The renewables-rich island state of Tasmania has big plans to become a green battery for the mainland, however, the project is set to cost billions and not everyone's convinced that the economics stack up.
In 2017 with much fanfare, then Prime Minister Malcolm Turnbull announced two major pumped hydro projects – Snowy 2.0 in New South Wales and the "Battery of the Nation" in Tasmania.
Both states have used hydro-electricity for decades and, in Tasmania, it is the main source of electricity.
Normal hydropower is created by storing water on high ground and running it downhill to spin a turbine at the bottom.
Pumped hydro operates on the same principle, except that two dams, one higher than the other, work in a cycle that pumps water into the upper reservoir during off-peak hours.
Potential energy is then stored and generated when it's needed — virtually a big, green battery.
Snowy 2.0 is well underway but the project has faced delays and cost blowouts.
Tasmania's project, however, is still at the feasibility study stage.
The island state's ambition to become the so-called "Battery of the Nation" hinges on someone funding two undersea Bass Strait cables, the Marinus Link, connecting it to Victoria.
She said this included the state's variable wind resource, "and the hydro resource we've got here and the pumped hydro potential we've got here".
While there is already an undersea cable connecting the island state to Victoria, called Basslink, it is running close to capacity and cannot carry any additional power.
When the Australian Energy Market Operator (AEMO) releases its latest plan to improve the grid on Thursday it's expected to again list Marinus Link as one of five key "actionable" projects.
The cables would have a combined, 1,500-MW capacity, which is enough to power up to 1.5 million homes and is roughly the equivalent output of the former Hazelwood coal-fired power station in Victoria.
Marinus Link is now expected to cost around $3.8 billion, after its price tag was recently revised upwards.
The federal and Tasmanian governments have already committed more than $200 million to pay for feasibility studies and a business case, with a final investment decision is set for 2024.
According to AEMO, the first cable could be built as soon as 2028, and the second from 2030, and would allow Tasmania to double the amount of electricity it exports.
"But we're also going to need what's called dispatchable energy, because a lot of the new energy will come from wind, it will come from solar."
"And that's great a lot of the time, but some of the time, it's not windy, and it's not sunny, so we'll need to store that energy. And that's where we can turn on hydro, and pumped hydro."
Tasmania does not need the extra energy, but the state's public-owned energy industry would make money from exporting the excess power to the mainland.
Mr Molnar said the current hydro system has enough capacity to immediately export energy into the first Marinus Link cable.
"The second cable relies on us constructing a pumped hydro power scheme and, again, we've done all the work to position ourselves to be ready to go with that," Mr Molnar said.
But the projects do not come cheap.
The estimated cost has already gone up. It could end up costing a combined $10 billion, including $2.25 billion for Battery of the Nation and $3.5 billion for Marinus Link. That price does not include wind development either.
Who pays?
Who pays for Marinus Link and the Battery of the Nation project is still to be worked out.
Right to Information — Freedom of Information in other states — documents show the Tasmanian government does not want to pay half the cost.
The projects could benefit from the new federal government's capacity mechanism to incentivise investment in dispatchable forms of energy such as pumped hydro, and its Rewiring the Nation policy to upgrade the electricity transmission network.
Bruce Mountain from the Victoria Energy Policy Centre is critical of Snowy 2.0 and Tasmania's plans to become the Battery of the Nation.
"Tasmania does have a great hydro resource, and it's been to Tasmania's advantage for years," Mr Mountain said.
"But the technology involved in making it available to the mainland is just too expensive and not needed, when now there are ever better alternatives to hand.
Mr Mountain said AEMO had not included the cost of building the wind generation needed to make the Battery of the Nation project and Marinus Link worthwhile. This, he said, could add another $5 billion to the total cost of Battery of the Nation.
"The two go together. You can't account for the cost of Marinus Link without taking into account the cost of the generation needed to make it useful," he said. "And AEMO hasn't done that.
