A plan to turn hydropower-rich Tasmania into the “battery of the nation” is now hanging by one 750MW undersea cable rather than two after spiraling inflation forced the Australian government to scale back the multibillion-dollar mega-project.
The federal government announced on Sunday that it was putting plans for one of those two cables on ice due to inflationary and supply chain pressures due in part to the Covid-19 pandemic.
The federal government has also upped its stake in the Marinus Link project to 49% to ease the pressure on the state government of Tasmania, which had warned of a “line in the sand” regarding its ability to pay.
That was after the expected costs for the project doubled from A$3bn ($1.9bn) to A$6bn. Delivering just one cable is now expected to cost between A$3bn and A$3.3bn.
Tasmania will now have a 17.7% stake in the project and now has the option to sell its stake to the federal government when it is commissioned. The state of Victoria has meanwhile maintained its 33.3% stake.
Marinus Link is currently undertaking a global tender process for HVDC cables and converter stations as it works towards a final investment decision by the end of 2024.
Australia’s minister for climate change and energy Chris Bowen said: “The Marinus Link has had challenges, but we are not going to let it hit the wall.”
Costs for “every big project”, and particularly the costs for cables, are going up at the moment, he said. “There’s several countries building these cables and there’s a lot of demand for the cables.”
“We’re also seeing supply chain challenges more broadly in the post-Covid environment. So, the cost has gone up. Tasmania indicated they couldn't bear those increased costs. The Albanese Government [is] going to step up and take the load.”
Australia’s Labor Prime Minister Anthony Albanese ran on a green ticket during his successful election campaign last year, promising to turn the country into a “renewable energy superpower”. He has committed to double the share of clean energy in the grid to 82% by 2030.
A key plank of that is the “battery of the nation” project, which plans to use and expand Tasmania’s extensive network of hydroelectric dams and energy storage facilities so they can help support the Australian mainland.
The Marinus Link project will allow excess renewable energy to be sent to Tasmania and stored in its dams and sent back to the Australian mainland when needed.
The project would also boost the energy security of Tasmania, which currently only has one electricity cable connecting it to the mainland. This failed in late 2015, sparking an energy crisis on the island.
The 255km Marinus Link connector will run undersea from North West Tasmania across the Bass Strait to Waratah Bay in Victoria.
The original 1.5GW plan for the project would have been equal to the power supply for 1.5 million Australian homes. However, the federal government maintains that even one 750MW cable would deliver “close to two thirds” of the benefits of the project as first planned.
Tasmanian Premier Jeremy Rockliff said: “This is a great outcome for Tasmania. It will mean jobs, economic growth, energy security and lower power prices with Tasmania investing its fair share and no more.”
“I’m very pleased we’ve been able to land this on the right side of our line in the sand,” he added.
This is not the only major Australian energy storage project that has been threatened by inflation. The Snowy 2.0 pumped hydro project in Kosciuszko National Park, New South Wales, has reportedly also seen its expected costs double to A$12bn.