The full cost of the Marinus link subsea cable is now estimated to be $4.8 billion, according to the Australia Energy Regulator (AER), highlighting yet another major transmission project that is likely to run well over initial, and even recent cost estimates.
The AER’s latest estimate for the so-called “Battery of the Nation” is part of its assessment of what a fair price will be for Marinus Link Pty Ltd (MLPL) to pay – and therefore be able to charge users once it’s built.
The higher estimate is based on the extra $950 million that is needed for the North West Transmission development, the TasNetworks-owned part of the overall project which is essential to connect the subsea cable to the Tasmania grid.Â
The AER’s current vision of what the subsea cable project will cost is almost $800 million more than what MLPL expected in its June 2024 RIT-T update.
And they could go even higher.
A newly released AER issues paper points out that only 46 per cent of MLPL’s own costs are settled – those relating to signed contracts for the undersea cable and installation, and converter station equipment.
The rest is still up in the air as the contractor set to deliver the balance of works isn’t due to be named until the end of this year.
The December estimate of MLPL’s own costs is still $3.9 billion, the company confirmed to Renew Economy.
But a $4.8 billion bill for the now-single subsea cable is a hefty increase on the original price tag of $3 billion for a dual cable project, which was pitched in 2019. It was then downsized to a single cable because of an initial blow out in cost estimates.
The firming – and rising – costs are a result of securing those key contracts for cables and converters, and the maturation of the project, a MLPL spokesperson told Renew Economy.
“There has been unprecedented demand for undersea cables, particularly in Europe, driven by the global energy transition,” they said.
“This demand has increased the cost of materials and manufacturing, as suppliers face higher competition and stretched capacity. Like many infrastructure projects worldwide, Marinus Link has been affected by inflationary pressures on key inputs, including labor and materials.
“The current estimate also accounts for a refined cost estimates for Balance of Works (BoW) civil components and improved cost certainty on scope and execution.”
Surging costs to deliver new transmission
The cost of building new transmission lines has been a tale of blow out after blow out, with Project Connect in New South Wales (NSW) admitting in February the bill is double what was originally proposed.
But the cost of delivering Marinus Link has defined what the project will become: a single cable across the Bass Strait instead of the originally proposed dual-cable 1500MW project.
In 2023, the Tasmanian government lost its nerve and publicly distanced itself over the long-term cost to Tasmanians.
In response, the federal and Tasmanian governments struck a deal to cut the capacity of the sub-sea link in half to just one 750MW cable, and for the federal government to take a bigger stake to reduce the financial burden on Tasmania.
The governments said the scaled down project would now cost between $3 billion and $3.3 billion, potentially more than the $3 billion estimate for the entire project in 2019, while still delivering two-thirds of the anticipated benefit.
It’s these cost issues that has Victoria University professor Bruce Mountain questioning who will ultimately pay for Marinus Link, given end users are the ultimate expected payee via network charges.
“It’s a typical factor of six-ish from start to this point, and who knows what it will be when it gets to the finish,” he told Renew Economy.
“Why would the Victoria government impose this on Victorian taxpayers? Why would the Tasmanian government? Likewise, it makes no sense.
“It’s becoming increasingly obvious that it’s not going to be built.”
Mountain says the subsea cable will quadruple network costs for Tasmanian taxpayers are the sole payees, and double those fees for Victorians if they find themselves to be the only one paying for the project.
MLPL’s revenue proposal for the single subsea cable in December suggested network charges for a typical Tasmanian residential user would rise by $46 a year and by $20 a year for Victorians.
MLPL is set to update its costs for the currently-uncertain balance of works in July this year.
The AER will issue its draft decision on what it thinks appropriate costs for the already-signed contracts on 16 May.
