Tasmania has provided yet another example of what happens when you let the lunatics run the asylum for too long. This time, it has run out of electricity to the point of needing 200 temporary diesel generators – at a start up cost of $44 million, plus operating costs of $22 million per month.
As you’ll soon see, these costs are merely the steam emanating from the hot pile of dung shoveled up in this scandal – whose key players include a greedy government owned hydroelectric operator, an inept State government and Australia’s most socialistic Prime Minister in history.
Even if you’re not Tasmanian, you should care about this: it’s your money that’s paying for it.
Act I: the table is set
Before nestling into dirty diesel’s comforting embrace, Tasmania prided itself on generating almost 100% of its power from ‘renewable energy’ – with over two-thirds coming from hydroelectricity.
We could stop here and just about have explained things (eggs, one basket and so forth). However, it is only on completion of the remaining four acts of this Tasmanian tragedy that we can fully appreciate the true nature of the scandal.
Act II: 2005 – Basslink commissioned as a single cable
Since 2005, there’s been a cable that runs from Tasmania to Victoria called ‘Basslink’. Its purpose was to ‘drought-proof’ Tasmania by allowing it to import and export energy to the mainland as needed.
Basslink is a single cable. If there’s a fault somewhere along the cable, the whole things falls over (no, I’m not joking).
The above table shows the energy going in and out of Tasmania via Basslink since it was built. It doesn’t take long to see that something strange was going on between 2012 and 2014 – but that’s not the whole story:
- Until 2010-11, Tasmania was overwhelmingly a net Basslink importer.
- During 2010-11 and 2011-12, Tasmania dramatically increased its exports to the point of equalling its imports (seemingly as if it were preparing for something big).
- In 2012-13, Tasmania’s Basslink’s imports suddenly plummeted to 2.6% of its energy consumption (see page 130 of the link).
- By 2013-14, Tasmania was importing practically nothing via Basslink – with a truckload of energy going the other way.
If you’re wondering what the hell was going on, you need only go back to August 2010.
Act III: 2010 – Julia Gillard and the carbon tax
In August 2010, Australia provided Julia Gillard with the means to introduce a carbon tax – which she cheerfully did. Among many other things, Gillard’s scheme made hydroelectricity artificially more price competitive in the energy market. In turn, Tasmania’s government owned hydroelectricity operator (Hydro Tasmania) became positively giddy with excitement… and greed:
As you can see, Hydro Tasmania was delighted to flick the Basslink switch and recklessly plough through more than half of its stored energy supply (i.e. stored water) during the carbon tax period:
The figures show that Tasmanian hydro generators have been selling electricity into the mainland market at unprecedented rates, drawing down storage levels dramatically since the carbon price was implemented in July 2012.
In the midst of its carbon tax induced hydro fire sale, a couple of basic principles became completely lost on Hydro Tasmania:
- Hydroelectricity relies on a nuisance called gravity – it is only ‘renewable’ to the extent that rainfall can re-fill the power plant’s dam.
- If you operate a hydroelectricity plant and you flog off all your stored water much faster than the rain can re-fill your dam, you’re going to have a bad time.
Incredibly, Hydro Tasmania’s involvement in this debacle did not end there.
Act IV: 2009-14 – Tamar Valley gas power station commissioned, micturated on, shut down, put up for sale… then recommissioned (*)
* (Yes, all these things really happened in under 5 years).
On being commissioned in September 2009 (as a replacement for the Bell Bay gas station), the Tamar Valley gas station provided about 10% of Tasmania’s energy. However, since then, it has been treated like a TV Guide:
- In 2013, it was put in the hands of Hydro Tasmania (for absolutely nothing). This gave Hydro Tasmania almost complete control over the entire Tasmanian energy market.
- On receiving the Tamar Valley station, Hydro Tasmania immediately cannibalised its book value down to zero and commenced decommissioning it in June 2014. This was despite the fact that it had been functioning for less than five years and represented a major form of energy insurance.
- In August 2015, Hydro Tasmania announced that the Tamar Valley gas station’s combined-cycle unit was not required for energy security and would be decommissioned and sold.
(Let’s keep that last date in mind – August 2015).
The decision to sell the Tamar Valley gas station’s major operating component in August 2015 was made despite the fact that:
- Hydro Tasmania had already savaged the State’s stored hydro energy supply to less than 30% (with summer coming around the corner).
