Marinus Link – great service, but who pays the bill?

Everybody loves the idea of a second under sea transmission link between mainland Australia and Tasmania, but no one wants to pay for it.

In a speech to CEDA’s State of the Nation Conference on Monday Prime Minister Scott Morrison announced the fast tracking of 15 major projects including the Marinus Link between Victoria and Tasmania.

But no money.

The bill to add two new 700 megawatt undersea transmission lines to the existing single 500MW Basslink cable is around $3.5 billion. That’s expensive, bearing in mind the cost of additional pumped hydro engineering works and wind farms will be added on top.

Hydro Tasmania aka the Tasmanian Government has been looking for a way to increase the transmission capacity to the mainland almost since the Basslink cable was commissioned in 2006.

This included a wild plan to build a $2 billion wind farm on King Island and connect it to Tasmania and the mainland by new undersea transmission.  An independent review of a second Basslink cable in 2017 was equivocal about the idea.

Apparently that was the wrong answer. Six months later Hydro Tasmania went to everybody’s favourite bucket of money, the Australian Renewable Energy Agency (ARENA), which produced a glowing feasibility study in 2018.

Because despite the spin of it being a national project where most the benefits are delivered to the mainland states, getting the Marinus Link across the line would be a giant net windfall gain for Hydro Tasmania. But only if someone else pays for it.

It would enable Hydro Tasmania to start retrofitting its network of dams and reservoirs to run as pumped hydro generators – the 2500MW Battery of the Nation concept –  while enabling another 500MW of new wind farm projects in Tasmania, much to the chagrin of former Greens leader Bob Brown.

The proposed Marinus Link is technically just another transmission line. its proponent, TasNetworks, could just make an application for the project as a regulated transmission asset under the conventional RIT-T approval process run by The Australian Energy Regulator (AER).

But they won’t.  Because even if they succeed a big chunk of the $3.5 billion cost of the transmission asset will be borne by Tasmanian consumers. Tasmania’s large industrial customers have signalled their unease with the project proceeding, at least under the conventional rules, as their transmission charges will skyrocket.

This is why Marinus Link is being promoted as a project in the national interest where most of the benefits lie with mainland consumers, with TasNetworks then also pushing for a revision of the way the cost of regulated transmission is allocated to a “beneficiaries pay”  approach.

Of course, all of this is resolved if the Federal Government just puts its hand in its pocket and funds the $3.5 billion from consolidated revenue. Then taxpayers, that’s you and me, pay for it. We should know by October 6 when the delayed Budget is handed down.