The current failure of the subsea power link between the mainland and Tasmania has cost $560 million since the December failure, according to energy market analyst, EnergyQuest.
While the Singaporean-based owners of the Basslink infrastructure have now targeted a revised restart for the end of this month, the new EnergyQuest report released today said the Basslink related economic losses to date are at best conservative.
Basslink is a high-voltage subsea power cable crossing Bass Strait, connecting the Loy Yang Power Station in northeastern Victoria to the George Town substation in north eastern Tasmania, allowing two way flows to service peak and base load electricity demand. The cable had been a lifesaver for drought-gripped Tasmania as the majority of its electricity is from hydro generation.
The link had to be shut down on December 20 due to a cable fault about 100 kilometres off the Tasmanian coast.
During the three month period, the state’s peak power price soared more than 500 per cent to $257.36/MWh.
“The estimates do not take into account the economic cost of lost production by the larger industrial gas users in Tasmania,” Dr Bethune said.
“We have also assumed that Tasmanian power prices would have increased anyway to some degree as in other east coast states.”
The new estimates are based on the volume of electricity generated in Tasmania between December 2015 and April 2016, multiplied by the difference in power prices between the most recent period and the corresponding period 12 months previously.
Electricity prices on the east coast mainland in 2015-16 were 17.5 per cent higher than in 2014-15 and the $560 million estimate assumes that there would have been a similar increase in Tasmania, even without the Basslink failure.
Dr Bethune said the Tasmanian situation would have been even worse without the back-up of Victorian gas supplies from Longford via the Tasmanian Gas Pipeline.
Production from the ExxonMobil/BHP Billiton plant at Longford in Gippsland “roared ahead”, increasing by 66 per cent in Q1 to 64.2 petajoules (PJ) as it met increased demand not just from Melbourne and NSW but the stricken Tasmanian energy network.
This was the Joint Venture’s highest Q1 production in at least a decade.
“During Q1, gas supplied 30 per cent of Tasmania’s electricity, up from virtually zero in Q1 2015,” Dr Bethune.
“Gas could have actually done a lot more but it took a month from the time of the Basslink failure to recommission the gas turbines that had been earmarked for sale at the Tamar Valley power station.”
Former Howard Government minister, Mr Warwick Smith and the Clean Energy Finance Corporation are now undertaking a study into a duplicate cable, Basslink 2, at an estimated cost of $1 billion.
“Any studies into improving Tasmania’s energy security should not be limited to one option costing one billion dollars,” Dr Bethune said.
“As the current crisis has shown, Tasmania already has a good energy security blanket in the Tasmanian Gas Pipeline (TGP), which was still only utilised an average 58 per cent during the crisis”, he said.
“The main constraint on doing more was limited gas-fired generation in Tasmania. Keeping the Tamar Valley power station on standby could be a much more cost-effective option than a second Basslink ,” Dr Bethune said.
The EnergyQuest report also found gross Australian LNG production increased by 53.2 per cent qoq to 10.1 million tonnes (Mt) with the ramp-up of production from APLNG and GLNG projects in Queensland and the first cargo from the Gorgon project in Western Australia.
Other highlights from the report include a 26.4 per cent increase in petroleum production; a drop in domestic gas production qoq in Q1 ro 262.6 PJ, despite domestic gas production growing by three per cent qoq in Western Australia to a record 94.7 PJ.
Total Australian natural gas and ethane production was up 33 per cent in the quarter compared to the March 2015 period at 774.1 PJ with increases in all basins except Bonaparte, Perth and Otway.
The report found that while east coast electricity demand has finally started to rise after years of flat or negative growth, coal and renewable energy sources are meeting that demand at the expense of gas, with gas-fired generation falling 14% qoq in Q1 2016.