Ms FORREST (Murchison) - Mr President, I am all for making bold decisions; however, it often happens - and I do not think it is coincidental - that those people pushing for bold initiatives stand to benefit the most. They are usually a different set of people from those who pick up the tab when something goes wrong. That is the problem I have with this bill. It is easy to sell renewable energy as being second only to motherhood - who could possibly argue with it? If saving the planet were 100 per cent dependent on us achieving 200 per cent renewable energy generation, I would not hesitate. But it is not, it is a matter of priorities.
There are a lot of unanswered questions in my mind about this bill. I know concerns have also been raised by the stakeholders. For example, Climate Tasmania - in a comment on this bill stated -
There are a lot of questions about future large-scale projects that require further expert analysis and public consultation. It is not clear that the TRET and associated projects are the most effective ways of reducing mainland greenhouse gas emissions. There is a risk that projects will be indirectly subsidised by the people of Tasmania and that the benefits will flow mainly to commercial developers of renewable electricity generation assets.
Climate Tasmania calls on the state Government to guarantee that before new projects are subsidised by the state Government, comprehensive public consultation processes are undertaken about the best way to reduce greenhouse gas emissions both in Tasmania and on the mainland.
The energy sector is complex and difficult to fully understand for most of us who do not actually work actively in this sector - none of us sitting round this Chamber fully understand it. It is hard to make a really proper assessment of this legislation, knowing how complicated it is. The member for Windermere and I, when we were on the Public Accounts Committee, actually did the Australian Energy Market Operator - AEMO - training course, which gave us a lot more insight than many other members would have, but still, to say that we actually understand it would be a complete exaggeration at the very least. We even did the test.
Do any of us fully understand the national electricity implications to the Tasmanian Renewable Energy Target, affectionately known as the TRET, the Project Marinus and the Battery of the Nation as part of the overall plan for Tasmania to move forward? Do we have a complete and comprehensive understanding of all those areas? Do we fully appreciate the implications of those and this bill? Does anyone else feel perhaps they are being a bit snowed here?
Like most people, members know about Parkinson's Law. Parkinson's Law essentially says that the work spreads itself out to fill the time available for its completion. We have all seen many examples of that law in practice. In the famous 1957 book, Parkinson's Law and Other Studies in Administration, there is another lesser-known law known as the law of triviality, which came to mind as I considered this bill. C Northcote Parkinson dramatises the law of triviality and the example of a committee's deliberations on an atomic reactor, contrasting it with two deliberations on a bicycle shed.
As he put it, the time spent on any item of the agenda will be in inverse proportion to the sum of money involved. A reactor is so vastly expensive and complicated, an average person cannot understand it - a bit like the National Energy Market - and how that all operates. One assumes that those who work on it understand it. On the other hand, everyone can visualise a cheap, simple bicycle shed so planning one can result in endless discussions because everyone wants to be involved and to add a touch to show a personal contribution.
As an example, there are 11 members of this committee. Four, including the chair, did not know what a reactor was. Of the remainder, three did not know what it was for. Of those who knew its purpose, only two had the least idea what it would cost. One raised concerns about advice they had been getting from consultants. The chair was dismissive, replying that large amounts of money had already been spent, although a formal contract had not been signed. I hope people are making a connection here. If the committee rejects the advice it has paid for, it would then have to pay as much again.
The remaining committee member was the only one who had any understanding. He distrusted some of the consultant's rubbery figures. He asked: what were the contingencies? So many questions and doubts. He did not know where to begin. No-one would understand him anyway. They had made up their minds. He said nothing.
The plan for the new reactor was given the go-ahead. The discussion had taken two and a half minutes. It was time to move on to the matter of the staff bicycle shed which everyone understood. I feel history is repeating itself.
In early 2000, Hydro Tasmania signed a preliminary contract for Basslink. The cost was estimated to be $450 million. Hydro agreed to lease the cable for 25 years, with an option for another 15 years. It would never own the cable - it would just use it.
