#20
1. It is factually correct that the King and Henty-Anthony schemes (a) were more costly per unit of output than the estimated cost of Gordon-below Franklin and (b) would not have been built if Gordon-below Franklin had proceeded.
King and Henty Anthony were built specifically as a PARTIAL alternative to Gordon-below Franklin.
2. Gordon-below Franklin would not of itself have prevented the need for some other power source to also be built. However, had the Franklin & King scheme (which is entirely different to the King scheme as built) also been built (as was proposed to immediately follow Gordon-below Franklin) then there would have been no need for Basslink, Tamar Valley or Woolnorth.
3. I would agree that selling at 2 cents does not make a lot of sense as such. However, we’ve already built Basslink and are stuck with the cost whether it is used or not. The MARGINAL cost of actually sending energy across it is thus effectively the value of the electricity itself – we’re paying for the link whether it is used or not.
It’s like owning a house and paying a mortgage, rates and so on. It may well have been cheaper to rent rather than buy, but once you’ve bought there’s no point leaving the house empty and renting the place next door to live in. You’ve still got to pay the mortgage, rates etc whether you occupy the house or not so you might as well make use of it.
4. I’ll simply note that by far the greatest energy-related opportunity, in a purely financial sense, would have been to do the following:
A. Take the effectively free 400MW coal-fired power station AND $500 million compensation that was initially offered if the Gordon-below Franklin were dropped.
Assuming we’d built the plant near known brown coal reserves in Tasmania, ongoing operating cost would have been minor (the plants in Vic have marginal costs generally 0.15 to 0.35 cents per unit – virtually free since the coal itself has no market value, its cost being only that of open cut mining it).
B. Use the $500 million to build the Vic-Tas gas pipeline and a widespread distribution network, building of which would have kept the displaced Hydro construction workers employed for many years.
Given that this was 30 years ago, $500 million back then was a lot more in real terms than it is now. We’d have effectively ended up with a free gas network (including conversion of Bell Bay to gas) and a free coal-fired power station as well.
All we’d have had to do is pay for the gas itself and the (relatively low) cost of keeping the coal-fired plant running.
Had we done this, we would have retained cheap energy. Basslink, Woolnorth, Tamar Valley, King and Henty Anthony, plus various transmission upgrades would not have been required.
Peak demands would have been lower, due to widespread use of gas heating and hot water. Hence far less would have been needed to be spent on the transmission and distribution system (noting that thes account for the majority of household power bills – the energy itself is comparatively cheap).
We would never have had the woodheater boom of the 80’s and associated air pollution. Tasmanians would instead have replaced their oil heaters with either gas (in many cases directly converting the old oil heater to gas) or the cheap electricity we would have had.
Yes, the coal-fired plant would have had some impact on air quality but not on the scale of having tens of thousands of woodheaters smouldering away in the suburbs.
Even 30 years ago, emissions from new plants like this were pretty tightly controlled – take a look at Loy Yang (total capacity over 3000MW, far larger than we would have built) in Vic if you doubt it. Lots of steam certainly, but very little visible smoke.
We would also likely have had more industry, aided by the cheap power and gas.
Carbon emissions? Yes there would be that issue, especially from the coal-fired plant. But they would have been lower than that associated with importing coal-fired power from Victoria and no worse than the alternative of sending industry offshore to China etc.
And of course we would have paid nothing for the coal-fired plant. Had it become obsolete (eg due to a carbon tax) then we would still have gained decades of almost free power from it before having to pay for an alternative. From a financial perspective at least, it would clearly have been a winner.
And at least the jobs in the power station and mine would have been in Tasmania rather than Vic. Plus with cheaper energy, we would likely have had more jobs throughout the economy in large and small businesses alike.
And we wouldn’t be arguing about industrial power subsidies – simply because with production costs so low, we’d be selling it at a profit such that there would be no issue.
We would have ended up with an electricity supply capacity 20% greater than present consumption. It would have been comprised of, on average, 76% hydro, 23% coal, 1% gas.
And,
#27 There is a known brown coal deposit sufficient (just) to support the plant I mentioned. A private company proved up the reserves in the 1980’s and made numerous attempts at finding a use for it, including selling the whole lot to the HEC.
The reserves were known prior to that, all the company really did was drill and prove their extent in the expectation that a market existed, most likely for a coal-fired power station.
It never happened and eventually the company abandoned it and took the financial loss of having proved an effectively worthless mineral resource.
Around the same time, Shell (as in the oil company) bought up the largest known black coal deposit in the state (60% of total black coal reserves). Presumably this was in the expectation that a market existed for a power station using coal. As with the brown coal, nothing happened and eventually Shell let go of the lease.
Actual coal production in Tasmania is sub-bituminous (black) however. I don’t have an up to date precise figure, but it’s in the order of 0.5 million tonnes per annum with the largest users being the cement works and the newsprint mill.
The only reason to favour brown coal over black for a power station is that the operating cost for such a mine would be far lower. Overall cost maybe not, since brown coal power stations are incredibly expensive to build, but in this specific case we wouldn’t have been paying the construction cost so, from Tasmania’s perspective, it would have been cheaper.
#23
A. If the capital expenditure required at some future date to continue operation of an existing Hydro dam is such that the cost exceeds the market value of electricity produced, then financially there is no point undertaking the investment.
About 80% of all power used in Tasmania is effectively either exported via major industry or used as an alternative to gas, wood etc for heating or hot water. That is fully 80% of the load which simply would not exist if prices were higher than competing locations or fuels.
The electricity industry is very much a price taker in that context. Either it competes with alternative locations (industry) or with solar / gas / wood etc (heating and hot water) or consumption will in due course decline to only “essential” uses – things that need to be done locally and which can’t use gas. In practice, that’s your computer, lights, fridge etc which collectively don’t use overly much power.
B. High price periods are rare. Prices have remained under 2 cents a unit most of the time recently, with the Tasmanian spot price hitting literally ZERO at various times over the past 24 hours. The spot price is only about 0.4 cents a unit right now in Tas, and 1.6 cents in Victoria.
Sure, we can export 594MW (after losses) to Victoria when the price is high but we’re not going to use much water doing that, since it doesn’t happen very often.
It’s like having a great big V8 car but only driving it once every few weeks, and then only down to the shops. No matter how big the engine, you’re not going to use much fuel using it that way.
Same with power. We’ve got 8700 – 10,200 GWh of hydro power alone (excluding wind etc) to use for SOMETHING. Exporting it at the rate of 0.6 GWh per hour for a few high priced 30 minute periods isn’t going to use much of that total. What do we do with the rest? Either we use it locally, or we sell it to Vic at the relatively low prices which prevail the vast majority of the time.
In any event, whatever we do export to Victoria at high prices, we can just buy back the following night at a very low cost.
C. If the dams are full then, when a high rainfall event occurs, they will inevitably spill.
Water spilled = money spilled and gone forever.
The smaller storages in particular (eg the Pieman and Mersey-Forth schemes) are intentionally targetted to certain levels so as to minimise the chance of spill, whilst also trying not to run out of water. Hydro doesn’t actually want them full, since that would mean lost revenue due to spill.
There’s a lot of math behind all that and it comes down to probability of inflows. If there’s no space in the dam, because it is full, then sooner or later it will end up spilling.
The golden rule of operating a hydro-electric scheme – don’t spill water. Once spilled, it is an opportunity gone forever that can not be recovered.
These comments first appeared on Bob Burton’s analysis, HERE. COMMENT HERE.
