'Tough' homework to check Snowy stacked up

Marnie Banger and Angus Livingston
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SCOTT MORRISON SNOWY HYDRO PLANT VISIT

Prime Minister Scott Morrison commits to a 1.3 billion dollar expansion of the Snowy Hydro scheme

It's taken "bare-knuckle brawling" to get a $4.5 billion expansion of the Snowy Hydro scheme up to scratch, but the project's operators say it stacks up economically.

Taxpayers will chip in $1.38 billion to pay for the expansion, which will see water pumped through 27km of tunnels using cheap power then used to generate electricity in times of peak demand.

"We didn't get here today because someone just drove around in a ute and had a bit of a look around and said, 'I reckon it will cost that much'," Prime Minister Scott Morrison told reporters in Tumut on Tuesday.

"We have been on this job for two years to get to this point. That's a lot of homework has been done to go into the estimates upon which we have made our investment decision today."

But Labor says the upgrade needs more wind and solar in the entire system to make it viable, and that can only happen under a bigger renewable energy target.

Pumped hydro uses cheap electricity - usually at night - to pump water up a hill and into a dam, where it is stored. When energy demands start to peak during the day, the water can be released downhill through turbines to generate power.

The expansion will cost up to $4.5 billion and be ready to supply power in 2024.

The government is now satisfied the generation project stacks up, but Snowy Hydro chief executive Paul Broad said it wasn't easy to convince.

"It was bare-knuckle brawling and it was very tough - and so it should be," he said.

Early works will begin this week.

When finished, it will increase generation capacity by 2000 megawatts and provide 175 hours of energy storage - enough to power 500,000 homes during peak times.

The project will create up to 2400 jobs in construction and support as many as 5000 direct and indirect jobs across the Snowy Mountains region.

Labor's energy spokesman Mark Butler said business cases for Snowy 2.0 and the proposed second interconnector to Tasmania showed they needed more renewable energy to make them viable.

"Pumped hydro investments only make sense to support ambitious renewable energy investment," Mr Butler said.

Labor is committed to making half of Australia's energy renewable by 2030.

The business case also relies on a major upgrade of a transmission line in NSW - estimated at another $2 billion - which federal Energy Minister Angus Taylor said was the NSW government's responsibility.