Image for Basslink: A short summary of risks ... UPDATES ...

*Pic: Hydro’s Gordon dam ...

image
When we had full dams ... water pours over the Devil’s Gate dam ...

image
Hydro logo ...

THURSDAY, February 11…

• Bryan Green in Comments: Tasmanians urged to conserve power as energy crisis deepens

Tasmania Power Crisis:  Premier to push for second Basslink undersea cable

FRIDAY, January 29 ...

Without warning, Tasmania’s power link to the Mainland suddenly ruptured in December 2015, just as it was being called upon to shore up power supplies. This event has sent shockwaves through the Tasmanian administration.

Joining Tasmania to the national electricity grid via Basslink was a long-term dream built around an assessment of perceived risks and economic opportunities. A reasonable business case was thus developed by the state government and sold on the basis that it would be not only good for Tasmania but that it would be necessary for Tasmania’s security.

When the project was originally being put up for developmental approval (in the late 1990s) Australian faced an acute shortage of peaking capacity to the extent that Melbourne was experiencing brown-outs and national spot prices for power sales during peak times were, at that time, extremely attractive. Prospects for Hydro Tasmania to trade profitably and compete in the national market (NEM) looked bright.

Indeed, if those parameters had remained static the business case was very promising – potentially earning more than enough to cover well over the $92 million per year Basslink usage fee.

At the same time, Hydro Tasmania has legal obligations to supply constant load on contract to the major power users and without a back-up from the Mainland the state’s power system may have been compromised in the event of extended drought conditions. Our vulnerability to drought was arguably always the primary purpose of the project – though this was never the selling point.

Tasmania generates approximately 90 percent of its power demand (in average rainfall conditions) thus requiring us to import the remaining 10 percent – so this need can be seen as a necessity in the absence of the state lifting its renewable capacity. By exporting high value peaking power and importing low value base load this gap could theoretically be made up at a profit and with a net greenhouse emissions reduction.

Environmental arguments went both ways, but the Tasmanian Greens and the broader environmental movement generally disapproved the project fearing that it would result in a net transfer of coal-fired power from the mainland to Tasmania, thus breaching our valued reputation as an all-renewable electricity island. As it turned out this is, in fact, what has transpired. During the ten years since the project was officially started up in 2006 the net power transfer has been from north to south by a strong margin.

In the state government’s defence it must be said that a number of risk factors – mostly beyond its control – have played against the project’s original business case. Even during its construction the ‘millennium drought’ ( HERE ) – lasting 8 years – had hit Australia and Hydro Tasmania’s storage levels had dropped to critical levels. Thus, for its first few years of operation Basslink had to serve the purpose of propping up the state’s ailing power system whilst also exporting peak load.

Meanwhile two further factors have disrupted the business case still further.

Firstly came the onset of gas peaking generators. Natural gas power generators can flex their output; they are relative cheap to build; it is easy to gain planning approval for them (as opposed to wind farms) and they are seen to have a carbon footprint half that of coal power. The addition of gas generation ( HERE ) to Australia’s energy mix had the effect of lowering peak spot prices.

To illustrate this, in 1997 hydro provided 8.6% of Australia’s power whilst gas provided 5.3%. Sixteen years later hydro provided 7% whilst the gas component had risen to 20%. (Gas-fired power is expensive for base load, but is competitive for peaking load.)

Secondly, almost nobody had predicted that so much manufacturing would shift offshore and, in addition, energy efficiency improvements would result in a dramatic lowering of Australian power demand, as shown in this graph. (Note that Basslink came online in 2006 just before the downward slide.)

image

The net effect of these three unpredicted factors (the drought, the rise of gas generation and flattening of national power demand) have all taken their toll on the opportunity for Hydro Tasmania to trade profitably and they certainly killed off any ability to net export renewable power.

A fourth unpredicted risk is the impact of climate change itself on the Long Term Average Yield of Tasmania’s power system. In 2007 (a year after Basslink’s inception) Hydro Tasmania formally wrote down the energy output of its integrated system by a factor of 10 percent ( HERE ), accepting that low water inflows into its storages are more than an aberration but a reflection of a long-term trends.

One plus for Hydro Tasmania’s accounts came with the national carbon price, providing a temporal stimulus to export for the two years that this national policy was in place. In an effort to take advantage of this policy Hydro Tasmania exported to maximum potential, hedging that average weather conditions would prevail. However, this was a miscalculation as 2015 panned out to be a very dry Spring and Summer.

At this critical juncture yet another risk factor befell the utility, as a breach in the Basslink cable put it out of action when it was needed most and Hydro Tasmania has been burdened with the additional costs of using the mothballed Tamar Valley Gas fired power to prevent a critical power shortage.

All of the above is not terminally disastrous, because the cable has been in operation for just ten years and it is not impossible that future years may be more kind to the business case. In any event Basslink has to be paid for by contract and under present circumstances Hydro Tasmania has reported that it cannot supply a dividend to government in the coming year, thus compromising not only its own finances but the state’s budgetary position.

