Dr WOODRUFF - To the Chair, Mr Gill or possibly to the CFO or CEO, in a media release on Monday, TasNetworks has the current updated estimated costs of stage 1 and stage 2 Marinus. Stage 1 at $3.85 billion and stage 2 at $2.8 billion, which is the total if the complete project continues on cost at $6.65 billion. The same release claims that there will be savings to a typical household user from stage 1 of $35 to $40 a year. Mr McGoldrick said, 'Even with inflation, Marinus is a proven winner for the wallets of Tasmanians'. Chair can you explain to us and table the data that you have used to come up with that estimate?
Mr GILL - The first point to note is that that is Marinus Plus for the north west development. The north west development itself will facilitate power move from within Tasmania literally to bring additional generation and load within the island. That's the first thing to separate out of that.
I will let the team get in to it in more detail but in broad concept the ability for us to inject long duration storage into the national market is a mechanism of helping to keep prices down in Victoria. Those lower prices in Victoria flow through to Tasmania by the connection of the two nodes. It is a combination of the cost of Marinus Link and the benefits of Marinus Link that get you the $35 to $40 of net benefit.
I am sure we can table the details.
Mr McGOLDRICK - Thank you. This is the basis of the release is a pricing study that was carried out by FTI Consulting. They chose that the first stage of Marinus is expected to reduce the wholesale energy cost component for a typical residential consumer between $90 and $95 per years on average. Taking these savings into account and the networks costs, calculated by TasNetworks, it is going to save, for stage 1, a typical consumer between $35 to $40 a year on average, and then further savings if and when stage 2 arrives.
Dr WOODRUFF - I understand it. I've read the release, I've been hearing figures as a member of parliament for years and years now about what it's going to save Tasmanians, but I'd like you to table the information that you used to come up with that. Otherwise, it's hard to have confidence going forward in this matter unless there's full transparency from TasNetworks. I don't think it's fair for you to expect to be able to make statements like that without having the evidence to back them up.
Mr McGOLDRICK - My understanding is that the evidence is going to be released by Marinus Link in due course, in the matter of a month.
Dr WOODRUFF - I would prefer it if I put it on notice and you provided it to us today.
Mr McGOLDRICK - This is a matter that will released into the market and to the regulatory regime. At the moment, the report is a draft report and we're checking through it. It will be released into the market in due course.
Dr WOODRUFF - Why have you done a media release on the back of draft figures that you haven’t properly checked?
Mr McGOLDRICK - I thought it was really good news. It confirms the importance of stage 1. About two-thirds of the benefits of Marinus Link will flow on stage 1 so I thought it was important information to bring.
Dr WOODRUFF - Excuse my eyebrows going right up into my forehead, but we've been hearing these sorts of figures for years and years; the jobs, the savings, the values and we've never seen the evidence. We're just getting a bit tired, especially on the back of a media release that shows that Marinus has basically completely doubled in cost. How you can possibly say that there's going to be money flowing through to Tasmanians who are suffering in a cost-of-living crisis - the savings would be about $3 a month.
I don't think it's appropriate for a taxpayer-funded business to go spruiking a PR campaign without having checked the figures and being prepared to provide Tasmanians with the evidence to back them up.
Mr McGOLDRICK - We are fortunate that we work in a regulatory regime that checks these things very carefully. We have brought Marinus through various stages of approval in that regime. At each stage of approval, AEMO has stood behind this project as the number one actionable project in the National Electricity Market. That is a critical piece of information.
It is not analysis by me, it is not analysis by TasNetworks, it is not analysis by Marinus Link. It is independent analysis of the optimal development path of the power system. It has indicated consistently that significant benefits will flow. Costs have escalated, like they have for many linear infrastructure projects across the world, but the fact is the benefits have also gone up and through the ReCFIT process and through this sort of analysis, it demonstrates that this project is viable and will bring savings to average Tasmanians.
Dr WOODRUFF - It's a different thing talking about global benefits. I'm talking about specific amounts of money that Tasmanians are going to save on their power bills, without being able to back that up. I think that is an abuse of a business, particularly a government-funded business, to not be able to provide the evidence.
Mr McGOLDRICK - In due course that will be released.
Dr WOODRUFF - In due course isn't enough, with respect to Mr McGoldrick. Will you take it on notice, minister, to provide that information ?
Mr DUIGAN - If Mr McGoldrick says that is difficult information to provide in a -
Dr WOODRUFF - It's not too difficult to do a media release, spruiking another PR campaign trying to support your Government's position.
Mr DUIGAN - The flow-on benefits for Tasmanian energy consumers is one element of what project Marinus is here to bring.
Dr WOODRUFF - Totally unsubstantiated so far.
