- In short: The Tasmanian government says it was left with no choice but to build a one-cable Marinus Link electricity project, after the cost of a two-cable development blew out by $1.7 billion
- What’s next? Several rule change applications are set to determine exactly how much Tasmanians will pay in their power bills for the cable to operate
The Tasmanian government has revealed a $1.7 billion Marinus Link cost blow-out caused it to re-enter funding talks with the federal government and scale down the size of the undersea power cable project set to link Tasmania to Victoria.
When a deal was struck between the Tasmanian, Victorian and Commonwealth governments last October, a two-cable project was expected to cost between $3.3 and $3.8 billion, with the up-front construction costs — making up 20 per cent of the project’s overall cost — split equally between the three governments.
Just 11 months later, Energy Minister Guy Barnett told the Tasmanian parliament the cost of that project had blown out to $5.5 billion.
With the Tasmanian government threatening to walk away, a new deal was struck.
One cable is expected to cost between $3 and $3.3 billion — with Tasmania to contribute 17.7 per cent of the up-front costs.
The government expects that will end up being about $115 million, with Tasmania able to sell its share back to the Commonwealth if, and when, Marinus is operational.
Despite the project’s reduced energy capacity resulting in pumped hydro developments being delayed, Mr Barnett said a one-cable project would still deliver “enhanced energy security”.
“The analysis on a one-stage Marinus indicates that it will support between 1.5 gigawatt (GW) and 2GW of new generation,” he said.
Despite the minister’s enthusiasm for the project, Tasmanian Greens Leader Rosalie Woodruff said there were lots of questions for the government to answer.
“This is a minister who only two months ago told us that Tasmania needed to have 1500MW, needed to have two cables, and they would cost $3.8 billion,” she said.
“Now we’re going to get one cable for the price of two and he hasn’t provided us with any understanding for why the goalposts have changed.”
She said she had no faith Tasmanians would understand the full cost of Marinus, and what it would mean for power bills, before a decision on whether the project would go ahead was made.
More detailed data needed, says Labor
A final investment decision is scheduled for the end of 2024, with a further decision on whether the government wants to proceed with a second cable, set to be made after that.
Opposition Leader Rebecca White said the government needed to provide updated figures about whether Tasmanians would be financially better off under the new Marinus Link.
“The government have not been able to provide an update on the data they’re relying on that tells us that Tasmanian power bills will be cheaper under Marinus than if we don’t have Marinus,” she said.
“They tell us that’s the case, but we don’t have any evidence that’s the case.”
What will Marinus mean for power bills?
Marinus Link, and the North West Transmission Line development — carrying electricity to the cable are set to be regulated assets.
That allows their owners, the three governments and TasNetworks, to recoup the cost through network charges — which makes up about 40 per cent of the average household power bill.
Under the current rules, customers in Tasmania and Victoria would each be responsible for paying half of that cost.
But the Tasmanian government wants the Australian Energy Market Commission to approve a rule to change that, and significantly lower the cost to Tasmanian consumers, with Mr Barnett saying he expects it to be as low as 11 per cent.
Energy expert Marc White said he did not understand how the government had landed on that figure.
“Our understanding is that consumers in Tasmania under the current market rules would pay around 50 per cent of the annual cost of Marinus,” he said.
“It’s heartening to see there’s potentially a lower share for Tasmanians, but until we see details of the rule change, I think what we’re talking about is what we’d like to see instead of what currently exists in the market.”
The rule change application is not guaranteed to succeed, and it could take several years before a decision is made.
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