Not to worry, it’s not like the Tamar Valley gas station cost around a quarter of a billion dollars to build and was still in brand new condition or anything. Oh, wait a minute…
Act V – completing the catastrophe
Following the 2013 Federal election, the carbon tax was removed. This eradicated the artificial price signal on energy and mercifully saved Hydro Tasmania from its own suicidal behaviour. To recap:
- From 2012 to 2014, Hydro Tasmania had been a busy little bee, flogging off as much hydroelectricity as it could. It was also closing down and trying to sell the Tamar Valley gas station’s major parts. This was all done for the sole purpose of making Hydro Tasmania’s balance sheet look good – and it only came at the expense of the public interest.
- By November 2015, Hydro Tasmania had completely dwindled its stored hydro energy to the point where Basslink was providing 40% of Tasmania’s energy needs (NB: this represents the full import capacity of Basslink). Or, put another way, about a third of Tasmania’s energy was now coming from those dirty, dirty Victorian coal power plants.
If the carbon tax hadn’t been removed, how much lower would Hydro Tasmania have allowed its stored energy to fall to before it stopped?
In any event, the damage had already been done. All that was needed now was a trigger and some fallout:
- In December 2015, a ‘fault’ rendered Basslink inoperable. It still remains out of action and there is no firm idea as to when the fault will be repaired or what it will cost to fix.
- Unfortunately, due to Hydro Tasmania’s above decisions, Tasmania hasn’t been able to:
- rely on its stored hydro supplies – because they are currently sitting at at less than 15% of overall capacity; or
- its backup gas power to the extent it should – because, funnily enough, the Tamar Valley power station has a really tough time generating electricity while it’s in a mothballed state and its combined-cycle unit is up for sale.
- By late December 2015, Tasmania decided to recommission the Tamar Valley gas plant – less than 4 months after the decision to sell its combined-cycle unit (yes, really). Not to worry, I’m sure they’ll re-decommission it as soon as possible so that Tasmanians can all feel clean again.
- And then there’s the diesel…
When you add it all up, Tasmania is now laughably and hopelessly reliant on the dirtiest forms of fossil fuel for its survival. Insane amounts of money have been squandered.
Cue the climate change brigade
Predictably, some are blaming this disaster on human induced global warming (because of some short term dry weather).
To anyone who has properly considered this matter, it’s obvious that neither carbon dioxide nor ‘climate change’ have had anything to do with this. ‘Political buggery’ are two much more fitting words to accurately describe the cause of what happened.
For the record, Tasmania is not immune to drought and dry conditions (see 1888, 1967 and 2008 for example). The problem is that the last couple of times Tasmania had dry spells, it had cheap and reliable forms of backup power to reduce the energy stress. This time it does not.
Get out your wallet
Tasmania is not self-sufficient economically. It relies on taxpayer funds which far exceed its contribution to Australia’s GDP ($48K per capita against the national average of $66K). The latestnational GST distribution drives this point home:
In its latest decision the Commonwealth Grants Commission (which determines the breakdown of the GST) has decided that Western Australia should get just 29.99 cents in the dollar of revenue.
This is the lowest share ever by any state by a long way.
New South Wales receives 97.7 cents in the dollar and Victoria just 89.3 cents. The rest of the states all receive more than the share they would receive on a pure per-capita basis. Queensland gets $1.12, South Australia $1.36, Tasmania $1.82.
This means that, for every dollar wasted on this fiasco, non-Tasmanians have to come to the party in a big way.
When all is said and done, the cost of the 200 temporary diesel generators alone could come close to (or exceed) what it cost to build the Tamar Valley gas plant. It all depends on when Basslink can be fixed. Using the figures at the very top of this article, the diesel bill will sail over $100 million if Basslink isn’t functioning within three months – which is almost half the Tamar Valley build cost of $230 million. Just stop and think about that for a minute.
On top of this, there’ll also be the cost of building a second Basslink cable (which should have been done in the first place) and re-commissioning the Tamar Valley gas plant and then doing goodness knows what to it after that. There will also be many more consequential costs on top of this (e.g. millions on government inquiries, ‘re-structuring’ and the like).
One thing is for sure, the short term money that Hydro Tasmania made between 2012 and 2014 will be completely and utterly dwarfed by the cost of this mess.
For the final insult, go back to the top of this article, look at the feature image again and wallow in the hilarious irony. Just make sure you have your preferred sedative ready.
Originally published at The Marcus Review.