MELBOURNE (Reuters) - Australia's plan to expand its biggest hydroelectricity scheme as back-up to rising reliance on wind and solar power will cost up to A$4.5 billion (2.62 billion pounds), double Canberra's initial estimate, the scheme's state-owned operator said on Thursday.
The firm, Snowy Hydro, said an independent estimate showed the 50 percent expansion of the giant scheme, adding 2,000 megawatts of capacity, would cost between A$3.8-4.5 billion. That's up from an initial estimate of A$2 billion.
All tunnels, shafts and caverns for the project, in rural New South Wales, 400 kilometres (250 miles) from Sydney, would have to be reinforced "due to challenging geological conditions," it said.
The scheme was first floated by Prime Minister Malcolm Turnbull in March. The government is under pressure to plug power supply gaps which have led to blackouts, as well as cap soaring prices.
A feasibility study released on Thursday found the 'Snowy 2.0' project was viable and technically feasible. But it still requires a final investment decision in 2018, hinging partly on major upgrades of transmission lines beyond Snowy's control.
If approved, first power is expected in late 2024 at the earliest.
"Snowy 2.0 will underpin the security and reliability of the National Electricity Market as we transition to a low emissions future, at least cost to consumers," Snowy Hydro Chief Executive Paul Broad said in a statement on Thursday.
But the feasibility study, led by Singapore-based infrastructure consultants Surbana Jurong's SMEC Australia, warned: "Failure to establish a clear path to connection will risk the FID (final investment decision) timeline and possibly the project itself."
The plan involves pumping water uphill using cheap, surplus electricity during low-demand periods. The water is then released through dams to drive turbines and generate power at peak demand times, when prices are higher.
Snowy Hydro, owned by the Australian government and two states, said the project would cost half as much as building batteries and gas-fired power plants that would be needed to prevent blackouts if the hydro expansion did not go ahead.
It said it intended to pay for the project itself out of internally generated cash and debt, with no government funding needed.
The main advantage of Snowy 2.0's pumped hydro capacity, compared with giant batteries like that Tesla Inc <TSLA.O> recently switched on in South Australia, is that pumped hydro can run for a week continuously, or for over two weeks during peak periods before needing a refill, the feasibility study said.
Existing household and big batteries typically need to be recharged after one to four hours.
(Reporting by Sonali Paul; Editing by Kenneth Maxwell)
