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TasWind isn’t feasible, Hydro finds

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A year-long Hydro Tasmania feasibility study has shown its $2 billion TasWind project on King Island is not economically viable.

Further planned Tasmanian wind farm investments totalling $2.3 billion are being disregarded by the Federal Government as it pushes ahead with plans to reduce the Renewable Energy Target (RET).

But Hydro Tasmania’s CEO, Steve Davy, left the proposed RET change out of a list of four principle factors that had blown TasWind away:

• A lower Australian dollar increasing the cost of wind turbines and other equipment;

• Loss of industrial load near the proposed cable connection point in Victoria, which impacts on transmission efficiency;

• Reduced revenue projections because of declining demand across the National Electricity Market; and

• Projected increased on-island construction and infrastructure costs.

“Our investigations eventually found that TasWind was not viable, even if the RET was maintained at the existing level,” Mr Davy said.

The TasWind concept announced in November 2012 was for the construction of a 200-turbine, 600 MW wind farm and a high-voltage underwater cable across Bass Strait to Victoria.

Mr Davy said a staged connection to Victoria via King Island would be more expensive than more direct options and the Government-owned business would now focus its efforts on investigating the feasibility of a direct inter-connector.

An additional cable link to Victoria would become essential to Tasmania if it were to lose core energy demand from heavy industry at any time in the future.

In that event, the existing BassLink would not have sufficient capacity to export all the excess renewable energy being generated.

The proposed additional link is strategically vital to other wind farm projects south of Bass Strait, but Mr Davy said a full feasibility study was still some way off.

The RET changes are looming as a major obstacle for three other Tasmania wind farm projects involving a total of more than 400 turbines:

• White Rock, a $1.2 billion, 220-turbine proposal by the cattle-farming Hammond family to generate 440 MW on uninhabited Robbins Island in the north-west.

• Cattle Hill, a $900 million, 160-turbine investment by OneWind near Lake Echo in the central highlands, with approval for 300 MW.

• Granville Harbour, a $200 million, 33 turbine scheme to produce 99 MW on Don and Royce Smith’s Granville Farm north of Zeehan.

The RET was originally a bipartisan target that required the equivalent of 20 per cent of Australia’s energy to be from renewable generation by 2020.

The Federal Government now intends to reduce the target by 34 per cent, from an existing 41,000 GWh to 27,000 GWh.

Renewable energy developers argue that changing the rules after commitments have been made will raise “sovereign risk" concerns about Australia in global markets.

There is talk of legal action.

The Labor Party, the Australian Greens and Palmer United are all opposed to the cut, so the eventual outcome remains uncertain.

But such a large reduction – allied with sluggish national energy demand – could cost Tasmania dearly and frighten away other potential investors in the sector.

The State already generates 50 per cent of Australia’s renewable energy through Hydro Tasmania’s water and wind assets.

Tasmania’s Minister for Energy, Matthew Groom, welcomed Canberra’s proposal to exempt the State’s aluminium and zinc plants from emission taxes.

“We will continue to lobby for an outcome that supports Tasmanian jobs as well as Tasmanian renewable investment,’’ Mr Groom said.

Footnote: Hydro Tasmania, which operates more than 290 MW of wind generation at four sites in the State, announced a record underlying profit of $242 million for 2013-14. The Government-owned business expects to return $233 million to the Government, including a dividend of $117 million. But retiring Chairman, David Crean, predicted tougher times ahead.

6 November 2014

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