Mr BAYLEY - It should be said that it should be made a priority and as much detail as possible given to all stakeholders so they can consider their options and make their applications in a timely manner.
While we are on the Tamar Scheme, when it came through the House, we challenged the minister who carried this on your behalf, Mr Barnett and sought some answers around payment for the arm of the scheme to Bell Bay. The minister effectively gave some guarantees that any potential hydrogen producer or customer at Bell Bay would ultimately pay the capital cost for that branch, let's call it. But, it seems a bit incongruous in our minds, how do you attract that player to Bell Bay when the system hasn't been built yet? The water may not be there.
Is it the Government's intention to build it first and then recover the capital costs through the water entitlements? Or, is it going to be a condition of allowing the player to access Bell Bay? How are you going to recover the costs? Can you give an iron-clad guarantee to Tasmanian taxpayers that it won't be them that is stumping up the capital cost for facilitating a hydrogen processor into Bell Bay?
Mr KNEEBONE - The short answer to your question is, we don't know what the exact funding regimen will be for the hydrogen extension to the irrigation scheme. It is not going to be the traditional irrigation funding regimen, which is 50 per cent from the federal Government, 25 per cent from the state, 25 per cent from the irrigators. We are not looking at an entitlement-based scheme for this.
We've done some modelling based on our expression of interest program that we ran. Through the expression of interest process, we identified that there is little appetite from the hydrogen producers for an up-front capital contribution. So, the recovery of any capital that's used, whether its borrowings or equity, to build the scheme or a combination of both, would need to be recovered through commercial contracts. Therefore, you would have to recover the cost of the debt or the cost of equity and build those into your commercial contract arrangements.
We went through a model and said that it is a fairly low risk at that level, even at the volumes that we were looking at for the extension of the scheme, which was about 12 000 megalitres, that even if you hadn't sold all of that, you'd basically have to sell about a third of that, and the scheme would still break even over a reasonably short period of time, given the assumption on the cost of water that we would put through.
That cost of water would need to take account of the return on and of capital. If would need to take account of any risks that would go with the supply of that. There is a risk premium that would be put on that as well, and any other back-up arrangements that would need to be put in place to secure the supply. In essence, the basic model is a commercial take or pay contract, that's locked in. That means that the off-taker has agreed to pay a certain amount regardless of what they take over a contract period.
Mr BAYLEY - Minister, can you talk us through the time line and the process for building the branch out to Bell Bay? What is the plan in the Government's eyes, in terms of making that happen and funding it? Is it still incredibly speculative? We've had numerous players that are interested. Surely you have turned your mind to how you actually deliver the capital? How do you deliver this water to that precinct so if one of them does come here to set up, they have access to water? I guess I am looking for a guarantee from you as well, minister, that taxpayers won't be footing the bill for that capital infrastructure.
Ms PALMER - Yes, for sure. It is anticipated that raw water will be supplied to Bell Bay in 2027. That's the anticipation and that time frame is consistent with the delivery of common-use infrastructure required to support the development of the Green Hydrogen Hub project at Bell Bay. I'm not sure if that completely covers off on your question and I can refer that to the CEO, but I can tell you that it is Government policy for the full commercial price to be paid by industrial users.
Mr BAYLEY - The full capital cost of that infrastructure, that's what you mean by commercial cost?
Mr KNEEBONE - The capital that would be recovered over time through operational charges. That's the model that's effectively being put forward. So, no up-front capital contribution by the users.
It does depend on whether or not we can get a Tamar scheme up and running. There is an option for a stand-alone scheme. That's why we are trying to relaunch the Tamar scheme at a revised volume. We have a preferred option which we are taking to our board in December and then relaunching water sales, hopefully, depending on that decision, before Christmas. That would probably see the majority of that construction completed by 2026, if that all proceeds and we get sufficient water sales.
Mr BAYLEY - And if no customer comes, if no hydrogen player comes to town?
Mr KNEEBONE - If no hydrogen player comes to town I don't think we're building anything.
Mr BAYLEY - But you have already built it on the spec that they will come.
Mr KNEEBONE - No, I don't believe that's the case.
Mr BAYLEY - You anticipate signing up water contracts with a hydrogen producer, through that recovering, over time, the capital investment and then the Government will make the investment decision. But the minister is saying the water is going to be there by 2027.
Ms PALMER - Anticipated.
Mr BAYLEY - When do you anticipate having a hydrogen producer signed up?
Ms PALMER - Correct me if I am wrong, but it's going to be the same process. We've to go out to water sales, no?
Mr KNEEBONE - We're sort of crossing boundaries here. My understanding is that there will be a process run by ReCFIT, the Department in State Growth, who will determine the arrangements in terms of who the seed or the hydrogen customers would be. We know at least one has a notice of intent in. They are an ethanol producer, but they are the ones that are most advanced. But, those negotiations are being done or that process is going to be run by a separate body, and we'll fall in and support that as they make those decisions and get to the point. I'm reasonably confident that no investment made until we have black ink on contracts.
Mr BAYLEY - Requiring energy as well?
CHAIR - I am giving the call to Mr Behrakis now, thank you.