The monthly fee was established to start at $40 million per month. Immediately, Hydro started doing deals on the side, fixing interest rates et cetera. By the time the final contract was signed in November 2002, the deals on the side had cost Hydro $100 million. There was no turning back. They had to proceed and try to claw back what they had already spent. The final cost of Basslink ended up being $875 million. By the time the contract ends in 2031, we, Tasmania, will have paid more than $3 billion for a cable we will never own - a cable that was estimated to cost only $450 million went it was on the drawing board.
We are paying $120 million a year in Basslink fees and associated finance costs. Who is the major beneficiary? Basslink's owner, Keppel, a Singaporean entity. What expenses does Basslink pay here in Australia? About $15 million per annum. Not much benefit to the local economy. Ongoing running costs of wind farms are also very small. How much will TasNetworks make from its transmission activities that flow from the additional renewable energy? We are not told. Perhaps the Leader can tell us before we launch headlong into this, and vote on the bill.
I can understand TasNetworks wanting more income. After all, the Government has saddled it with more than $2 billion in debt via its dividend policy, plus the equity withdrawals to help prop up other GBEs over its journey.
Then there is the Battery of the Nation. There is a lot of doubt from independent experts about 'pumped hydro'. I believe there are three plants already in Australia, have been for years, but they are not being used much. Why not? Do we know? I do not.
It costs eight times as much to run a cable under the sea as it does across land. Thirty per cent of the power is either lost in transmission across Bass Strait, or is used to pump water uphill. Over 40 years, the life of a generation asset, is it reasonable to assume we can maintain sufficient of a corporative advantage to overcome all the additional costs?
Mr President, are the potential rewards for us, the people of Tasmania, worth the risks? I am not asking you to specifically answer that, Mr President. I would have hoped that is another question the Government can answer. Do we actually know, and understand, all the risks?
Will the TRET be another Basslink? Come to think of it, if another cable is such a great idea, why are we not told exactly how well the first cable is doing? Surely if you are ordering in another of something you already have, you would want to be pretty sure the first one is going and how it is faring - and really, we have not got a clue. Like mushrooms, we are kept in the dark and fed on a similar diet, a diet obscured by claims of commercial sensitivity, even when some of the detail is publicly reported by the parent company.
The lack of transparency, which this bill actively mandates, sticks in my craw. Just as the Labor government proceeded with a few side deals before the final Basslink contract was signed, this current Government has started doing deals as if Project Marinus were a fait accompli.
It has compelled Hydro to buy large generation certificates for the Granville Wind Farm. What does Hydro want with more LGCs? It generates its own. Hydro has been forced to record an extra liability on its books, over $200 million - that is the amount it will pay over and above the market price for LGCs which the government forced them to buy to subsidise the Granville Wind Farm. I believe it is called a community service obligation.
Aurora, too, has been made to enter into onerous contracts to buy LGCs from the Cattle Hill Wind Farm. Its liability is about $30 million. If it is like Basslink, the onerous contracts will become the reason for continuing with Marinus when all other figures suggest it may not be a goer. It is not the way we should be deciding public policy. I wholeheartedly welcome more renewable energy, but I am not very keen on the snow job approach the Government appears to be using here. Is this the cart before the horse? I believe it is.
Tasmania is already close to 100 per cent self-sufficient in renewable energy generation. Doubling production only makes sense if there is additional demand. We know how reliant we are on a small number of major energy users in Tasmania and how TasNetworks has a very constrained operating platform. We also know we all need to be responsible for reducing our own emissions as we embrace renewable energy ourselves. Many of us have increased our own energy efficiency and many have installed distributable solar generation.
I also note the desire to be a leader in the renewable hydrogen energy, but we are not alone in this. I believe we are competing with a number of other states for the Commonwealth's attention for financial support to achieve this. I note in today's Australian Financial Review there is an article about Origin Energy and Fortescue going head-to-head in a bit of a battle for Tasmania. Andrew Forrest has been around the world - I do not know if he has been physically around the world or virtually around the world recently - looking at renewable energy and getting right into that space. Good on him for getting involved in that. No relationship I might add, just the same surname.