Beyond the business case, the installation of Basslink added another risk factor to Tasmania in that our physical connection to the national electricity market has necessarily resulted in Tasmania losing a level of political autonomy – having to comply with national policy agreements, including nationwide agreements to phase out attractive solar feed-in tariffs and introduce retail competition. It can be argued that some of these impositions may have applied even without Basslink, but the physical exchange of electrons has locked us in deeper than otherwise. Some have likened this to an ‘electrically transmitted disease’.

Renewable energy advocates have repeatedly lobbied energy minister, Matthew Groom, and also the former Labor minister, Bryan Green, to adopt policies that would support and progress new renewable energy projects. These efforts have met a solid brick wall ...

More significantly, perhaps, is a level of complacency that Basslink appears to have had on state energy policy within Tasmania. Renewable energy advocates have repeatedly lobbied energy minister, Matthew Groom, and also the former Labor minister, Bryan Green, to adopt policies that would support and progress new renewable energy projects. These efforts have met a solid brick wall, mainly on the grounds that Basslink can cater for any shortfall in power supply that is induced by drought conditions, so augmenting the state’s power supply has been deemed to be unnecessary. In other words, the very existence of Basslink has unfortunately rendered Tasmania less self-sufficient in energy supply – this despite an original aim for it to enable exports.

* * * *
It is against this backdrop that a second Bass Strait interconnector is being mooted. (It is state government policy to work up the business case for it.)

As with Basslink 1, the case for the mooted second link needs to be built around an assessment of perceived risks and economic opportunities to see if a solid business case can be developed. Since this was a priority issue in the state government’s election platform, it can be assumed that a positive business case has not been developed. This is to be expected, since all of the above parameters render such worse business conditions than existed during the first round.

Tasmania does face a contrary known risk, the possibility that a major power user may become non-viable, and close down, and thus flood the Tasmanian market with excess power that can’t be used internally.

In that event ‘take or pay’ contracts mean that any such circumstance is unlikely to take place without forewarning and with minimal risk to Hydro Tasmania’s income stream. However, to offset this (fairly likely) risk it would be prudent for the state to undertake necessary planning for a second interconnector so that it could be developed and installed if a situation arose where it would be urgently needed.

Meanwhile, a multi-pronged alternative economic model should be developed to:

• enable any such circumstance to speedily bring the hydro-electric water reservoirs up to full capacity,

• to aggressively focus on electrification of the state’s transport fleet and

• to actively entice high end business enterprises (e.g. IT cloud storage) to set up within the state.

With regard to climate change mitigation, there is potential for Tasmania to contribute to reducing national carbon emissions via a very aggressive policy to enhance renewable energy output. This would require a complete change of heart at government level, taking out all stops to enable maximum wind energy (and other) developments and thus building enough surplus capacity that a second and possibly third Basslink would be required in order for Tasmania to become a major exporter of renewable energy. Basslink 1 being used to capacity means that an agenda to become a major exporter relies on a decision to augment connection to the mainland across Bass Strait.

The risk scenarios for developing Basslink 2 are very similar to those for Basslink 1, except that what were unforeseen risks are now obvious liabilities ...

The business case for this would arguably be very marginal since any renewable producer in Tasmania would not only have to cover development costs for the generation system but would also need to carry Basslink development costs and still compete with mainland generators. It seems unlikely that this business case is workable unless Australia invokes a national climate policy that also pulls out all stops and thus financially covers the high costs of such projects.

A final, rather radical, scenario being talked up in some quarters is that over time the addition of too much intermittent renewable energy is likely to jeopardize the stability of the national electricity grid. In that circumstance Tasmania’s very flexible hydro-electric system could theoretically be converted from base load to become a deep cycling peak energy provider, feeding into the national grid at maximum rate whenever the NEM system was constrained. Such a scenario would see the Tasmanian hydro-electric energy system being run flat out for short periods – all generators on all dams being used – then shut down completely to allow the dams to restore water levels.

It is perhaps too early to glibly entertain such a scenario because it would have major ecological ramifications and would most certainly entail the building of at least two additional Bass Strait interconnectors. The business case for all of that would need to cover the capitalization required plus the annual utility rentals.

Tasmania presently has approximately 1500 MW average peaking capacity, over and above general load, and this seems to be an inadequate volume of available peaking power to justify any such costly program in a national context. In any event, large-scale battery or molten salt storage is quite likely to nip that scenario in the bud before it could get legs.

* * *

The risk scenarios for developing Basslink 2 are very similar to those for Basslink 1, except that what were unforeseen risks are now obvious liabilities.

We have sustained drought conditions, we have low national power demand, we have a broken cable and there is no national carbon price. For at least the medium future this all weighs heavily against a business case being viable.

