-of-living relief, or even nuclear/small modular reactors if the policy taboo weren't so strong.

Time to Cut Losses and Change Course

Continuing Snowy 2.0 because "we've come this far" is the sunk cost fallacy on steroids. A Royal Commission — as Mountain, Woodley, and others have called for — would be money well spent to expose the decision-making failures, hidden costs, and political spin.

More fundamentally, Australia needs an honest national conversation about population policy. Unlimited high immigration without matching infrastructure (especially energy) is a recipe for higher prices, congestion, and fiscal waste. Moderating NOM to sustainable levels would ease pressure across housing, health, education — and the electricity system.

Snowy Hydro 2.0 is not just an engineering and budgeting fiasco. It is a symptom of deeper dysfunction: governments using high migration to juice GDP while papering over the infrastructure costs with ever-larger taxpayer-funded megaprojects.

The $42 billion sinkhole should be a wake-up call. Stop throwing good money after bad — and stop engineering demand growth that makes bad projects look "necessary." Lower immigration and smarter energy choices would have left Australians with cheaper power and far less debt.

https://www.macrobusiness.com.au/2026/04/snowy-hydro-2-0-is-a-sunk-cost-fallacy/