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Tasmania energy prices to soar as supply crisis forces switch to diesel gen-sets

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Energy consumers in Tasmania – already facing a trebling in wholesale electricity prices since the state lost its grid connection to the mainland, now face yet another trebling in prices as the government turns to highly expensive diesel gen-sets to protect its rapidly depleting hydro resources.

The Tasmania government late Friday announced it would turn to diesel gen-sets to ensure the lights would not go out and was ordering at least 200MW of containerised diesel generators to be installed as hydro levels continue to fall and the repair to the Basslink cable to the mainland is further delayed.

tas wind farm

Tasmania enjoys among the cheapest costs of wholesale energy in the country when it relies only on hydro and wind energy. But prices doubled to around $90/MWh when it decided to import 40 per cent of its needs from Victoria in the face of the driest spring on record which forced hydro levels to fall to near record levels.

That cost rose further to more than $110/MWh when the Basslink cable failed in December, and the government had to accelerate its plan to bring back its Tamar Gas power station into production.

That has brought back 280MW of gas capacity into production, and Hydro Tasmania is now planning to add another 75MW of gas and up to 200MW of diesel power in “containerised diesel generation.”

The cost of diesel generation is expected to be at least $300/MWh and may be more. As some diesel was switched on at the weekend, the average price of electricity jumped to more than $160/MWh on Friday and Saturday. This compares to prices of around $40/MWh last summer.

The situation is highlighting the fact that wind energy and solar energy would have provided much cheaper power, and obviously much cleaner power, except the state authorities have passed up opportunities to accelerate the deployment of those technologies, despite having a large hydro resource to act as a battery.

Tasmania has the best wind resource in the country, with capacity factors of more than 40 per cent, but only has just over 310MW of capacity in a grid with average demand of around 1000MW.

It would cost $80/MWh at most for wind power. And while the government is now prepared to pay more than $300/MWh for diesel, it is offering less than $60/MWh for the output of rooftop solar, a decision that has considerably slowed the installation of rooftop solar in the state.

Energy efficiency is another largely ignored element. Two of the major power users – Bell Bay and Temco – have each offered to reduce demand by around 30MW,

Alan Pears, an energy expert from RMIT, says Tasmania is among the least efficient regions in Australia, and the use of imports, gas and diesel is pushing the marginal greenhouse gas emissions for the state up to mainland levels. “So Tasmaina is NOT a low electricity emission state at the margin” any more, Pears noted.

The Basslink repairs were due to be completed in mid March, but the company said over the weekend it could no longer provide a date because it hasn’t been able to locate the fault.

“Basslink has today advised the Tasmanian Government and Hydro Tasmania that it will take longer than expected to locate and repair the fault as it is proving far more difficult to narrow the fault area than anticipated,” it said in a statement.

“The lack of an external visual of the cable fault due to the silty and sandy seabed conditions has also contributed to the longer period.”

Opposition Labor Leader Bryan Green said the cost to Hydro Tasmania of using diesel generation would be enormous. “The cost of diesel generation will be astronomical on a month-by-month basis, which will put enormous pressure on the finances of the state and of course the consumers,” he said.

   

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  • Beat Odermatt

    It is hard to believe that Tasmania, which could be an exporter of renewable energy is burning diesel to make electricity. I am sure there will a long list of excuses to justify the current situation but there won’t be an excuse if the same thing is going to happen again in the future.
    This could be a wakeup-call to South Australia, which must also look at stored hydro. SA has potentially huge resources of wind and solar energy but it must look at a fall-back situation when the link to Victoria “fails” again.

    • Jill Leisegang

      Yes this is so disappointing.Tasmania had many opportunities to go for renewables. It is not too late to right their wrongs

      • Beat Odermatt

        Yes, I hope so. It is a beautiful State and has a great chance to be a green clear power house of Australia.