Short of infrastructure funding (unlikely in a competitive market where the government’s philosophy is not to distort the level playing field) and a very strong national climate policy (the jury is out on this at present) or possibly a major industry closure (this is quite possible but would not pose an urgent situation) it would be prudent to presume that the business case to build additional interconnectors is rather a long way off.

On the plus side, in the medium future the National Electricity Market (NEM) is likely to change quite markedly. The existing surplus of electrical generating capacity in Australia is forecast to mostly disappear during the coming decade. In tandem, some 10,000 MW of coal-fired generators are projected to be retired along the Eastern seaboard of Australia by 2025, and this, along with greater political emphasis on renewable energy, may radically alter the opportunity for profitable Tasmanian power exports in the future.

Again, this can only happen in a significant way if there is a projected pathway to markedly increasing our renewable output. This plus the building of a dedicated undersea cable for export purposes (Basslink 1 being unable to serve this function).

For now it should be assumed the business case for additional connector(s) is dead, but a contingency plan to allow for its implementation through some forward development planning may be a sensible way to go.

* * *

On the broad issue of whether or not it is wise to vigorously pursue exporting of power from Tasmania, here there is a philosophical division both within environmental circles and within Tasmania’s bureaucracy and power utilities.

One stream argues that Tasmania should go all out and ambitiously work towards being a renewable energy exporter. The other stream argues that we can only ever be a two-bit player in the national market and carrying the rental cost of two or three Basslinks would be an insurmountable burden in these uncertain times. For the latter case, a forward plan focusing on greater energy self-sufficiency would carry significantly less risk and position the state better in the event of unforeseen disruptions.

This is a classic risk-versus-risk debate that is not in the average citizen’s mind as yet.

Chris Harries has been a long term environmental educator, specialising mainly in building energy awareness. He is a member of the professional advisory body Climate Tasmania and has played a key role in sustainable community development, behaviour change and the uptake of rooftop solar through community bulk buy projects.

• Anne Cadwallader in Comments: Chris, which large industrial consumer is likely (as you write) to pack up and go?  That does, as you indicate, seem to be a massive game changer.
Hydro industrialization was a major part of our state’s development, but can’t last forever.  But if we once again become awash with electricity, surely it positions us well for a low carbon world?  I never minded the idea of being Australia’s national park (a lot better than being its disused quarry, as W.A. is rapidly becoming).  But being Australia’s hydro power battery pack sounds wonderful.  We can be both profitable, and a positive force in the world.  Then there will be no more dying old people lying on the floor of the Royal Hobart on towels:

• asoka nelson in Comments: on the 28th of jan 2016 a vast amount of moisture was in the atmosphere above the fires on the west coast, if a 747 aircraft was loaded with 50 ton of dry ice…..it would have induced a significant rainfall it the area it was most needed…..I contacted Greg Carson at Hydro Tasmania and he automatically said no we will not help you and we will not investigate the concept….I also contacted CSIRO and they said we do not investigate other peoples ideas…I contacted the fire department but they were all busy ...I sent an email to the premier and doubt it will be investigated….the fire team actually has large aircraft but did not fly on the 28th because there was cloud cover was too heavy,....50 ton of dry ice injected into those cloud could have produced 500,000 ton of rain. the fires are changing the weather system, as the hot air rises it pushes moisture out of that area….. cloud seeding is required to induce rain

• Andrew Wadsley in Comments: There never was a business case for Basslink to be profitable, even in the good old days. Submissions to the JAP on Basslink clearly showed that the project was uneconomic and under sustainable trading would lose at least $70m / year. Hydro Tasmania have been selling the State’s resources (in this case water) just like Forestry Tasmania sells our trees (Lapoinya?) for short-term gain with long-term loss.

• Jack Gilding in Comments: … Thanks Campbell (Gizmodo). A good summary of an aspect of the Basslink break that hasn’t got much coverage so far. It’s not explicit in your article but I presume that the fibre failed on 20 December at the same time as electricity connection was lost. I’m surprised we are not feeling more pain if we have dropped from 645 to 5 Gbps. Alternative explanation is that fibre is still in operation but will be lost when the cable is cut to repair the electricity break.

Mercury: Wind backed as power solution

• Shaun in Comments: … I do think the media is a lot to blame however. Throughout the current situation there has been a lot of words but very little hard, factual data presented to the public. Very few seem to understand the true situation and there’s a real risk that we’ll end up spending a fortune on unnecessary and potentially pointless “fixes” as a result. What’s the bet that we end up over-building new sources of supply and the next problem is how to deal with the financial consequences of doing so? Pretty likely I expect given the general misunderstanding that we’re not actually short on long term electricity supply as such, it being a question of the very short term only in that sense plus a question of the merits of imports from Victoria versus gas versus something new. It’s like saying someone could have earned $130K last year in their occupation but chose to not work too much and is now short on cash. That doesn’t mean they need to move interstate or do another degree to increase their earning potential, it just means they need to go back to work.

• Bryan Green in Comments: Tasmanians urged to conserve power as energy crisis deepens