If there is one constant in Tasmania’s energy debate, it is the persistence of myths. Some are harmless misunderstandings. Others are repeated so often – by ministers, departmental officials, and even Hydro’s own leadership – that they have become part of the public consciousness. But when you examine how the National Electricity Market actually works, most of these claims fall apart.
This chapter sets out the most common myths and explains, in plain English, why they are wrong. These misconceptions shape billion‑dollar decisions. They influence public expectations. They distort debate. And they make it harder for Tasmanians to understand what is really happening inside their energy system.
The goal here is simple: clear the fog. Once the myths are stripped away, the real issues become much easier to see.
I thank John Lawrence for his assistance in preparing this information, his attention to detail and research over many years as we have worked together to better understand one of the most complex areas that impact our state, economically and functionally.
Glossary of acronyms used in this chapter
CF – Capacity Factor: measures how much energy a power plant actually produces compared to its maximum possible output over a specific time, expressed as a percentage.
GWh – Gigawatt‑hour: A measure of energy. One GWh equals one million kilowatt‑hours.
IRR / IRRs – Inter‑Regional Revenues / Inter‑Regional Residues: The financial mechanism that captures price differences between NEM regions. Historically a major windfall for Hydro.
ISP – Integrated System Plan: AEMO’s long‑term blueprint for the national grid. Not a revenue forecast.
LGC – Large‑scale Generation Certificate: A renewable energy certificate created for each MWh of eligible renewable generation.
MW – Megawatt: A measure of power (capacity). One MW equals one million watts.
NEM – National Electricity Market: A collection of five separate regional markets linked by interconnectors.
OTTER – The Office of the Tasmanian Economic Regulator.
RRP – Regional Reference Price: The official price for each NEM region. Tasmanians pay the Tasmanian RRP.
Chapter 14: Myths, Misconceptions, and Convenient Narratives
Myth 1: Tasmania will benefit from negative Victorian prices
Whilst we’ve all become immune to spruikers making misleading statements, it was jaw‑dropping to read Hydro’s CEO assert recently:
“We’ll be able to import surplus wind and solar, often at very low or even negative prices (which means we get paid to import the surplus energy).”
The assertion is wrong. Not slightly wrong. Fundamentally wrong. There is no way we get paid to take Victoria’s surplus energy. That is not how the NEM works.
Tasmania is part of the National Electricity Market, but the NEM is not a single market with a single price. It is a network of five regional markets, each with its own Regional Reference Price (RRP). Tasmanians pay the Tasmanian RRP – not the Victorian price, not a blend, not a weighted average.
And here is the key point: Victorian prices do not flow across interconnectors. Not now, not after Basslink becomes regulated, and not when Marinus is built. Interconnectors move electricity, not settlement prices.
For electricity to flow between regions, there must be a price difference. That is the condition that activates a flow. When Tasmania imports, the Tasmanian price must be higher than Victoria’s. When Tasmania exports, the Tasmanian price must be lower. This has always been true, under every regulatory model.
But – and this is crucial – a flow tells you nothing about who benefits. The dispatch engine moves energy because prices differ, not to give Tasmania access to Victorian prices.
Negative Victorian prices never reach Tasmania – the system isn’t built that way. Negative prices would only appear here if the Tasmanian RRP itself went negative, which for Hydro would be catastrophic.
The only mechanism that ever enabled Tasmania to capture price differences was Inter‑Regional Revenues/Residues (IRRs) – and Hydro lost access to them entirely after June 2025. Even with Marinus, Tasmania will not “receive” Victorian prices. It will receive the Tasmanian price, because that is how regional settlement works.
Myth 1 survives because it is convenient. It has helped to sell Marinus to an increasingly wary public especially when it comes to big ticket infrastructure projects. It promises free energy. It promises effortless arbitrage. It promises benefits without effort or risk. But it has no basis in the rules of the NEM – and it will not become true when Marinus arrives.
Myth 2: Tasmania earns Victorian prices when exporting
Another misunderstanding that has done almost as much damage is the belief that Hydro “gets Victorian prices” for its exports. It suggests Tasmania can tap into mainland volatility and sell into high‑priced events at Victorian rates. But this collapses the moment you understand regional pricing.
Hydro earns the Tasmanian price when exporting – not the Victorian price. That is how the NEM is designed. Each region settles at its own RRP, and Tasmania’s revenue is determined entirely inside Tasmania.
