Greed is also behind Tasmanian power crisis

The overuse of dams has helped generate the present power crisis.
Thursday, April 7, 2016

The fault in the out-of-service Basslink power cable connecting Tasmania to mainland Australia has reportedly been found, and repairs are expected to be completed by June. Meanwhile, a battery of diesel generators has been deployed and a mothballed gas power station re-opened to supplement the state's dwindling hydro-electric dams which are below 14% capacity.

Industries are deliberately running on low power, and paper mill owner Norske Skog recently joined the Bell Bay aluminium smelter and the TEMPCO manganese alloy factory in reducing their electricity demand. Hydro Tasmania and the state government are talking optimistically about being able to maintain supply until Basslink is repaired. But if they are wrong, widespread blackouts could ensue.

The great cost of switching on gas and diesel is ironic, as a significant part of the blame for the low dam levels is their overuse during the period of the carbon price, when Tasmania's clean hydro-electricity was especially profitable. The managers of Hydro Tasmania, a state government-owned utility, saw the opportunity for a windfall profit and went for it.

They seem to have predicted the carbon price had a limited lifespan, and went all out while it was there. This would have been no problem if the Basslink cable had not developed a fault in December, after a very dry year had kept the dams low. Instead of being able to import cheap Victorian brown coal electricity while the dams refilled, a crisis emerged.

The way this crisis has unfolded has revealed weaknesses in renewable energy policy and the now-scrapped carbon price.

Running the Hydro to make a short-term profit has in this case exposed Tasmania to the risk of power failures and very high prices from using gas and diesel for baseload power generation.

Tasmania opted to maximise the profitability of its existing renewable assets, hydro dams, rather than invest in more wind farms and solar power. Despite some of the best winds in the country, and hydroelectricity being a perfect complement to variable wind farm output, only two wind farms totalling 310 megawatts capacity have been built on the island.

Solar energy in the state languishes at about 80 megawatts installed capacity, a fraction of the potential that exists.

Beyond Zero Emissions calculated in 2013 that Tasmania has about 5 square kilometres of available roofspace for solar, which might accommodate 10 times the current installed capacity. Although Tasmania is far from the sunniest state in the country, their long summer days offer some bonuses as solar panels can keep producing right into the evening peak electricity use period.

Yet, in line with the coal-dependent states to the north, Tasmania has slashed the price paid for solar energy — the feed-in tariff — to less than 6 cents per kilowatt-hour or $60 per megawatt hour. Given that retail electricity prices are several times this figure, a higher feed-in tariff would have encouraged much greater installation and would be supplying clean electricity at far less than the estimated $300 per megawatt hour for diesel.

To underscore just how backward Tasmania's energy policy has become, since 2002 the clean hydro-powered state has been importing gas from Victoria, and households have been encouraged to install inefficient gas heating and cooking in place of much more efficient electric appliances that could run on clean energy.

The crisis also highlights the weakness of the carbon price enacted under the Julia Gillard Labor government. While the Renewable Energy Target pushed significant growth in renewable energy, the notable reduction in Australia's carbon emissions during the carbon price period is in part due to the increased use of already-existing hydro power and, in part, due to slightly cleaner black coal being favoured against the dirtiest, brown coal.

The use of hydro power would be great if it were sustainable, but the Tasmanian power crisis suggests it was not. The emissions reduction attributed to the carbon price was not sustainable and too much credit is given to that policy.

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