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

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.

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.

This 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.