Australia’s future energy market – Tasmania’s competitive advantage 

Australia’s energy sector is undergoing significant transformation, with a rapid acceleration of retiring coal plant expected in the late 2020s.

Battery of the Nation is planning for an orderly, secure and cost-effective transition for the energy sector.

Development of additional interconnection across Bass Strait would unlock the full potential of Tasmanian hydropower in transforming the Australian energy market. It would also trigger significant development of new renewable energy, both in Tasmania and in Victoria. 

Additional interconnection would support expansion of Tasmania’s existing hydropower system, through development of pumped hydro, providing the firming capacity that will be needed to support a future Australian energy market characterised by decreasing coal plant and increasing wind and solar.

The Tasmanian opportunity is extremely cost-competitive with other realistic options for Australia’s energy future.

When implemented, Battery of the Nation would put Tasmania’s energy needs beyond doubt, and ensure that Tasmanians enjoyed the lowest possible power prices.

The need for energy market change

The need for market change

It’s expected that in coming decades the National Electricity Market (NEM) will rely less on coal and more on renewable energy sources like wind and solar.  These changes are already starting to happen, and the late 2020s is expected to be the start of rapid change. The graph shows the rapid decline of coal from 2028 and the impact on overall generation capacity.

Wind and solar are what’s called ‘variable’ energy sources (as the sun doesn’t always shine and the wind doesn’t always blow). If we rely more on these sources, there’ll be a much greater requirement for ‘firming’ capacity, to ensure energy security and support variable generation sources.

How will Tasmania deliver on this opportunity?

The Battery of the Nation opportunity offers economies of scale, diversity and flexible, reliable renewable energy resources. This is combined with cost-competitive, large-scale storage that can be built in stages, aligned to market drivers. 

This opportunity can bring significant benefits to both Tasmania and the rest of the NEM.

The advantages of the Tasmanian solution are summarised below. You can read more detail on these outcomes in our full report – Battery of the Nation: Analysis of the future National Electricity Market.

Significant Tasmanian hydropower potential

Tasmania has an extensive hydropower system that can be repurposed for the needs of a future market, to quickly and reliably support variable generation. 

The state also has significant pumped hydro potential which is very cost competitive compared to other storage options. Most identified options are $1.5M / MW or less to develop and can offer a diversity of storage lengths ranging from hours to several days.

Significant Tasmanian wind potential

Tasmania is often talked about as having the best wind resource in the world, lying directly in the path of the Roaring Forties. 

This wind resource is relatively untapped and plentiful. Tasmania’s other clear advantage is the different wind pattern to other states.

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Cost competitive coordinated solution

Tasmania’s renewable energy solutions are lower cost than other credible options.

Our wind power, pumped hydro potential and further interconnection create a credible and cost-competitive solution to address the energy trilemma.

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Addressing the energy trilemma

Affordability, security and sustainability make up the energy trilemma. The Battery of the Nation opportunity addresses all parts of this equation, in a coordinated system solution.
Importantly, our analysis shows that flexible hydropower can reduce reliance on gas for firming services and will reduce energy resource costs by as much as 20%, putting downward pressure on prices to customers.

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National planning alignment

Future energy solutions must fit with national energy market strategies and planning.

Since the release of our report in June, Hydro Tasmania welcomes the first release of the Australian Energy Market Operator’s Integrated System Plan (ISP) and its support for developing the Battery of the Nation initiative.

Battery of the Nation is one of two major existing energy storage proposals (along with the Snowy 2.0 project), identified in the ISP released by AEMO.

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What does this mean for Tasmania?+

The Battery of the Nation opportunity could:

  1. Ensure the lowest possible power prices for Tasmanians
  2. The renewable energy developments proposed under Battery of the Nation are extremely cost effective compared to other realistic options. This will put significant downward pressure on Tasmanian power prices.

  3. Ensure long term energy supply security for Tasmania
  4. Thousands of megawatts of new wind generation on island and more interconnection to the mainland would mean secure long-term energy supply for Tasmania.

  5. Provide a long term economic stimulus to regional areas of Tasmania
  6. The investment in pumped hydro, wind generation and transmission will be incremental over decades and focused on areas outside major city centres. This will generate significant, ongoing economic stimulus in regional areas of Tasmania.

The benefits for mainland Australia...+

Australia is going to need huge-scale renewable development in coming years and the Battery of the Nation plan is one of the most achievable and competitive solutions to Australia's looming energy challenge. Australia now has a clear and viable solution to invest in, for building the renewable storage and wind farms our nation needs.

This will bring national benefits including:

  1. Ensure the lowest possible power prices for the NEM
  2. Compared with credible alternatives, the renewable energy developments modelled under Battery of the Nation would put downward pressure on prices to customers across the NEM.

  3. Provide stable, secure and reliable energy supply
  4. The ability to leverage existing assets and storages will enable Tasmania to provide critical system balancing and firming services to ensure reliable energy provision in the NEM.

  5. Meet Australia’s energy sustainability targets
  6. Investing in Tasmania’s world class wind resources will help deliver Australia’s energy sustainability targets and international carbon reduction commitments.

The next steps…

This report is only the first stage of the investigation. 

Its conclusions confirm Battery of the Nation is extremely competitive and cost-effective, and further strengthens
the case for more interconnection across Bass Strait.

TasNetworks is undertaking a formal assessment of further Bass Strait interconnection, which would unlock Tasmania’s untapped wind energy potential.

To better understand the case for a larger Tasmanian role in a future NEM,
modelling and analysis will continue to be developed. Hydro Tasmania will work
closely with TasNetworks, AEMO and other key stakeholders on the
next stage of analysis.

© Hydro-Electric Corporation 2019