    • eddierothmanisatool

      large hydro is unlikely to get built anywhere in the western world ever again? south australia is smart and encouraging energy storage rebates. the tesla powerpack (industrial infinitely scalable battery 100kwh and above is only 250/kwh USD) 80% of teslas orders are for the powerpack not the powerwall. SA would be wiser to use this or similar product than hydro?!

  • Malcolm M

    Tasmania could probably have the equivalent of another 120 MW wind farm at no extra capital or operating cost if they hadn’t drained their dams so much seeking short-term dividends. This is because the Gordon Dam is now operating at only about 75% of its full supply level head. If the dam were allowed to fill up, Hydro Tasmania would get the benefit of the full head it was designed for. The Gordon Power station has a capacity of 432 MW, and operates at a capacity factor of 37%. If its full head were used, it could operate at a capacity factor of 48%. The additional power (a year-round average of 47 MW) would be the equivalent of a 120 MW wind farm at a 40% capacity factor.

    • MaxG

      greed is what killed it for the bastards… they sold their hydro energy at premium to the mainland… now what.

      • eddierothmanisatool

        now they lose money for the next 5 years completely obliterating their “record profit” and the tasmanian taxpayers bail them out. all they while they stifle solar and storage and management count down the days till they get their defined benefit.

  • Malcolm M

    Re the differences between SA and Tasmania’s links with Victoria, SA has much more security because
    – there are 2 links
    – one of these is entirely overhead (680 MW), hence easy to find faults
    – the smaller link (200 MW Riverlink) is underground, but still easier to find faults than under water
    – there are 4 transformers (3 at Heywood I believe)
    – the southern link is on 2 circuits
    – SA has much more gas backup than Tasmania

    • Smurf1976

      Agreed with your points although there is one major difference.

      Tas – link failure causes a gradual draining of energy from the system. But peak demand can still be met so long as the dams don’t actually run dry.

      SA – loss of connection to Vic, or loss of a major gas-fired station (once the coal plant closes forever) = inability to meet peak demand and immediate chaos if it’s a hot day.

      So whilst it may be less likely in SA, it would also have a far more immediate impact if it did happen.

  • Ian

    Time to sit on the sidelines and enjoy Tasmania’s power spectacle, schadenfreude. They are located in the roaring 40’s, an area of very high winds. Chose not to approve wind farms did they, rely on a single plastic coated sea cable they did, afraid of roof top solar they were. How funny. 200MW of diesel generation at $300/MWH. Ouch, that’s got to hurt!

    • Ian

      How much extra does diesel generation cost per day , if this money was used to install solar how much solar can be installed for say a direct subsidy of $200/ KW ? 200MW x 24 x 100 days x ($300/MWH -40/MWH) = $124.8 million. $124.8 million/ 200= 624 MW.

      The undersea cable is broken somewhere on the sea bed, they don’t know where. This is going to take ages to sort out probably more than 100 days. Presumably the diesel generators will be running 24/7. If the money spent on the emergency diesel was spent on a 20% direct subsidy of solar my calculation above suggests 624 MW of roof top solar can be deployed. Remember that it takes less than a day to install a roof top system. Giving roof top solar such a boost will ensure that no one will be bothered by a 5c/KWH FiT. People would jump at the prospect of subsidised solar and especially if it was a time limited offer , like queensland’s experience, they would sign up in their droves. 20% subsidy means a leverage 5 to 1. 124.8 million of government cash will buy a total of $624 Million solar investment.

      This seems manic, but put in your own assumptions and do your own calculations and see what a great opportunity they have there in Tasmania.

      • eddierothmanisatool

        totally agree. another connector just shows how “disconnected” the govt and hydro are from whats actually occurring in the market.

      • Imad Khan

        Shouldn’t there be smarts on the cable which reveals the location?