It is going to be a hotly contested area and, yes, Tasmania has some definite advantages but it is by no means a done deal. We also do not know if these projects will be economically viable without significant subsidy. As Climate Tasmania points out, it follows that the doubling of electricity generation in Tasmania is largely dependent on anticipated exports to the mainland and these in turn are dependent on the construction of Marinus Link at the estimated cost of $3.5 billion for a 1500 megawatt link.
Again, I ask: are we going down the path of a fait accompli? I have already described the process around Basslink and I believe we need more detail and information up-front in a user friendly format.
In addition to these concerns the bill does not provide any mechanism, other than sharing information, by which the targets may be achieved. When we consider the number and value of the obligations and current onerous contracts held by Hydro Tasmania and Aurora with regard to purchasing agreements and the purchase of LGCs, many of which were required by the shareholders - the Government - this bill effectively enshrines this approach as the way forward. The fait accompli.
As noted by Climate Tasmania and from my own assessment, the explicit provision of the protection of the sharing of confidential information between the state Government, with its energy GBEs and private renewable energy developers, implies that this type of coordination is the best way to ensure new generation projects are encouraged.
This is concerning in that these types of confidentially negotiated agreements do not provide full transparency of the costs of encouraging new investment and do not ensure that projects are developed at the least cost to the state or to energy consumers. There is a requirement that once you start sharing cost information, they will go in some sort of joint project through a different process, but still most of this is done behind closed doors and trying to get information about costs associated with Basslink is like pulling teeth. I have been trying to do that for years through GBEs and also in the Public Accounts Committee inquiry. You might as well bash your head against the wall.
Just look at our years of scrutiny of Hydro Tasmania regarding Basslink. You can see how much transparency is lacking there. I pointed out previously there is information provided publicly by Keppel, the owner of Basslink, but Hydro says they cannot divulge it, even though it is in the public arena. I have challenged them in the past and they said they cannot confirm or deny that comment, even though it is in the public arena. It is a listed company. There is so much greyness and opacity around these operations, it makes me very concerned about what we are doing here by making this basically the fait accompli without all the information.
I will quote again from what Climate Tasmania provided to me in terms of comments in relation to this bill -
The fact that these arrangements are reported as obligations or onerous contracts indicates that they were not entered into on a totally commercial basis and there is some risk of costs being borne by the businesses (and ultimately) the GBE owners, -
Who are they? The people of Tasmania.
These arrangements may ultimately be of net benefit to Tasmanians. In a competitive wholesale electricity market, facilitating increased supply via new generation should drive down prices. This is less certain in Tasmania where the dominant position of Hydro Tasmania as the largest generator allows it to strongly influence wholesale prices. It is also possible that in the longer term these arrangements may not be onerous. If wholesale electricity prices or LGC prices rise, the arrangements entered into by Hydro Tasmania and Aurora may prove to be sound financial arrangements. A rise in LGC prices is unlikely without an extended and increased national Renewable Energy Target.
We do not have the information to make this sort of assessment and I return to Climate Tasmania's comments -
The explicit protection in the TRET legislation for commercial negotiations between the state government bodies and private developers of renewable energy generation suggests that the government anticipates continuing with these kinds of arrangements. Climate Tasmania's concern is that it is not a fair and transparent mechanism for ensuring the economic and environmental benefits of increased use of renewable electricity are met in the most cost-effective way.
We were then informed in the briefing that AEMO requires a legislative target to consider Marinus as an actionable process in 2022 under its ISP. I asked for a copy of that and whilst I only printed some sections of it, I fear potentially taking some of this out of context. It was only provided just before the bells rang to come in. I will read from a couple of sections we were directed to in the end. I do appreciate the Leader's advisors getting this to us promptly. On page 15, under 'Marinus Link', the report says -
Marinus Link, two new high voltage direct current (HVDC) cables connecting Victoria and Tasmania, each with 750 MW of transfer capacity and associated AC transmission, should be progressed such that the first cable can be completed as early as 2028-29 (should the Step Change scenario emerge) or no later than 2031-32 (should the Tasmanian Renewable Energy Target [TRET] be legislated or the Fast Change scenario emerge, and the cost recovery be resolved).
