The absurdly high cost of Tasmania’s switch to diesel: $1,163/MWh

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In Tasmania, solar households are paid $60/MWh for exports back into the grid. In the recent energy crisis, Hydro Tasmania paid 20 times that price for dirty diesel.

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Hydro Tasmania has revealed the ridiculous cost of the diesel gen-sets that it was forced to turn to in the recent energy crisis – $1,163 per megawatt-hour. To put that into context, the cost of generating electricity from rooftop solar panels is probably little more than one-tenth of that cost.

In evidence tendered to the Public Accounts Committee of the Tasmanian Parliament, and in a following press release, the state-owned utility revealed that diesel had contributed 55GWh to meet demand while it was forced to scale back hydro generation, at a total cost of $64 million.

That translates into a cost of $1,163/MWh. That compares to the cost of wind energy of around $80/MWh and the amount that Tasmania’s solar households receive for the export of excess solar power to the grid – $60/MWh.

The revelations will certainly underline the case from renewable energy advocates that Tasmania should invest more in renewable energy, rather than turning to expensive fossil fuels.

The Tasmanian government has been widely criticised for failing to invest enough in wind and solar, which left it no option but to turn to gas and diesel generation when the dams dried up and the Basslink cable was lost.

A new link to the mainland is being contemplated, but analysts say that is only worthwhile if more wind and solar is built to increase exports to the mainland, rather than being a vehicle to import more coal power. Labor is advocating for 500MW of new wind and solar capacity.

tasmania diesel

The $1,163/MWh price for diesel is truly mind-boggling. Hydro Tasmania ordered the import of some 200MW of diesel to ensure its supplies, which had been left short by the loss of the interconnector to the mainland and record low levels in its dams.

tasmania diesel shareThis graph above – courtesy if the Melbourne Energy Institute – shows diesel’s relative low contribution (in red).

Even in remote Australia, that cost of diesel is around three to four times less than the price paid in Tasmania, which presumably included the cost of importing and installing the gen-sets, most of which came in containers.

Hydro Tasmania also turned to gas-generation, restarting the mothballed Tamar Valley gas generator. That, according to Hydro Tasmania figures, generated 745GWh at a total cost of $47 million. That translated into an average cost of $63/MWh, although Tasmania wholesale prices were often five times that amount during the crisis.

The biggest saving came from electricity not used, with major energy users reducing their load by a total of 325GWh during the crisis.

Chairman Grant Every-Burns said the result of the crisis meant that the company was facing a loss of $90 million for the financial year. That included lost income from large-scale renewable energy certificates ($15 million), and the offset of reduced fees for the failed Basslink cable, which was off line for nearly six months.

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12 Comments
  1. MaxG 3 years ago

    A story for dumb and dumber… I wish the youth would vote out these grey-haired idiots in power… The sad thing is, whatever the losses, the public will have to pay for them.

  2. Brunel 3 years ago

    Can someone work out the cost of having a ship full of aquion or lithium batteries and getting it to go back and forth between Tasmania and Vic.

    So the ship could be recharged in Vic and discharged in Tas to supply electrons in case the Basslink is cut again.

    It would only need to be cheaper than getting electrons from diesel generators to be viable.

    • Ian 3 years ago

      I really like this idea. A battery ship could be charged in the most efficient solar and wind zones , and plugged into anywhere that needs it .- be it an incompetent state or any country where neened.
      Australia could be a sort of Saudi Arabia for energy

      • Brunel 3 years ago

        It just needs to be cheaper than diesel generators – which is what gets used in emergency situations like the BassLink cut.

        • Ian 3 years ago

          Oh , I get that, and yes you are right in the sense that a sea-borne battery pack may be a cheaper alternative to diesels, but so too would be a number of other exotic schemes, perhaps emergency grid-tied gym spin classes could be another, but sufficient wind farms and distributed solar combined with a judicious usage of hydro would mean that Tasmania would be drought proofed for up to a once in a thousand year type of drought event. They wouldn’t have to beg for a watt hour from Victoria.

      • Ian 3 years ago

        Other Ian, installing solar PV and wind power to excess in Tasmania is probably cheaper than a type of mobile bass link, but hey who knows!

    • Hans the Elder 3 years ago

      Would a second HVDC link not be cheaper in the long run?

      • Brunel 3 years ago

        Of course you would not use the ship daily.

        The ship would be used instead of diesel generators.

        South AUS is without a coal power station now. So if the SA-Vic HVDC link is cut, the ship could supply electrons to SA while the HVDC link is repaired.

        Yes a 2nd HVDC link could be built to Tasmania to provide redundancy.

  3. neroden 3 years ago

    Hopefully the Tassie government will learn from this and install lots and lots of PV and wind turbines. They’ve certainly got enough space to install them. In a couple of years they should be able to export power to Victoria.

  4. Sam0077 3 years ago

    Its because there are NOT grey heads that we are in the mess – meaning grey heads = experience of life – only one with grey today is the leader of Opposition and a Minister in the government that sold off electricity to mainland Qld state, and then bought it back again for government depts, cheaper than residents pay. All for for a quick cash injection into government coffers taken from profits and leaving the state owned 3 companies that make up what once was one, still in debt. And worse, knowingly using up known always kept back reserves of water from the dams for drought conditions. And if you have the capacity to actually think things out for yourself, which seems to be lacking today in far too many, it was a Labor government. Not many grey heads either.

    No what is wrong is our system of electing these days totally corrupted by preferences and not sticking with the lower house first past the post wins the seat.

    And solar return to householders is 6.5c and installers say harder to get agreement from power co if too many in one street, or area, wont allow it. Seems silly as this is then cheap generated power coming back to them saving future expansion etc its green too.

    Funny thing is too that the Labor Opposition is now claiming they didn’t use up reserves when it was done in middle of their last term. Has to be those same gremlins who during the last 6 years of Federal Labor ran up the 300 billion $ of debt which they also deny was them.

  5. Les Johnston 3 years ago

    What is also interesting is that energy consumption does shift when prices increase. The so called electricity generation capacity is not a fixed item. If prices are charged which reflect generating cost, demand will change. Get rid of subsidies to coal mining in the form of diesel fuel rebate and allow prices to reflect supply and demand. We will adapt if we are provided with accurate information. Remove misinformation and subsidies from the market.

  6. ChrisB_SA 3 years ago

    Would have been good compare apples with apples. i.e calculate much it would have cost to install sufficient renewable power generation and associated transmission infrastructure (after factoring in the average capacity factor for intermittent generation forms (solar, wind) plus a couple standard deviations contingency) and get it running in the time frame the diesel modules were commissioned.

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