Mr Mountain's research, which was commissioned by the Bob Brown Foundation, found there were cheaper alternatives.
"We found you could build sufficient capacity of a four-hour battery in mainland Victoria to give you as much peak production as the new cables will for half the cost," he said.
"And you could build enough eight-hour [batteries] to get the Marinus capability at roughly equal cost, just to the cost of the cable."
Victoria — which stands to benefit most from Marinus Link and the Battery of the Nation — has other priorities.
The Victorian government — which would likely have to share the cost of Marinus Link — has instead identified the $4 billion KerangLink, which would connect the state to New South Wales, as its priority project.
Lessons from Snowy 2.0
Public Interest Advocacy Centre senior energy adviser Craig Memery said the Tasmanian Battery of the Nation project was a sounder investment than Snowy 2.0, which he describes as being "planned on the back of an envelope".
"So, what we really need to do with projects like — this to make sure the consumer interest is reflected — is to change the cost-recovery arrangements in a regulatory framework, so that the beneficiaries pay."
Mr Mountain agreed.
"I don't think [Battery of the Nation] is going to be the white elephant that Snowy 2.0 is very likely to be. So, I think, the issue is not its use. The issue is its cost," he said.
Get on with it
Grattan Institute director of energy Tony Wood has a different point of view.
Mr Wood acknowledged how costly pumped hydro can be.
He said the recent chaos on the National Electricity Market was an example of why Australia needed alternative forms of energy storage as ageing, coal-fired power stations shut down.
"What has changed in the last, only five years or so, was how quickly we are moving towards a renewable future," he said.
"Not very long ago, the Coalition government rejected having 40 per cent renewables by 2030. Now they themselves before they left office, we're talking about 70 per cent renewables by 2030. And Labor's talking 82 per cent."
Mr Wood's analysis of real weather data found that, when the national energy grid gets to 80 or 90 per cent renewables, wind and solar, it would encounter what he calls "the winter problem".
That's the period in winter when demand is high and renewables supply is low.
Mr Wood's analysis of real weather data shows there will be two weeks of every year where there won't be enough sun or wind to supply the National Electricity Market.
Mr Wood said the shortage of wind and solar was, at times, falling as much as 9 gigawatts short of demand for an entire fortnight.
"We will need the equivalent of Snowy Hydro all the time, and we need nine of them. Now we don't have nine Snowy Hydros," he said.
"Now, that means we have to do things faster."
What about private investment?
Mr Mountain said private investment in Marinus Link was unlikely, considering the history of the Basslink cable.
The Singaporean owners of the Basslink cable, Keppel Infrastructure Trust, were ordered to pay Tasmania $40 million in December after years of legal battles with the state government.
That cable broke in 2015 and plunged the state into a six-month energy crisis.
Instead of paying, Keppel Infrastructure Trust put the business into administration.
"It is the case that the experience with Basslink has made investors wary of a similar piece of infrastructure," Clean Energy Investor Group's chief executive, Simon Corbell, said.
"So, I think the key issues moving forward will be for there to be a good level of certainty around revenues associated with that project," Mr Corbell said.
"That will be a key issue for any new private investor.
"And, so, that comes down to how costs are recovered, and how costs are shared across different jurisdictions, recognising that this is an interconnector and, therefore, benefits both the Tasmanian but also the Victorian [states] and possibly other regions in the national electricity market."
Mr Corbell represents 19 companies with a combined generation portfolio of 11GW, and value of more than $20 billion.
Problems with the grid meant that private investors were increasing the cost of capital and that was making projects more expensive, or causing them to invest elsewhere.
"They're investing in other OECD markets — such as North America and Europe, North Asia — which have less of a risk profile, compared to the Australian market."
"The pools of capital are available.
"It's really about moving through some of these detailed issues of future market design when it comes to grid congestion, and access to grid when it comes to transmission infrastructure and construction, because that will help reduce those risks from a consumer and from an investor perspective."
