It was the hot topic of letters between former prime minister Scott Morrison and the Tasmanian government — and it appears there’s still no guarantee Australia’s poorest state won’t pay half the cost of a massive new power project and reap a fraction of the benefits.
Marinus Link is a $3.5 billion plan to build two new undersea power cables between Tasmania and Victoria
Most of the benefits will go to mainland power users, but under current rules Tasmanians will have to pay half the cost of Marinus Link
Former prime minister Scott Morrison told the Tasmanian government last December he doubted that rule could be changed in time for Marinus Link to be built on schedule
The undersea electricity interconnectors and new transmission infrastructure between Tasmania and Victoria, dubbed Marinus Link, are estimated to cost $3.5 billion to build.
The Commonwealth and Tasmanian Governments have already committed over $200 million to pay for feasibility studies and a business case, and a Final Investment Decision is set for 2024.
But both governments privately acknowledged most of the benefits will go to mainland electricity customers and Tasmanian energy generators, including Hydro Tasmania and wind farm owners, and not to Tasmanian consumers.
This was made clear in a letter from former Tasmanian premier Will Hodgman and current Energy Minister Guy Barnett to then prime minister Scott Morrison, made public under a Right to Information request.
“Given the overwhelming majority of benefits from Project Marinus will flow to National Electricity Market (NEM) regions other than Tasmania, the Tasmanian government cannot justify a funding scenario in which Tasmanian taxpayers or electricity customers incur additional costs to benefit other NEM regions,” they wrote.
Mr Hodgman and Mr Barnett were making it clear to Mr Morrison that a way would have to be found to ensure Tasmanians didn’t have to pay for half of Marinus Link since they wouldn’t get half of the benefits.
But Mr Morrison wasn’t certain that could happen before a final decision was made on whether to build the new interconnectors.
So what are the rules locking consumers into Marinus costs?
Marinus Link is proposed to be a regulated interconnector — that means the investors who pay for it to be built will get a guarantee they will be repaid whatever money they put in, as well as a set extra return on top of that.
Goanna Energy principal consultant Marc White said under Australia’s current energy market rules, it would be power users like households and businesses that would have to pay the investors back through higher electricity bills.
“The question is where is that money coming from and, the answer is — as a regulated interconnector — that money is coming from consumers to repay the capital and to provide a return on that capital to investors,” he said.
Under the Australian energy market rules, the costs of interconnectors, or electricity transmission cables between states, are shared equally between the states that are connected.
That means Tasmanian consumers would be up for 50 per cent of the cost of Marinus Link.
TasNetworks, which is managing the Marinus Link project, has acknowledged Tasmanian consumers will get about 6 per cent of the benefit, with 94 per cent going to other stakeholders including generators and interstate consumers.
“The fact is that it’s the Australian market that needs our clean, reliable and dispatchable energy, and therefore they should fund Marinus Link.”
Former PM worried about rule change
In their letters to the former prime minister, former Tasmanian premiers Will Hodgman and Peter Gutwein said getting a fair price deal for Tasmanian power users was a “threshold issue” for the state government.
“The state has been very clear since the outset that we cannot proceed with the project without achieving a fair cost allocation, and as you would be aware, the current regulatory arrangements do not allow for the costs of project Marinus to be fairly allocated among customers ,” Mr Gutwein wrote in December 2021.
They wanted the Commonwealth government to support an application to the Australian Energy Market Commission (AEMC) to change the rules so that Tasmanians wouldn’t bear 50 per cent of the cost of Marinus Link.
But later that month Mr Morrison warned it probably wouldn’t be possible to change that rule in time for Marinus Link’s proposed Final Investment Decision date.
I have suggested that Tasmanian consumers would have to pay based on the current rules, but that would be made up for by Hydro Tasmania and other generators getting higher revenues.
Mr Morrison also said that the Commonwealth would pay to build Marinus Link if private investors didn’t want to.
The then-prime minister and then-premier Gutwein agreed that the Commonwealth would support Tasmania’s application to AEMO for a cost recovery rule change.
Energy Minister confident rule change can be made
The correspondence between the federal and state leaders was obtained by the Tasmanian Labor Party through Right to Information.
Labor’s Energy spokesman Dean Winter questioned Tasmania’s Energy Minister Guy Barnett about it during a budget estimates hearing earlier this month.
On Tuesday, Mr Barnett said the Tasmanian government was working with the Commonwealth and AEMC to make its application for a rule change.
He said he was confident a rule change could be made in time for the Final Investment Decision for Marinus Link in 2024.
“Written into the Memorandum of Understanding and funding agreement for Marinus Link and Battery of the Nation, is a commitment from both the Tasmanian and Australian Governments to work together to submit a cost allocation rule change to the Australian Energy Market Commission (AEMC) for Marinus Link,” Mr Barnett said.
“This agreement was signed on the 3rd of April 2022.”
Doubts rule change can be secured quickly
Consultant Marc White was less confident a rule change could be secured before 2024.
He said it would usually take one to two years to get AEMC to agree to and carry out a rule change.
“This (rule change application) appears to be a very complex one because it may have unintended consequences for other interconnectors either now or in the future, and so it looks to me like this is such a complex issue that it doesn’t appear that it’s going to be likely to happen before Marinus is planned to progress,” he said.
Mr White was concerned by the prospect that the Tasmanian and Commonwealth Governments might green-light Marinus Link even if a rule change, protecting Tasmanian consumers from bearing an unfair proportion of costs, wasn’t yet in place.
Calls to ensure Tasmanians don’t pay more than their fair share
Labor’s Dean Winter said his party would support Marinus Link if it’s in the best interests of Tasmania, but said Labor did not have the information needed.
if it [Marinus Link] can’t get its rule change by Final Investment Decision date, I’m not sure how it’s going to be able to make a decision,” he said.
“We can’t be in a situation where Tasmanians have to pay over and above the benefits they get, that’s obviously not fair.”
Marinus Link is projected to inject $2.9 billion into the Tasmanian and Victorian economies, and create 2,800 jobs while the infrastructure is being built.
Independent Murchison MLC Ruth Forrest has reservations about the project. She said Tasmanians had very little information about how they will benefit from Marinus Link.
“Ongoing employment will be very limited in terms of even during but particularly after the build, should it proceed. There are so many unknowns the require clear answers before we really do commit to such a major project.”‘
Marinus Link has been contacted for a response.
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