The current big issue isn’t ‘who pays for Project Marinus?’
Any and all funding for Marinus and the North West Transmission Development (NWTD) will be a debt burden on anyone who uses electricity – you and me – but it turns out this is almost a side issue. Brace yourselves…
In brief, the system, and current agreements, around Marinus, the NWTD and Hydro Tasmania, from beginning to end, work something like this:
As a ‘regulated asset’, Project Marinus is submitted to the Australian Energy Regulator (AER), who decide the reasonable costs of the asset in order to regulate proportionate costs for which jurisdiction will pay for it and how much.
In this case, Marinus was estimated by the Tasmanian proponents (TasNetworks) to be around $3 billion for the Link and $800 million for the NWTD. But, when tendered to the market, the market chuckled, said ‘yeah but nah’, and TasNetworks quickly found costs soaring to at least $4-5 billion and possibly more.
Either way, AER would normally observe the 50-50 rule for energy moving across two jurisdictions – in this case Tasmania and Victoria. They’d allow half the costs to be recovered from energy customers in Victoria, and half from Tasmanian customers. But, acknowledging the premise of Project Marinus is simply to transfer all new renewable energy from Tasmania to the eastern mainland states – aka the National Energy Market (NEM) – and that Tasmania therefore derived less benefits, an informal agreement is now that the ‘costs are split according to the benefits’ – Victorian energy consumers to pay 85% of costs, Tasmanian consumers to pay 15%.
The next step from AER’s determination is to increase the Transmission Use of System Tariff (TUOS) in order to recover the allowable costs – a tariff which creates a massive cross-subsidy, and which applies to every customer for use of the system.
Well, almost every user…
While ordinary households and businesses will automatically pay the TUOS as part of our power bills, the renewable energy companies only pay a connection fee to plug their new windfarm into the grid, and then nothing. Foreign investors will use our new grid and transmission link almost entirely for free. Free wind energy, free grid – a bargain.
If you’re wondering why any government, like ours, or any transmission company, like TasNetworks, would enter into a commercial agreement like that – one that imposes all costs on us, and none on the renewables companies using the system we pay for, then there’s more bad news.
It’s highly likely that there will be a ‘risk transfer’ arrangement with Hydro Tasmania, brokered by its shareholder, our state government, ordering Hydro Tasmania to guarantee purchase of all new renewable energy destined for the mainland via the NWTD and Marinus Link. This agreement will doubtless be at prices favourable to the energy company rather than what the energy can be sold for in any particular moment on the NEM, whose prices do fluctuate considerable. In other words, Hydro Tasmania guarantees private renewables company profits at the expense of…Hydro Tasmania and its owners, us. And, due to ‘commercial-in-confidence’, we will probably never even know the terms of that price guarantee and how much it costs us.
Free wind energy, free grid, guaranteed profits. All paid for by us.
If you’re wondering why our government aren’t asking new renewables companies to pay TUOS – at, say, reasonable rates comparable to those we pay – the company would only pass those costs on, and the energy shipped to the mainland might increase beyond what is deemed affordable – or readily saleable – on the spot market. In corporate-speak, it wouldn’t be ‘economically viable’.
This means that whatever commercial decisions are made in the energy sector, any costs will devolve to us – the people who pay power bills. It’s this unfairness – socialising the costs, privatising the profits – that the state government refuses to talk about. To admit to bad planning is political poison. If people knew the state government were proposing a system even worse than the one we already have, even rusted-on voters might flirt with the idea of voting independent.
Meanwhile, Hydro Tasmania will be reconfiguring the Battery of the Nation (BotN) to generate more reliable and sustainable (in a commercial sense) peak electricity for sale on the NEM. This consists of various ‘upgrades’ to provide more pumped hydro electricity capacity and output.
This will mean billions more dollars that we, and future generations, will have to pay for. And, while all commercial-risk decisions are taken on by ‘our’ Hydro Tasmania, rather than the renewables companies, good luck finding the true extent of the liabilities buried in Hydro Tasmania’s Annual Report.
Treasury and the wider state government are only now acknowledging what our community have known for years – that Project Marinus is a burden not a benefit for Tasmania. Now, with the tabling of the government’s begging letter (see below) to the Commonwealth government, they’re leveraging the promise of more renewables and transmission, something the feds loudly want, with a threat that without a less odious deal for the Tasmanian energy consumers, Marinus Link risks being dumped – and perhaps even the NWTD and the BotN. We can only hope.
Whether the Federal Labor government will double-down on bad planning to fund even more debt to pay for Marinus Link, or whether they kick it into the weeds, Tasmanian energy customers still risk being told to pay for the NWTD and BotN. After all, Victoria and the other states are likely to look the other way when asked to stump up more TUOS fees for the beleaguered Project Marinus – they neither need nor want it. The existing 15%-85% split between Tasmania and Victoria is also redundant – Tasmania is, at best, only likely to receive a hypothetical 6% benefit.
So, from almost everyone’s point of view, Project Marinus is a dud deal but, with Federal Labor’s push to greenwash current policy settings by actioning renewables and transmission infrastructure, it’s still entirely possible it’ll get funded, at the cost of even more intergenerational debt.
Meanwhile, communities like ours in the Loongana Valley remain under the threat of having TasNetworks’ vast new transmission grid bulldozed through our forests and farms, causing immense and ongoing costs to us, our small businesses, and our wildlife.
For us, with a government determined to push all costs onto communities, the news, like TasNetworks plans, is still all bad.
SOLVE – Supporting Our Loongana Valley Environment – solvetasmania.org – https://www.facebook.com/solvetasmania
Chris
August 11, 2023 at 10:34
With a grin everyone could hear/see on radio, the Minister for Raising Bills to maintain the poverty levels of many Tasmanians by socialising the costs and privatising the profits, the Treasurer, the Minister for Standing Still (previously for Health) and the Grinner ask us to trust them.
Why not keep the power here and use the energy to do what Eric did, namely to offer the cheaper rates and reliability to industries which require power and are able to operate here.
Just imagine all that loot available to fund a free line for Chinese wind farms, being used instead to install solar to Tasmanian homes and farms etc, which can be repaid over time and remove the need for extra transmission lines.
Ben Marshall
August 11, 2023 at 11:20
I concur, Chris. Were we to sensibly ditch Project Marinus and do a coordinated genuine multi-sector consultation, especially and directly involving communities, we’d plan for our future using OUR wind energy, in OUR state, for the principal benefit of ourselves and our kids and grandkids.
It’s likely that a classroom of 12 year olds, provided with independent evidence, would come up with a better plan than Marinus and Battery of the Nation before their first recess break.
Simon Warriner
August 11, 2023 at 20:25
It’s interesting to hear Minister Barnett griping about the maintenance costs of the hydro generating asset being around $100 Million pa.
While lauding the benefits of shiny new wind turbines and solar panels, the minister might take a minute to consider what the design life of a wind turbine or solar panel is, and compare it to the life span of a hydro dam and the potential for retrofitting and refurbishment to increase the life of hydro generating assets.
Having personally rebuilt hydro gensets that were installed in the early part of last century, with materials and techniques that improve output and had lifespan potentials several times that of the original materials, I can see a glaring flaw in the minister’s argument – one that may well cost power consumers in this state far more than it should.