“There are deep seated concerns across the industry about what appears to be nakedly political pork barrelling and an egregious lack of process or transparency,” one power industry executive – speaking on condition of anonymity because of the pre-election atmosphere – told The Australian Financial Review.
Mr Morrison and energy minister Angus Taylor defended the projects including the pumped hydro projects in Tasmania again on Wednesday, saying that Snowy 2.0 had gone through a detailed planning process.
“They are good projects but need government involvement. That is why we will play a role if the numbers stack up,” Mr Taylor said. “Given the environment we face, though, there is every – more than every chance the number also stack up on this project”.
But an executive from another power company said, “It’s extremely disappointing but not unexpected. This is the behaviour we’ve come to expect from this government, who are happy to put politics ahead of economic outcomes for the community.”
This executive said the Prime Minister’s announcement of the conditional underwriting of the Tasmanian hydro projects came as private bidders for the generation underwriting program would struggle to finalise their bids in the five weeks remaining before the government is likely to into “caretaker mode” ahead of the election due to be held by May 18.
“Clearly this is about the politics of securing an outcome to announce,” he said. The government has found its lack of climate and energy policies a liability in inner city seats in the Wentworth byelection in Sydney and the Victorian state election, and is seeking to claw back ground from Labor, which has aggressive carbon reduction and renewable energy targets, for the federal election.
Tassie interconnector costly
An executive with a third company said the money for pumped hydro feasibility in Tasmania was small beer for “a few headlines” but the cost of a second interconnector from Tasmania to Victoria – about $2.5 million per megawatt of capacity on top of the cost of generating the power – was “not competitive compared to other mainland gas or pumped hydro projects”, making the economics “unworkable”.
The Australian Renewable Energy Agency found in a study that the Marinus Link would cost $1.3 billion to $1.7 billion for a 600 MW link and $1.9 billion to $3.1 billion for a 1200 MW link and “could become economically feasible in the early 2030s or as early as the mid 2020s – depending on when existing coal fired power stations retire”.
Rosemary Sinclair, chief executive of Energy Consumers Australia, said that the free for all risked raising prices for consumers rather than lowering them in a rapidly changing energy market.
“Affordability must be a constraint on all our investments and decisions about energy – an explicit criterion in our decision-making up and down the supply-chain,” Ms Sinclair said.
“That means that existing and future investment in the power system – networks, generation and retail – must be optimised based on consumers’ demands that not one more dollar is spent than required, and new investments are not made one day earlier than is necessary.
Australian Industry Group chief executive Innes Willox welcomed the government’s decision to proceed with Snowy 2.0 but said the impacts on competition and investment would have to be carefully managed.
“All sides of politics and all levels of government need to be careful to ensure that their future investments in the electricity system do not undermine the environment for necessary private investment,” Mr Willox said.