Chris Harries, Comment 11:
There’s no question that Basslink is a financial millstone. In the lead-up to its implementation, many of us saw that Hydro Tas would be a sitting duck and wrote submissions and made representations to the inquiry. I did myself. We weren’t heard.
However, now that Basslink exists and has to be paid for it can’t simply be disposed of, it’s a financial liability. Wishing it out of existence is not an option.
Hydro’s only choice is to trade through Basslink to it’s best commercial advantage. But, to that extent, it is severely restrained by its existent bulk power contracts, largely imposed on it by state government.
Operating in the national electricity market is rather like buying and selling shares on the stock exchange. The price of a share parcel trade at any moment in time is not necessarily a reflection of prudent investment. But if the trader consistently sells below its operating margin then it will go under.
I suspect, as the Age article illustrates, that conditions do not favour Hydro and it is now blaming the extra costs of having to install a return undersea cable as a reason for its financial losses. In other words, Basslink was only viable if done on the cheap, with no return cable.
That agenda was fully on the table right at the beginning but the powers-that-be decided to proceed with the upgraded development anyway, fully knowing the risks.
Again, it is now built and the only constructive pathway forward is to maximise the opportunity (or minimise the liability) that Basslink presents.
Shaun, Comment 15:
As I have often said, exporting BASELOAD power to Vic is not a serious option for Tasmania. We will get those sort of prices for it and, after the costs of transmission, would be essentially giving it away.
In short, exporting BASELOAD (as distinct from peak) electricity is to the Hydro what woodchipping and log exports did for the forest industry. It will end the same way, with a loss of employment in Tasmanian industry and no real profit being made.
Exporting at the peaks is a different situation, but the total quantity of energy exported is necessarily small and easily able to be offset by cheap baseload imports. This does not represent a means of utilising more than a very small percentage of the Hydro’s total annual energy production.
Peak energy exports formed part of the economic case for Basslink, the other economic pillar being that it represented an alternative to building some other new generation source to meet increasing energy (as distinct from peak power) demand in Tasmania. Build the cable, meet increasing load in Tas with imports at 2 cents unit, and offset part of the costs through exports at times of high prices.
It actually does make some sense as a total concept, provided that we actually have sufficient load to warrant the increased baseload supply. But The construction of Tamar Valley power station made that aspect redundant which is a big part of the problem.
Yes it costs 20 cents per unit at home. But bulk wholesale electricity isn’t worth much at all outside a few peak periods (mainly Summer afternoons and Winter evenings). Contrary to popular belief, there is indeed a substantial variation in peak versus off-peak pricing in Tasmania which reflects the opportunity cost of imports / lost exports to Vic as well as the reality that we now have ongoing gas-fired generation in the Tasmanian system.
All of which raises a few questions. Why Hydro has been running Poatina (long term storage which is nowhere near full) flat out during relatively low priced periods recently in order to export to Vic raises an awful lot of questions.
The words “cash crisis” come to mind as the only rational explanation, unless Hydro honestly believes that the value of energy in long term storage is worth very little – a situation that only makes sense if there were to be either a sustained flood or a major decline in system load in Tasmania.
The other question is why Aurora has structured the Pay As You Go rates to encourage higher consumption at times when market prices are likely to be highest, thus reducing the ability of Tasmania to export to Vic at those times? There is a real cost associated with that lost opportunity and someone will ultimately be paying for it.