We do not know about that, do we?
This requires delivery of early works for both cables to be completed prior to a final investment decision in 2023-24. If by then the Tasmanian Government does not legislate the TRET, or if there is no successful resolution on how the costs of the project will be recovered (from consumers and/or other sources), then the project schedule should be revisited.
Without reading the whole report - and I do not how many pages it was, but it was a lot - this concerned me in that they are saying we either legislate or we have to have a successful resolution on how the costs of the project were recovered from consumers or other sources. That is a bit of a worry.
Marinus Link's first cable is on the least-cost development path in all scenarios except for Slow Change. Marinus Link's second cable should be able to be completed as early as 2031-32, with the decision rules for its completion to be defined in the 2022 ISP.
So we know there is another ISP coming in 2022. I went to page 30 of AEMO's Integrated System Plan report, and under the heading 'Round 2: Review of Draft 2020 ISP', it says -
Insights accumulated from the consultations have added to targeted refinements of inputs and assumptions since the Draft 2020 ISP. In particular, the introduction of the Tasmanian Renewable Energy Target (TRET) in some scenarios and significant transmission cost increases have had an impact on the development sequence and timing of actionable ISP projects. As a result, AEMO has had to remodel, extending the analysis in areas requested by stakeholders, and updating the list of committed and anticipated generation projects.
What does that really mean? Another concerning comment there. On page 65 of the report, there is a heading titled 'Selection of candidate development paths', and under a bullet point below that is a paragraph that reads -
Marinus Link timing is heavily influenced by emission abatement policies. The tighter the carbon budget, the earlier the first cable is built. Similarly, in scenarios where the announced TRET is assumed to be legislated, the first cable is built no later than 2031-32, with the second cable built three to four years later.
I appreciate getting that. It did not give me a great deal of comfort, though. I appreciate pressure has been put on us here to support this so we do not allegedly delay Marinus Link as an actionable project, but it is pretty clear from what I read there that the whole costing and where the costs are going to fall are still completely unknown.
Does anyone here know how it is going to be funded? Who is going to pay for it? Who is going to pick up the bill at the end of the day? How much is TasNetworks going to be involved? How much are they going to make from the additional renewable energy in Tasmania? How much are they going to make through the transmission of energy across the strait? Will they make any or will it cost them a whole heap of money?
How much does it cost Hydro to hook into Basslink? Is it going to be regulated? Unregulated? What is it? Who is going to own it? We are informed that, without this, we may see the project reconsidered at the 2022 review - the annual two-yearly review. Now I feel we are being pressured into accepting this without all the detail regarding costs, who pays, and the benefit versus the risk to Tasmanians.
I fear a Basslink-revisited scenario emerging. At least Macquarie did very well out of Basslink. The State of Tasmania did less well. To be reassured, we are informed there is no penalty for not meeting this world-leading target other than some public embarrassment perhaps for not quite getting there, but I think the intention is to get there. We are going to be 100 per cent renewable when Granville Harbour is fully commissioned, which is not far off. I believe Cattle Hill is fully commissioned now, so that is already in the mix.
Here I am in the unenviable position of having to consider this bill, and to vote against it will be akin to voting against motherhood, which, of course, I could not do, or be accused of not supporting jobs in our regional areas, which is, of course, an absolute fallacy. All of us care about jobs and I particularly do in my region. I have been here before with these pressures about jobs. While I do not regret decisions of the past, sometimes I think a bit more information would be helpful in making these decisions. I will listen to the debate, but we need to be very careful to ensure we know exactly what we are agreeing to here, and I am certainly not sure that I am.
Wednesday 18 November 2020Go Back