The Liberal Government in Tasmania has pledged to leave the National Energy Market (NEM) if re-elected in the upcoming election, igniting fears that Victoria could be left vulnerable in heatwaves.
Premier Will Hodgman’s plan, ahead of the state election on 3 March, has been met with confusion and criticism from energy experts, which are questioning what the government intends to achieve.
The ‘Tasexit’ is part of the Liberal Government’s Tasmania First philosophy where local generators would not be given full freedom to sell electricity generated in Tasmania to other states.
Energy pricing will become more volatile if Tasmania leaves the National Energy Market
The move will fuel more volatility in energy pricing and will continue to upset the markets which have not stabilised, despite the government’s intention to introduce the National Energy Guarantee.
The Hodgman government says the plan is part of the state’s aim to reduce electricity prices, even though recent reports by the Economic Regulator found that Tasmania’s energy prices are the lowest in any state in Australia.
The policy document states that the move to break away from the mainland pricing system will reduce electricity prices by between 7 and 10 percent. It also said that it will deliver the lowest regulated electricity prices in Australia by the year 2020. Tasmania has also pledged to become totally self-sufficient in energy by 2022.
Energy security in South Australia and Victoria could be threatened
The Grattan Institute’s energy Director Tony Wood said that if the plan is implemented, energy security in South Australia and Victoria could be threatened.
The threat to South Australia is being offset by the already functioning Neoen wind farm and Tesla battery, a planned 150MW thermal solar plant and a virtual solar power plant to be built on rooftops by Tesla.
The Victorian government has also teamed up with Neoen and Tesla to build a 200 MW wind farm and a 20 MW battery array later this year.
He also said that it could also scupper the proposed second Basslink interconnector project. He said that it would make little sense to build another link if Tasmania was not going to play ball.
“Tasmania may only supply electricity when they feel like it, and that’s only if the price is attractive – in other words, high enough,” Mr Wood was quoted in Fairfax Media.
“It’s not a [complete] exit from the NEM, we’re not sure what they’re proposing to do. It’s hard to see how this will work,” said Mr Wood.
Experts say Tasmania has nothing to gain by leaving the National Energy Market
His thoughts were echoed by climate scientist Dr Hugh Saddler, who also spoke to Fairfax Media.
“It seems to be a strange way of working since the Tasmanian government has a monopoly of suppliers and [can] set prices how they want,” he said.
“I don’t understand what breaking from the NEM means unless it means they won’t buy electricity from Victoria.”
Tasmania plans to rely heavily on its hydropower assets to achieve this goal, with Dr Saddler stating in an Australia Institute National Energy Emissions Audit that, “the Tasmanian system consistently generates significantly more electricity than all other Australia hydro generation combined, a fact which is not well appreciated.”
Tasmania has the best long-term average wind power capacity in Australia
The Australia Institute also stated that Tasmania has the best long-term average capacity for wind farm power generation in Australia.
“It’s clear that pumped hydro of certain sizes can work, but it’s ownership, location, incentives, and impacts on the electricity market must be considered,” Dr Saddler said.
Energy Action analyst Ivan Slavich said he could not understand how leaving the NEM would have any benefit for Tasmania.
“On the face of it, I can’t see how it would be for them to split the NEM,” he said.
Tasmania is the only state to link wholesale prices to another state – Frydenberg
Federal Environment and Energy Minister Josh Frydenberg said Tasmania was the only state to link its wholesale price to another state.
“Linking the wholesale contract price to Victoria’s price was part of the move to try and introduce more retail competition, the closure of Hazelwood has pushed up Victoria’s prices, which has flowed through to Tasmanian prices,” Mr Frydenberg said, effectively saying that the Tasmania government brought any problems on itself.
He clarified that the state would not cut the physical power link to the mainland. “Tasmania is still part of the NEM and will continue to trade over Basslink.”