Taylor’s UNGI may underwrite two state-owned hydro projects in Tasmania

Energy minister Angus Taylor’s stalled Underwriting New Generation Investments program may be deployed to underwrite two new state-owned hydro generation and energy storage projects in Tasmania.

The two projects, unveiled as part of a wider energy deal struck between the Morrison and Gutwein governments that includes federal government investment in the Marinus Link to the mainland, include the expansion of the Tarraleah hydroelectric plant, located on Lake King William in the centre of the state.

The state government-owned utility Hydro Tasmania will also conduct additional works towards the establishment of new pumped hydro energy storage facilities at Lake Cethana, identified as the preferred location for pumped hydro storage facilities that would be the first stage for a larger vision to establish Tasmania as the ‘battery of the nation’.

Hydro Tasmania CEO Evangelista Albertini said Marinus Link project would be key to unlocking investment in a number of new generation projects throughout Tasmania, that could also include additional pumped hydro energy storage facilities at Lake Rowallan in Tasmania’s North West and another near Tribute Power Station on the West Coast, which will also undergo further studies.

“Having a portfolio of opportunities places Hydro Tasmania in a great place to respond to the future capacity and storage needs of the NEM. Combining our significant hydropower and pumped hydro capacity with low cost wind and solar gives Tasmania a strong competitive advantage,” Albertini said.

The ‘battery to the nation’ projects are the third projects originally shortlisted under the Morrison government’s Underwriting New Generation Investments program that have received specific commitments of funding support.

Funding support for two gas generators in Victoria and Queensland was announced at the end of last year, and additional support for NSW projects shortlisted under the UNGI program again reiterated in a bilateral deal struck between New South Wales and the federal government.

However, despite the public announcements that the federal government would provide funding, none of the projects have progressed, and no formal agreements to actually deliver the funding has been signed.

The delays have predominantly been caused by the Morrison government not yet legislating the establishment of the $1 billion Grid Reliability Fund which the government is expected to use to fund the UNGI commitments made to date.

The interventions in the energy market, which has included the Morrison government saying it will invest in a number of new projects without actually delivering finished projects, has attracted the ire of the energy sector, as well as market regulators, who fear that the interventions are interfering with private sector investment.

Key energy market players have cautioned the Morrison government about its recent desire to directly intervene in the energy market, with the Australian Energy Council, which represents some of the largest energy companies, saying that the government’s ad hoc promises to invest in new electricity infrastructure were making it harder for the private sector to confidently make its own investments in energy projects.

Australian Energy Council CEO Sarah McNamara pointed to a recently published report from the Australian Energy Regulator on Monday, saying that the government’s energy market interventions were putting plans to replace retiring coal generators with adequate new supplies of electricity at risk.

“The (AER) report notes that while there are concerns from government the market may not deliver sufficient new generation, particularly flexible generation, to replace retiring coal-fired plants, a barrier to entry is the various government schemes intending to underwrite generation investment which the market is also seeking to supply,” she said.

“That should not be surprising. You need confidence in the market playing field before investors can commit to major investments that will be around for a long time.”