The federal Coalition is throwing down a challenge to governance norms in the way it is conducting its FUNGI – federal underwriting new generation investment – tender, announcing an early winner on Wednesday that has yet to identify what it will build.
Prime minister Scott Morrison visited Tasmania on Wednesday to announce that the federal government had decided to offer an underwriting contract to help support the Tasmania government’s “battery of the nation” pumped hydro scheme.
The only problem, it appears, is that the government-owned utility Tassie Hydro, hasn’t yet decided what the underwriting money would be used for. It says it has 14 potential opportunities, but hasn’t decided which one is best.
The awarding of an underwriting agreement to a project with no name, no location, no business model, no pricing, no customer, and no date may come as a surprise to other applicants to the scheme, given that the criteria required that the project be near “shovel ready” and have identified customers and impacts on the system.
The criteria identified by the government also said it should make clear it has limited market share. The Tasmania government owns the state’s energy market virtually lock, stock and barrel, and approval for any new link to the mainland and other markets is years away.
Contrary to media reports, Hydro Tasmania and the federal government insist that the utility did file an application by the January deadline, but offered a “number of different options”.
All are linked to the proposed new inter-connector which is currently not due to be built until the early 2030s, unless it is fast tracked.
That fast-tracking is only likely to occur if the regulator sees an economic justification, which in turn would depend on a rapid uptake of renewables on the main grid, the modelling shows. But the Coalition government has rejected this idea of fast-tracking wind and solar.
Those within Hydro Tasmania tell RenewEconomy that the company has had no talks with the federal government since the application was made, and any discussions were held at the political level between the federal and state governments.
Governance experts say it is normal for government tenders to be processed by departmental experts, and most governments go to great lengths to be “at arms length”. The government says there have been 66 different proposals, from coal, gas, pumped hydro and a mix of wind, solar and battery and pumped hydro storage.
Still, Morrison said this on Wednesday: “The Commonwealth commits to develop an underwriting mechanism for the project through its Underwriting New Generation Investments program.”
Hydro Tasmania CEO Stephen Davy responded that the company was “accelerating work to identify a pumped hydro project that will be ready to go when a second Bass Strait interconnector comes online.”
“We’ve been investigating 14 options for pumped hydro that present the greatest potential. We will now invest up to $30 million to refine that to three options for deeper studies and ultimately identify a single pumped hydro project that can be ready to take advantage of additional interconnection coming online in 2025.”
A spokesman for Taylor said the government would have more to say on the underwriting program in coming weeks.