      • Chris

        the numbers Ian quoted don’t reflect logistics of renewable infrastructure. The ARENA solar project is expected to be completed in 550 days, provide 155MW at a cost of $231.6 million.
        Fixing the link is the priority, then basing a plan for a redundant service supply or local distributed provided (the aforementioned gas turbine). this may include the “care and maintenance” of the Gas turbine for seasonal extremes.
        This will be an expensive exercise for the Tasmanian people but should be used to rally a stable/standby base energy supply locally by the Tasmanian government.

    • Malcolm M

      How much would they be selling the power to the Bell Bay aluminium refinery ? Is it a matter of generating for $300/MWh and selling it for $10/MWh because of a long term supply agreement ? The big users in Tasmania didn’t show much enthusiasm for reducing demand, offering only about a 10% reduction.

      The high spot prices must eventually reach domestic power prices, which could drive more of the market to solar.

      • eddierothmanisatool

        without a doubt. they are selling power to all 4 major industrials (MIs) at around 3-7c/kWh. its a joke. the tassie taxpayer subsidises the rest. they cant reduce demand. the products they make are nicknamed congealed electricity in the industry.

    • Richie

      Agree totally. However I feel really sorry for ordinary Tasmanians and can only hope they get angry enough to kick out the idiots. For good.

    • Imad Khan

      Great Poetry Ian!

    • Miles Harding

      I find it oddly comforting to see that the electricity authorities
      in Tasmaina are as short sighted and incompetent as they are around the rest of the country.

  • riley222

    There are apparently a number of sites in the Tasmanian hydro scheme which could be converted to pumped hydro. This article by William Fleming made a lot of sense as an overall strategy for Tasmania. He advocates a second Basslink cable with the aim of Tasmania being a serious supplier of electricity to the mainland

    [PDF]Ideas for Tasmania’s energy strategy. The output of existing …
    http://www.stategrowth.tas.gov.au/__data/assets/file/…/William_Fleming.pdf

    • Miles Harding

      The reservoirs on the tasmanian hydro scheme are very big, so long term (annual+) averaging is possible.

      Using wind and solar to reduce the amount of draw from the hydro scheme to a level that it is able to naturally recharge achieves the same goal without need to use pumped hydro.

  • Miles Harding

    A story that aired on ABC Radio National RN Drive 6:30 Mon15Feb2016 shed some light on the history leading up to the current predicament.

    The story goes back some years:
    In 2010, Hydro Tasmainia, anticipating the arrival of the carbon tax started stockpiling energy by importing from Victoria, rainsing the dam storage to 61% in the process, a 10 year high.
    With the introduction of the carbon tax in 2012, HT started selling energy to victoria, receiving about $100M per year in the process. By the end of the Carbon tax, storage had declined to 28%.

    2015 saw the lowest dam inflows on record, casusing the BassLink cable to be switched to full import mode.
    I wonder if they over-did it and fried the cable?
    Something similar happened in Auckland a few years back.

    It would seem to me that TasHydro has been aware of the limits of the hydro scheme for a long time and buying additional wind from 2010 would have been a lot smarter, so resulting in the same sales opportinities to Victoria during the period of the carbon tax.

    Abbott’s chaos, not withstanding, the pre-emptive buy from victoria was only ever a cash grab with no thought to sustainability, so it seems that Tas Hydro has reaped what it has sewn.

    Should the Carbon tax have continued (I have no doubt that it will return when Direct in-Action is proven to be a farce), HT will be seen as guilty of dereliction of duty for putting short term profit ahead of the state’s interests of security and sustainability.

  • Adam Lucas

    More idiotic decisions from an intellectually bankrupt Tasmanian political elite. Blind Freddy could have seen the decline in hydro resources happening over the last 15 years or so, hastened by equally stupid decisions by Hydro Tasmania to run down its hydro lakes to profit from Labor’s short-lived price on carbon. Heroic assumptions about ‘business-as-usual’ with respect to energy generation have caught these morons with their pants down again. Instead of installing more windpower and PV, they fall back on the same old dumb, dirty technologies. God help us.

    • eddierothmanisatool

      +10