It was the hot topic of letters between former Prime Minister Scott Morrison and the Tasmanian government – and there still seems to be no guarantee Australia’s poorest state won’t pay half of the cost of a massive new energy project and will only 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 electricity 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 the rule could be changed in time to get Marinus Link built on schedule.
Undersea power interconnectors and new transmission infrastructure between Tasmania and Victoria, dubbed Marinus Link, are expected to cost $3.5 billion to build.
The Commonwealth and Tasmanian governments have already committed more than $200 million to pay for feasibility studies and a business case, and a final investment decision is expected in 2024.
But the two governments have privately acknowledged that most of the benefits will go to mainland electricity customers and Tasmanian energy producers, including Hydro Tasmania and wind farm owners, and not to Tasmanian consumers.
This was made clear in a letter from former Tasmanian Prime Minister Will Hodgman and current Energy Minister Guy Barnett to then-Prime Minister Scott Morrison, made public as part of a lawsuit request. to information.
“Given that the overwhelming majority of profits from the Marinus Project will flow to National Electricity Market (NEM) regions other than Tasmania, the Tasmanian Government cannot justify a funding scenario in which Tasmanian ratepayers or customers electricity incur additional costs to the benefit of other NMS regions,” they wrote.
Mr Hodgman and Mr Barnett made it clear to Mr Morrison that a way would have to be found to ensure Tasmanians did not have to pay half Marinus Link as they would not get half the benefits .
But Mr Morrison was not sure that might happen until a final decision was made on whether to build the new interconnectors.
So what are the rules that lock consumers into Marinus costs?
Marinus Link is proposed to be a regulated interconnector, which means that investors who pay for its construction will get a guarantee that they will be reimbursed regardless of the money invested, as well as a defined additional return on top of that.
Goanna Energy senior consultant Marc White said under current Australian energy market rules it would be electricity users like households and businesses who would have to repay investors through higher electricity bills.
“The question is where does that money come from and the answer is – as a regulated interconnector – the money comes from consumers to repay capital and provide a return on that capital to investors,” he said. he declares.
Under Australia’s energy market rules, the costs of interconnectors, or cables for transmitting electricity between states, are shared equally between the states that are connected.
This means Tasmanian consumers would pay 50% of the cost of Marinus Link.
TasNetworks, which runs the Marinus Link project, has acknowledged that Tasmanian consumers will get around 6% of the benefits, 94% of which will accrue to other stakeholders including interstate producers and consumers.
“The fact is that it’s the Australian market that needs our clean, reliable and dispatchable power, and so they should be funding Marinus Link.”
Former Prime Minister worried about rule change
In their letters to the former prime minister, former Tasmanian prime ministers Will Hodgman and Peter Gutwein said securing a fair price for Tasmanian electricity users was a ‘threshold matter’ for the government of State.
“The state has been very clear from the beginning that we cannot proceed with the project without achieving an equitable allocation of costs, and as you know, current regulatory provisions do not allow for the costs of the Marinus project to be allocated equitably between customers,” Mr. Gutwein wrote in December 2021.
They wanted the Commonwealth Government to support a request to the Australian Energy Market Commission (AEMC) to change the rules so that Tasmanians would not bear 50% of the cost of Marinus Link.
But later that month Mr Morrison warned it was unlikely to be possible to change that rule in time for Marinus Link’s proposed final investment decision date.
He suggested consumers in Tasmania would have to pay under the current rules, but that would be offset by Hydro Tasmania and other producers getting higher incomes.
Mr Morrison also said the Commonwealth would pay to build Marinus Link if private investors did not want it.
The then Prime Minister and then Prime Minister Gutwein agreed that the Commonwealth would support Tasmania’s request to the AEMO for a change to the cost recovery rule.
The Minister of Energy is convinced that a change of rules can be made
Correspondence between federal and state leaders was obtained by the Tasmanian Labor Party through the right to know.
Labor Party Energy Spokesman Dean Winter questioned Tasmania’s Energy Minister Guy Barnett about the matter during a Budget Estimates hearing earlier this month.
On Tuesday, Mr Barnett said the Tasmanian government was working with the Commonwealth and the AEMC to bring forward its request for the 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 in the Memorandum of Understanding and Funding Agreement for Marinus Link and Battery of the Nation, there is a commitment from the Tasmanian and Australian Governments to work together to submit a cost allocation rule change to the Australian Commission of the Energy Market (AEMC) for Marinus Link,” Mr. Barnett said.
“This agreement was signed on April 3, 2022.”
Doubt rule change can be secured quickly
Consultant Marc White was less confident a rule change could be secured before 2024.
He said it would typically take one to two years for the FMEC to accept and proceed with a rule change.
“This (rule change application) seems to be very complex because it may have unintended consequences for other interconnections, now or in the future, and so it seems to me that it’s such a complex problem that it doesn’t doesn’t seem like it’s likely to happen before Marinus is expected to progress,” he said.
Mr White was concerned about the prospect that the Tasmanian and Commonwealth governments could give the green light to Marinus Link even if a rule change, protecting Tasmanian consumers from bearing an unfair proportion of the costs, was not yet in place. square.
Appeals to ensure Tasmanians don’t pay more than their fair share
Labor’s Dean Winter said his party would support Marinus Link if it was in Tasmania’s interests, but said Labor did not have the necessary information.
Whether [Marinus Link] he can’t get his rules changed on the date of the final investment decision, I don’t know how he will be able to make a decision,” he said.
“We can’t be in a situation where Tasmanians have to pay on top of the benefits they get, obviously that’s not fair.”
Marinus Link is expected to inject $2.9 billion into the economies of Tasmania and Victoria and create 2,800 jobs while the infrastructure is built.
Independent Murchison MLC Ruth Forrest has reservations about the project. She said Tasmanians had very little information about how they would benefit from Marinus Link.
“Ongoing employment will be very limited, even during but especially after construction, if it continues. There are so many unknowns that need clear answers before we really commit to such a large project.”
Marinus Link has been contacted for a response.