Hydro Tasmania to end work on TasWind project

27 October 2014

Hydro Tasmania will not proceed with the TasWind project on King Island.

CEO Steve Davy said the feasibility work to date had clearly indicated the project was not economically viable. The Corporation will now focus its efforts on investigating the feasibility of a second inter-connector across Bass Strait.

The original TasWind concept announced in November 2012 was for the construction of a 600 megawatt wind farm on the island, with the power generated to connect to the National Electricity Market (NEM) via a high-voltage underwater cable across Bass Strait to Victoria.

The first stage of a feasibility study has been underway for just over a year.

Mr Davy said Hydro Tasmania’s decision not to proceed any further with the TasWind project was based on analysis showing:

  • It was not economically viable as a stand-alone wind farm project or as a staged connection to Tasmania.
  • Changing economic conditions had seen the estimated capital costs for the wind farm alone increase by around $150 million.
  • Extending TasWind as a staged connection to Tasmania would be more expensive than other direct connection options between Tasmania and Victoria.

 

Mr Davy said the case for TasWind was highly dependent on being competitive through a high quality wind resource, a highly favourable connection point to a load centre and attractive equipment and construction costs due to the scale of the project. Over the past 12 months, the original business case projections had been impacted by a range of factors, including:

  • a lower Australian dollar increasing the cost of equipment such as wind turbines, high voltage direct current (HVDC) cables and converter station equipment;
  • impact on transmission efficiency as a result of loss of industrial load near the likely cable connection point in Victoria;
  • reduced revenue projections as a result of declining demand across the National Electricity Market (NEM); and
  • projected increased on-island construction and infrastructure costs.

 

He said it was no secret TasWind was under considerable pressure as a result of changing external factors. He said the accumulation of information over the past few months had led the Board to agree to discontinue work on the project at its meeting on 22 October.

While the eventual outcome of the current Renewable Energy Target (RET) negotiations at a federal level would determine the future of major renewable energy projects across the country, the Board decision on TasWind was, in the end, driven by economics.

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

“We have exhausted all avenues by which this concept could progress and now do not believe it appropriate to continue with the feasibility study. We will now focus our resources on further investigating the benefits and viability of a second inter-connector as outlined in the Tasmanian Government’s recent state budget.”

Mr Davy said the second inter-connector offered the best opportunity for Tasmania to maximise its position as Australia’s renewable energy powerhouse.

He said Hydro Tasmania had already undertaken preliminary work on the second inter-connector option. This had looked at potential market benefits, capital cost estimates, broad economic assessment of a range of options and their impact on Hydro Tasmania, and an initial evaluation of potential landing points and cable routes in Victoria.

Mr Davy said a second inter-connector could provide significant strategic advantages for Tasmania such as support for further renewable energy development, including increased output from hydropower and wind, as well as greater market competition.

However, it was very early days and any decision on proceeding to full feasibility was some way off.

Mr Davy said a key focus for Hydro Tasmania over the next 12 months would be ensuring the second inter-connector investigations reflected the Tasmanian Government’s commitment to developing an energy policy that built on expanding Tasmania’s competitive advantage.

King Island

Mr Davy thanked the King Island community for its considerable interest in the project and the patience it had shown during the community engagement phase of TasWind and the early feasibility work.

He said Hydro Tasmania would continue to support King Island through its ongoing operations and presence on the island and its support for a range of initiatives and events such as the King Island Imperial.

“We recognise that the TasWind project has created significant community debate on the island over the past two years,” Mr Davy said. “We also recognise that today’s announcement will be received with mixed emotions.

 “Hydro Tasmania believed very strongly from the start that this was a project worth investigating and that the local community needed to be involved in the process. We wanted King Islanders to be given every opportunity to better understand what was being proposed. It is their island and their home.

“The initial concept showed considerable promise but in the end the project simply did not stack up.”

Ends                                                                     

Released by Samantha Meyer, 03 6230 5746