Abandoning Marinus link benefits taxpayers and the environment

“I’m calling on the Albanese government to abandon the Marinus link cable. It’s a huge cost to taxpayers, but worse still, a huge financial impost on Tasmanians. Not only has it the potential to break the hydro and turn it into a corporation with a begging bowl, but it will mean much higher power prices for Tasmanians for no benefit to the state. The impact on Tasmania’s biodiversity, its forests and its communities is great. People in the Northwest do not want to have massive transmission lines running through their properties, destroying forests and threatening migratory birds. We are losing our sense of place and industrializing the North supposedly for a benefit for the mainland when the whole thing is not beneficial to the climate or economically,” said Christine Milne.

“Hydro Tasmania and the Tasmanian Government have always argued that being linked to the mainland, to the national electricity market, was a good thing. It has been a bad thing. Recently, when power prices surged in the midst of the gas crisis, the Australian energy market operator had to suspend operation of the national electricity market. When that happened, Tasmania effectively disconnected from the national electricity market and our power prices immediately went down. The minute the national electricity market started again the power prices went up. That is a clear indication that being linked to the national electricity market forces power prices up in Tasmania. So not only will we have an increase in power prices because we are linked to the national electricity market and our prices will be set by the Victorian price, but we will also have to recoup the cost of the $2.5 billion that Hydro will have to spend to reorganize Hydro Tasmania for Marinus. As if that is not enough, we will also have to pay for whatever percentage of the $4 billion cost of Marinus that is allocated to Tasmania. This is a disastrous proposition,” concluded Ms Milne.

“We have all imagined that Tasmania had hydro storage capacity to share. In fact, we find it needs $2.5 billion before it’s useful to Victoria. This will sink the economics of battery of the nation to Hydro Tasmania and to the Tasmanian people,” Professor Bruce Mountain, Director, Victoria Energy Policy Centre said.

“Even if the Commonwealth government paid for the entire network connection, Tasmania still needs to incur a great deal of expenditure on Hydro Tasmania. They’ll be left with a corporation that’s not more competitive compared to the mainland producers. If you’re not more competitive, there’s no profits to be had. Even if you pay nothing to ship the product, you have to be able to compete on the underlying production. And if you don’t have an advantage in that cost, how you’re going to make your money?” said Professor Mountain.

“If the underlying economics of Tasmania and energy was so advantageous, why wouldn’t private developers buy the cable and gain the benefit themselves? That’s what they were trying to do with Basslink. They fell flat on their faces with what was then a cheaper interconnector and arbitrage based higher value based business proposition.They need to learn from past eras,” said Professor Mountain.

Professor Bruce Mountain’s presentation to the Australian Conference of Economists 2022

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