Morrison’s fast-tracking of Tasmania link only makes sense with rapid coal exit

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Scott Morrison should be careful what he prays for: fast-tracking the Tasmania battery of the nation project only makes sense if Australia fast-tracks the exit of coal generation and lifts emission cuts to 50% by 2030.

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Scott Morrison should be careful what he prays for. One of the few notable actual commitments made in his new “Climate Solutions” package – the rebadged and near useless Direct Action – is a $56 million payment to fast-track Tasmania’s Battery of the Nation project.

But here’s the catch – fast-tracking the Battery of the Nation project, which proposes new links totalling 1,200MW of capacity between the island state and the mainland, and so unlock its considerable hydro and wind resources, only makes financial sense on two conditions, the latest feasibility study says.

One of these conditions is that the retirement of Australia’s coal fleet on the mainland must be accelerated. The second is that Australia adopts  52 per cent emissions reduction target of 2030, and so accelerate the uptake of renewables, the very target that Morrison and his cabinet ministers have repeatedly derided as “economy wrecking”.

Is Morrison, who lovingly and infamously fondled a lump of lacquered coal in parliament, having a bet each way?

The Battery of The Nation project’s latest feasibility studies which do not exactly knock your socks off with an over-whelming positive view of its economic benefits.

It says that the project, including the Marinus Link that has received the Morrison government funding, is likely to deliver positive economic worth in the mid-2030s only “under some circumstances”, and it also managed to identify “some circumstances” when the Marinus Link can deliver positive economic worth in the mid-2020s.

Both depend on the early departure of coal fired generators.

“The timing is primarily linked to the value that Marinus Link provides to the NEM as coal-fired generation retires,” the study says.

“Different timing of large-scale retirement of coal-fired generators in the NEM therefore affects the optimal timing of Marinus Link. If Australia’s existing coal-fired generators remain in service until the end of their design lives, Marinus Link is likely to deliver a positive economic worth in the mid-2030s.”

This conforms with the view expressed by the Australian Energy Market Operator’s Integrated System Plan modelling, which also recognises that existing coal-fired generators may retire earlier than design life due to higher emissions reduction targets – albeit an unlikely event under a Coalition government.

So, here’s the rub. If 7,000MW of coal fired capacity was retired by 2030, then the Marinus link could deliver a positive benefit of $490 million for a 600MW capacity link commissioned in the mid-2020s; or $480 million for a 1200MW capacity link built and commissioned in two stages from the mid-2020s.

  • But under the neutral scenario, where the government maintains its current emissions target of a 26-28 per cent cut by 2030, and coal retirements continue as advertised (i.e. Liddell and maybe Vales Point by 2030) then fast-tracking the Marinus Link makes no financial sense.
  • An EY analysis says it would be worth a negative $230 million for one of the two 600MW links and a negative worth of $730 million if both 600MW links were fast-tracked,
  • If it were to go ahead, and coal was retired, the EY modelling says the benefits are gleaned from cheaper production in Tasmania, and less renewables and storage (both battery and pumped hydro) being built in the mainland. Snowy 2.0 makes a similar case for its business proposal – build us and you won’t need to build so much other stuff, particularly batteries.

In the high emissions reduction targets, Snowy 2.0 would reduce the economic worth of Marinus Link compared with the high emissions reduction sensitivity, but the 600 MW option would still have an economic worth of $114 million and the 1200 MW option would be $40 million.

“This indicates that the quantum of coal-fired generation that is anticipated to be retired under a high emissions reduction target – almost 20 GW by 2050 – is such that the construction of Marinus Link, plus the increased Tasmanian renewables and pumped hydro developments which ensue, provide economic value in addition to Snowy 2.0 to assist in the energy transformation of the NEM.”

It makes RenewEconomy wonder if Morrison and his people actually read this document before agreeing to put the money forward. if they did, it speaks to a different agenda than the one he delivers to the Murdoch media.

We asked this question to the office of energy minister Angus Taylor, who explicitly endorsed the fast-tracking of the Marinus Link in a press release today, saying it would help “keep the lights on.’

Does the government now endorse early retirement of the coal fleet and Labor’s emissions reduction policy. Or did it not read the feasibility study?

A spokesman replied saying it was all about keeping the lights on, and then quoted the hotly disputed costing of Labor’s climate and renewable policy produced by Brian Fisher, a long time critic of climate and renewables policies who has done much modelling for the fossil fuel industry.

“As we saw with Hazelwood’s closure, we can not rely on system models for predicting our future generation mix,” Taylor’s spokesman said.

“With the length of time required to build substantial hydro projects such as this, the Government is doing the responsibile thing and bringing it forward to ensure we will have the reliable supply that Australians need.

“This Government won’t put the nation’s energy security in the hands of the big energy companies who, as the ACCC pointed out, made substantial profits from the early closure of Hazelwood.

“The Government’s policy is clear: we have a sensible & balanced 26% emissions reduction target compared to Labor’s higher targets, which will slash jobs and wages, and cost the economy $472b, according to modelling done by Dr Brian Fisher’s BAEconomics.”

 

 

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