The only way to capture the Victorian price was through Inter‑Regional Revenues/Residues (IRRs), and:
- Hydro loses IRRs entirely after June 2025
- IRRs become regulated in 2026
- IRRs must be bid for competitively
- IRRs may cost more than they return
Murraylink proved this years ago: bidders paid $25 million to receive $30 million in residues. A thin margin at best – and one that can easily turn negative.
Exports are not a guaranteed profit centre. They are a dispatch outcome. Dispatch only sends energy from Tasmania to Victoria when Tasmania is cheaper than Victoria. If Tasmania was paid the Victorian price, the price separation that drives the export would disappear – and the export would stop.
This is why the idea that Tasmania “sells into Victoria at Victorian prices” is not just wrong; it is incompatible with the most basic feature of the NEM: regional pricing.
And this matters, because the price Hydro actually receives, the Tasmanian RRP, fell sharply in 2024/25. Hydro’s implied average price dropped from $76/MWh to $60/MWh. That is the number that determines Hydro’s revenue, and that is the number that collapsed.
Tasmania does not earn Victorian prices. It earns Tasmanian prices and those prices have been falling.
Myth 3: The drought was the reason for Hydro’s poor result in 2024/25
Of all the explanations offered for Hydro’s collapse in profitability in 2024/25, none has been repeated more often – or more confidently – than the drought. It is the official story: inflows were low, storages were tight, generation fell, and profits suffered. It is simple, intuitive, and reassuring. It suggests the problem was temporary, external, and unavoidable.
But it is also a false narrative.
Inflows were indeed low in 2024/25 – but they were even lower in 2023/24. Hydro generated more electricity in 2023/24 with less water. In 2024/25, production fell not because inflows collapsed, but because Hydro chose to import more and store more, lifting dam levels rather than maximising generation. Both years were dry. Both years had constrained output. Yet only one year produced a catastrophic financial result.
That tells us the drought was not the sole cause. Something else was happening.
And we know what it was:
- IRRs inflated Hydro’s 2023/24 and 2024/25 results – a temporary windfall that disappears entirely after June 2025
- Structural LGC losses deepened
- Tasmanian prices fell, cutting Hydro’s implied average price from $76/MWh to $60/MWh
- Settlement exposure rose, because Hydro had to buy more energy at Tasmanian prices to cover load
- Operating cash collapsed, falling from $250 million to $142 million
- Debt rose, because Hydro borrowed $232 million to fund capex and dividends
- Underlying profit fell from +$196 million to –$14.7 million
These are not drought effects. They are structural weaknesses.
And yet, paradoxically, in the same year Hydro blamed the drought for its poor performance, it increased the value of its generation assets by $800 million. This uplift must have been driven by higher assumed future prices, as inflows were assumed to be around what is now the current 10 year average of around 8,700 GWh per year. Hydro brushed aside long run drought concerns with modelling which shows future inflows only declining by 17 GWh per year on average.
The drought was a challenge. The cause of Hydro’s 2024/25 results are structural and it is still with us.
Myth 4: The ISP guarantees Hydro future revenue
Hydro often cites AEMO’s Integrated System Plan (ISP) as validation of its strategy. The implication is clear: the ISP confirms Tasmania’s role, confirms future firming opportunities, and confirms that Hydro will benefit from the national transition.
But this is a misunderstanding of what the ISP actually is?
The ISP is a planning document for the national grid. It identifies transmission needs, system risks, and least‑cost development pathways. It does not:
- guarantee Hydro income
- guarantee firming revenue
- guarantee arbitrage opportunities
- guarantee price spreads
- guarantee benefits for Tasmania
The ISP models system‑wide outcomes, not Hydro’s cash flow. It is not a revenue forecast. It is not a commercial assessment. And it is not an endorsement of Hydro’s financial assumptions.
Treating the ISP as a source of guaranteed revenue is a category error – one that has already crept into ministerial statements.
Myth 5: Tasmania’s energy future is secure because we have deep storages
Tasmania’s storages are often invoked as a kind of talisman – a reassurance that no matter what happens in the market, Hydro will be fine because “we have deep storages.”
Storages are an asset. But they are not a business model.
Storages do not:
- generate revenue
- offset structural losses
- replace IRRs
- pay dividends
- service debt
They are a physical advantage, not a financial one.
Hydro’s financial strength depends on:
- prices
- inflows
- contracts
- regulation
- risk management
- transparency
Storages help manage variability. They do not solve structural revenue problems. They do not protect Hydro from falling Tasmanian prices, rising settlement exposure, or the loss of IRRs. And they do not guarantee that Hydro can monetise firming services in a future market that is still being designed.
