Will Tasmanian consumers end up subsidising new wind farms just so the latter can send their goods to market via the Marinus Link, asks Ruth Forrest
THE list of infrastructure projects that would enhance our standard of living and unlock the benefits that will make us a more productive, fairer and equitable society is limited only by our imagination.
Selecting which project, trying to assess costs and benefits, particularly the flow-on benefits from well-planned infrastructure, is the perennial challenge for public policy.
Choosing between shelter for all, a health system meeting the needs of Tasmanians, childcare facilities, and major event stadiums from an endless list is a difficult task. Who will pay?
What are the costs and what are the benefits? How will the benefits be shared? What are the flow-on effects?
The $3.5bn Marinus project to build a second interconnector linking Tasmania to the National Electricity Market is one project under consideration.
A Talking Point article on March 9 by Andrew Catchpole ("King Coal's Final Days") quoted Tasmanian Chamber of Commerce and Industry chief executive Michael Bailey as saying: "Marinus Link will unlock a second, green wave of hydro industrialisation in Tasmania that will underpin our economy for generations." Project Marinus will require a doubling of the output of renewable power, from about 10,000GWh/per annum to 20,000GWh/per annum.
Most will come from new wind farms, with some from pumped hydro.
The recent publicly released 2021 financial statements for Woolnorth Wind Farm Holding (WWF) Pty Ltd helps explain wind farms.
WWF has wind turbines at Woolnorth in the far NorthWest and at Musselroe Bay in the North-East. Hydro Tasmania still owns a onequarter share, but sold the rest to the Chinese state-owned Shenhua Group. Hydro agreed to a power purchase agreement (PPA) requiring it to buy all the electricity and the large-scale generation certificates (LGCs) at contract prices.
WWF generates roughly 10 per cent of Tasmania's needs, or about 1000GWh. In the 2021 year WWF received $95 per MWh for what it produced (1 GWh = 1000 MWh). Had WWF received market spot prices it would have only banked $60 per MWh. Hence the Hydro subsidy was $35 per MWh, or about $34m in total, being the contract amount paid above spot prices. The pattern in the previous year was similar.
Future Hydro subsidies will help clear WWF's debt. It's a generous subsidy. With Hydro owning only one-quarter of the WWF business, three-quarters of the benefit leave the state.
The other two major wind farms in Tasmania at Granville Harbour and Cattle Hill in the Central Highlands, which together generate about the same as WWF, also have PPAs in place, one with Hydro and one with Aurora Energy.
PPAs are common.
Financiers and investors are nervous without long-term agreements. There's nothing safer than having a government-backed business as a buyer of your output at guaranteed long-term contract prices. But as WWF shows, these come at a cost to Tasmanians. Uncovering the costs is difficult, with "mansplaining" used to state the obvious and "commercial in confidence" employed to help hide the relevant.
Our future is renewables.
We need a clear idea of what will happen. Will the government keep subsidising wind farms via PPAs? Or will other major users sign PPA contracts, as they have on the mainland? Marinus won't proceed without a lot more generators, which won't be built without Marinus.
The government has just announced an expressions of interest process, so maybe there's not as much interest as we've been told. Then to cap it all, how will Hydro and Tas Networks benefit and thus their owners, the people of Tasmania?
Marinus requires more electricity to justify its existence, possibly up to 10 more wind farms each the size of WWF. That's another $7.5bn in addition to the $3.5bn cable cost. Then there's the extra and upgraded transmission lines to connect wind farms to our grid, the costs of which tend to be borne by all network users. Will Tasmanian consumers end up subsidising new wind farms just so the latter can ship their goods to market via Marinus?
We all deserve to know.
Maybe pumped hydro/ Battery of the Nation will be a windfall, using cheap wind power, not the expensive energy bought from WWF, to pump water uphill, hoping to generate electricity at a convenient time to send northwards into the NEM via an expensive Marinus Link to compete with mainland windand solar-generated power, which increasingly will be stored in batteries at zero cost awaiting a better price.
Once built with largely imported components using FIFO workers, wind farms are relatively cheap to run, with few trickle-down effects.
Spare cash will be used to repay financiers and reward investors. WWF provides the template. Little tax will be paid because of capital write-offs.
The beneficiaries of the new wave are unlikely to include many people in Tasmania.
The Mercury Monday, 20 June 2022Go Back