When Hydro Tasmania’s Chair quietly warned of a “subdued year ahead” at last year’s GBE scrutiny hearings, most people probably heard it as corporate modesty – the kind of cautious phrasing executives use when they don’t want to spook anyone. But six months into the 2025-26 financial year, the numbers tell a story far more confronting than “subdued”. This is not a gentle easing. It is a structural shift in Tasmania’s energy economy, with consequences for Hydro, the State Budget, and the political decisions made in the shadows over the past year.
Electricity consumption fell 7% in the first half of the year latest figures from the Office of The Tasmanian Economic Regulator (OTTER) reveal. That is not a blip. It continues a long‑term trend: rooftop solar, efficiency gains and flat industrial load are eating away at the grid. Every household that installs solar removes demand from Hydro forever. Every business that upgrades heating or lighting reduces reliance on the grid. And every year without a new major industrial load locks in the decline. Hydro can only sell what the market consumes. When consumption falls, so does revenue.
The second pressure point is Basslink. Under APA’s control, its behaviour has changed dramatically. Total flows are down 68%, and net imports have collapsed 85%. APA now pockets the inter‑regional revenues (IRRs) Hydro once relied on and it determines Basslink’s use. Last year, Hydro paid APA a fixed fee and kept the arbitrage upside, netting over $100 million. This year, APA keeps the upside – and Hydro gets nothing.
IRRs have fallen from $72 million to $28.5 million in six months. Hydro saved the fee it used to pay APA, but it lost far more in arbitrage revenue – a hit to its bottom line at exactly the moment it can least afford it.
The third pressure point is price. The weighted average spot price fell from $94 to $72/MWh – a 23% drop. Hydro generated more electricity (up 9%), helped by good late‑spring inflows. Wind generation rose 8%. But when prices fall faster than production rises, revenue goes backwards. Hydro is producing more and earning less. The one bright point is that storages are at record levels for this time of year.
Hydro’s business model is being squeezed from all sides: falling demand, falling prices, falling arbitrage revenue, and rising losses on legacy contracts.
Which brings us to the fourth pressure point: Hydro’s long‑term power purchase agreements (PPAs), especially the Woolnorth Wind Farm contract. Hydro must buy electricity and renewable certificates at fixed prices and sell them into a falling market. When new Large Generation Certificates (LGCs) are created under PPAs, Hydro pays around $50 and sells for as low as $6– $44 loss every time the wind blows. It is on track to lose $66 million on LGCs this year alone. And when spot prices fall, the electricity side of the contract becomes more loss‑making too.
More wind means more losses. Lower prices mean bigger losses. None of this is theoretical. Hydro itself disclosed $142 million in future losses on PPAs over the next 5 years. That number is real, and it is growing.
So, when the Hydro Chair said “subdued”, was this what he meant? Or was that the most diplomatic word he could find for a year shaping up to be one of the most financially challenging in Hydro’s modern history?
And here is the uncomfortable question hanging over the Marinus decision: did the Government know all this when it signed off?
We know the WoSBC — the Whole‑of‑State Business Case — was heavily redacted. We know key financial assumptions were withheld. We know Hydro’s true position was not publicly disclosed until after the Marinus decision was locked in and since has been anything but forthcoming with explanations. And we know the Government was simultaneously pushing ahead with its stadium plans knowing a miraculous turnaround in Hydro’s fortunes was a key to rescuing the State’s precarious fiscal position.
If the full picture had been on the table – falling demand, falling prices, collapsing IRRs, rising PPA losses and a weakening Hydro – would the Government have been able to justify Marinus? Would it have been able to justify the stadium? Would the public have accepted either? Was Parliament conned?
These are not conspiracy theories. They are legitimate questions about transparency, accountability, governance and stewardship of the State’s most important public asset.
Hydro Tasmania is not just another business. It is the financial backbone of the State Budget. Its dividends fund hospitals, schools, roads and essential services. When Hydro’s earnings fall, the State’s fiscal position weakens. When Hydro’s risks rise, the State’s risks rise. When Hydro’s future is mortgaged to long‑term contracts and infrastructure bets, the State’s future is mortgaged with it.
Six months into 2025-26, the warning signs are flashing. The Chair’s “subdued year” now looks like a polite understatement. The numbers tell a harsher truth: Hydro is under pressure, the State’s revenue base is under pressure, and the decisions made in the lead‑up to Marinus – and the stadium – deserve far more scrutiny than they received.
Tasmanians cannot afford to look away.