Storages are valuable – but they are not a substitute for a viable business model.
Myth 6: Tasmania Has “World‑Class” Wind
One of the most persistent claims in Tasmanian energy politics is that our wind resources are “world‑class” – so exceptional, so superior, that they justify a second interconnector and a whole export‑led energy strategy. It’s a comforting idea, and it has been repeated so often that it has taken on the status of fact. But when you look at the actual performance of the wind fleet, the story becomes far more ordinary.
Tasmania has 568 MW of installed wind capacity. In a typical year it produces around 1,800 GWh. That about 18 % of our needs. The calculation is easy as our annual consumption has just fallen to around 10,000 GWh. Wind production works out to a fleet‑wide capacity factor (CF) of roughly 35-36%. Solid. Respectable. But not exceptional. And certainly not the kind of number that screams “world‑class”. It puts us squarely in the middle of the NEM pack, not at the top of it.
You don’t need a consultant’s report to see this. Because the theoretical maximum weekly output of the fleet is about 95 GWh, you can eyeball OTTER’s weekly reports and instantly see what’s going on. A 35 GWh week is a 35% capacity factor. A 70 GWh week is about 70%. Most weeks sit in the 30-40 GWh band. Some windy weeks spike into the 60s or low 70s. Some dud weeks sag into the teens. The long‑run reality is a fleet that mostly lives in the mid-30s.
So where does the “world‑class” story come from? It comes from cherry‑picking. Tasmania does have some very windy sites, and a few individual wind farms have recorded standout weeks and months. But it’s the long‑run average that matters for system planning or for justifying a multi‑billion‑dollar interconnector.
Meanwhile, the mainland has quietly overtaken us. The best wind farms in South Australia and southwest Victoria now outperform most Tasmanian sites. Part of that is geography – the Coorong, the Eyre Peninsula, and the southwest Victorian coast are simply outstanding wind regions. But part of it is technology. Newer turbines are taller, with larger rotors and better power curves. They extract more energy from the same wind resource. A modern 5-6 MW turbine in Victoria or SA will often outperform an older 3 MW turbine in Tasmania even if the underlying wind speeds are similar. Technology has moved faster than the Tasmanian narrative.
And that’s the real issue. The story of Tasmania’s “world‑class wind” has been shaped more by aspiration than by data. It has been used to justify Marinus, to sell the idea of Tasmania as a renewable export powerhouse, and to suggest that we have a natural advantage that the mainland can’t match. But the numbers don’t support that. Our wind is good, sometimes very good, but not exceptional. And certainly not exceptional enough to carry the weight of the claims made about it.
If Tasmania truly had a uniquely superior wind resource, developers would be lining up to build here without needing Hydro to sign loss‑making PPAs. They aren’t. They go to South Australia and Victoria instead – because that’s where the economics are strongest.
Tasmania’s renewable future should be built on facts, not slogans. And the fact is simple: our wind is decent, but it is not the strategic trump card we’ve been told it is.
Why these myths matter
These myths are not harmless misunderstandings. They shape public expectations, government decisions, media narratives, investment choices, fiscal planning, and Hydro’s own messaging. What makes them more concerning is that some of these misconceptions were repeated by people directly involved in advising on the Marinus Final Investment Decision – a multi‑billion‑dollar commitment that will shape Tasmania’s energy system for decades.
The Expert Advisory Panel, chaired by Dr Kerry Schott, was established to assess the Whole‑of‑State Business Case and provide independent advice to government. Yet the public narrative surrounding Marinus has often relied on assumptions that do not align with how the NEM actually works. When the expert analysis remains largely unseen, and the public messaging is shaped by those outside the scrutiny of transparent modelling, the risk is not just confusion – it is misallocation of billions of dollars.
This is not merely a communication problem. It is a governance problem.
Tasmania is being asked to support major infrastructure decisions in an environment where key documents remain redacted, commercial assumptions are opaque, and public claims are made that cannot be reconciled with market rules. When myths fill the space left by missing information, accountability weakens and poor decisions become more likely.
The next chapter examines:
- the governance failures that allowed these myths to flourish
- the secrecy surrounding the WoSBC
- the concentration of decision‑making
- the fiscal risks now facing the state
- and the reforms needed to restore transparency and trust
The myths are easy to repeat. The truth takes longer to explain. But the truth is what Tasmania needs.