Editorial: Ownership key to second Bass Strait interconnector

The case for a second Bass Strait interconnector sounds feasible and logical but the big $3.5 billion question remains — who will pay for it?

A NEW business case that outlines the benefits of a second Bass Strait interconnector is encouraging news.

It reveals that for a $3.5 billion investment in a new high-voltage electricity link between Tasmania and mainland Australia, the Marinus Project would deliver up to 1400 jobs during construction and as many as 2350 jobs in renewable energy generation and storage infrastructure in the state. Key to making the figures add up has been the ongoing income the link would bring in.

The business case was funded by the state and federal governments and completed by TasNetworks and the Australian Renewable Energy Agency.

Back in February, a feasibility study into a 1200MW cable concluded that the project would be a net benefit to the state only in certain circumstances. So they went back and recast the figures based on a bigger 1500MW cable. Suddenly the case is much stronger. The argument goes that if we are going to spend $3.1 billion on a new cable, why not spend a bit more ($3.5 billion, or a 12.9 per cent jump) and significantly increase capacity by 25 per cent.

All this presupposes we will have excess renewable energy to export and it relies on more wind generation coming online and investment in pumped hydro — the process of pumping water back up into a dam to go through a turbine a second time and selling the extra energy generated at a high price.

If that can be achieved, there is no doubt there is demand for clean, green renewable energy.

As the coal-fired power stations of the major states become redundant, they are eager to buy clean power from other sources. There is real potential to build a new economy based on our ability to generate reliable, clean electricity and become an energy powerhouse on the national grid.

It all sounds feasible and logical but the big $3.5 billion question remains — who will pay for it?

UNCERTAINTY ON WHO WILL FUND SECOND BASSLINK CABLE

There are a number of options. One is that the state could build it outright — borrow the funds while money is cheap and reap the benefits of a large investment. That’s probably unlikely because along with the benefit, there is significant risk and a whole lot of debt to pay.

Another is to share the cost with the Commonwealth. This is clearly a preferred option.

In its business case, the Marinus link is seen as having the potential to allow the state and federal governments to underpin the security of the national energy market, boost jobs and services in regional areas and place downward pressure on energy prices.

The report also outlines the possibility of private investment during the life of the project.

Private ownership might provide a handy cash injection but carries a risk too, as the 2013 energy crisis caused by the Basslink failure has demonstrated. The Hydro has spent big money chasing $30 million in costs from the shutdown, and the matter is still not resolved. Private equity can be useful to fund big infrastructure projects but public ownership means the long-term income from the asset can be used to pay for public services like health and education.