Snowy 2.0, which will add to the Snowy Mountains hydro-electric scheme, may now cost up to $25 billion, having been priced at $2 billion when proposed in 2017, according to a reassessment.
The new figure includes a $2.8 billion buffer on the project's target cost of $22.2 billion.
Its original completion date of 2021, already well out the window, has been pushed back another year to late 2029.
The project would provide net benefits to Australians, despite the "very disappointing cost blowouts", Energy Minister Chris Bowen said.
Proposed under former coalition prime minister Malcolm Turnbull, the scheme is expected to play a key role in Australia's clean energy transition by helping store excess power generated by wind and solar.
"I'm here as as a shareholder minister saying 'yes, this is unwelcome news', and obviously we wish the project was being delivered more cheaply," Mr Bowen told News24 on Friday.
"But it's a geological and engineering fact that it is just impossible to deliver it any more cheaply than it's being delivered."
Mr Bowen and Finance Minister Katy Gallagher blamed geological challenges for soaring costs, exacerbated by design flaws they say were inherited.
"The original decisions were made very immaturely," Mr Bowen said.
"Hardly any geotechnical work had been done, not enough soil testing had been done ... the project designers working in a very complicated field have learnt a lot."
Those geological challenges led to one of the project's tunnel-boring machines, nicknamed Florence, getting bogged in softer-than-expected rock for most of 2023.
It became wedged in harder-than-expected rock the following year.
But tunnelling work is 65 per cent complete, according to the latest update, having only gone 19 per cent of the way in 2023 when the project was overhauled.
The "reset" involved renegotiating the agreement between the government-owned Snowy Hydro corporation and Italian contractor WeBuild.
Canberra put itself on the hook for more potential cost blowouts, increasing the price tag from $6.1 billion to $12 billion, but baked incentives in for the builder to deliver the project cheaper.
Snowy 2.0 chief executive Dennis Barnes, who was parachuted in at the time of the reset, was also dismayed at the cost increases, but said progress was promising.
"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," he told ABC Radio on Friday.
"That's a big difference."
Opposition energy spokesperson Dan Tehan demanded Mr Bowen resign over the higher costs and delays, with coalition members criticising the "cost-plus" contract model entered into after the 2023 reset.
The energy minister swiped away the call to quit his role.
"That's the sort of personal attack I've come to expect from Dan Tehan. He's wrong about the contract," Mr Bowen said.
He accused Opposition Leader Angus Taylor, who was energy minister under the previous coalition government, of concealing Snowy 2.0's true costs and complications before Labor came to power.
"The former chief executive, who has said on the record that he'd warned Angus Taylor the costs were blowing out before the 2022 election - Angus Taylor chose to hide it," he said.
Nationals member Darren Chester labelled the Snowy 2.0's latest update "alarming" and slammed Labor for continuing to redirect blame.
"At what point does a statute of limitations on blaming previous governments come into effect?" he told ABC Radio on Friday.
"Continually blaming the previous government when you've been in power for four-and-a-half years is getting a little bit ridiculous."
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