Mr DUIGAN - We will be doing an all-of-state business case that will be available publicly late next year before any final investment decision is made. We will embrace the numbers. We will provide as many numbers as are able to be provided in that instance because we and I want this to be a good deal for Tasmania.
Dr WOODRUFF - I have heard it all before, thanks minister.
Dr WOODRUFF - The entire Marinus project was projected to be around $3 billion when it was announced just a few years ago. Now it is $6.65 billion and the minister in his opening statement reminded us that recently it was $5.5 billion. These are enormous amounts of money that this project has been increasing by.
Stage 1 is predicted to be $3.85 billion but the final investment decision is not until December next year, so how can you be confident that the costs you have said today will remain that way next year? Should we be preparing ourselves to spend more taxpayer money towards this project by the end of next year? Just for clarification, you can answer me directly in this GBE scrutiny.
Mr GILL - To clarify, there hasn't been a move from $5.5 billion to $6.65 billion. The $5.5 billion is for the Marinus chunk alone, the $6.65 billion is for Marinus plus North West TD. Sometimes I can understand how they are brought together, because they'll be funded as one, but in relation to the cables alone, until you go out to the market and undertake price discovery, the best you can do is your best estimates.
We happen to be in a world right now where every country in the globe is trying to transform to get climate change under control. That has resulted in many countries moving into undersea cable activities. Interconnecting is a key part of geographic dispersion in the renewables space. We also have offshore wind which is also taking up a huge amount of cables. The cable market globally is under a lot of pressure. When demand goes up and supply is reasonably constrained, then price goes up. Notwithstanding that, the benefits of this project are high and we remain in a positive net benefit situation.
Dr WOODRUFF - You can understand, though, that it seems disingenuous and inappropriate to be making claims about how much it's going to be saving people in their power bills when the prices are going up by it seems a billion dollars every year to six months. It's a very unstable situation to make any claims about actual benefits for Tasmanians and it's hard to see it as anything more than just a PR exercise. Why is our publicly funded company spending money doing PR on what is meant to be a public service?
Mr GILL - There is significant interest in this project and it has huge implications for Tasmania. We have given progressive updates on our view but we do recognise that there is still a way to go before we get to the financial investment decision point. There is a whole-of-state business case to be completed but we are giving information as we see it during that process.
Dr WOODRUFF - To the final investment decision, many of the renewables projects that are intended to service North West Transmission Developments and Marinus Link have only just begun their approvals process and some of them aren't even in that stage yet, so they are likely several years away at best. There could also potentially be further legal delays from challenges, assuming that the projects are approved by the federal environment minister and also that they are not subject to conditions that the proponents might see as making them commercially unviable. The normal process for planning transmission developments is based on the capacity that is required for an identified project beforehand.
How can Marinus and North West Transmission have a final investment decision made if there isn't certainty about the amount of new generation that will be online by the time Marinus is ready to operate? It seems backwards. I am concerned that what we are seeing here is the bad old days of gold plating, where you build the infrastructure on public money with the assumption that there will be a capacity generated to fill it. Is that what's really going on here?
Mr GILL - The good thing about the processes that govern us is that we are a fully regulated entity. That means there is an independent party that decides whether the investments we make are able to recover revenue from a customer base. That, I think, ought to give great certainty to the community that this is an investment that will have solid foundations in both economics and contribution to the various communities that it serves. Do you want to add to that, Sean?
Mr McGOLDRICK - I think that is the key. It is very important to realise we will make an FID in possession of information with respect to environmental approvals, procurement and we will have a cost. We have to make all of that information available in the contingent project application to the AER. They then determine whether the project can recover the revenue required. Their assessment is critical, the contingent project application is critical and Marinus Link is going through that process with the AER. Indeed, has been going through it for over a year.
We are expecting that we will get that CPA decision in two parts: one to cover early works and one to complete construction costs. I believe the early works decision will be in February or March of next year and the construction costs CPA will be, I believe, heard in October. We are expecting clarity on the certainty of revenue recovery through that process, and that forms an important element of the FID.
Mr DUIGAN - On Dr Woodruff's question, the rescoping of the entire project really speaks to what you are talking about. It is not at any cost - it is at a cost where the benefits stack up for Tasmania. I think that is a really important point.
Dr WOODRUFF - It has never been substantiated on paper so far.
Dr WOODRUFF - The Marinus project will be a massive burden on the Tasmanian taxpayer in some form or another. If it goes ahead, there are many assessment processes to proceed. Has TasNetworks signed any contracts with private entities relating to the Marinus project? If so, Chair, could you please detail what those contracts are for, who they are with and what the cost to the taxpayer is? I don't expect commercial in-confidence details but I would expect an overall cost.
Mr DUIGAN - I will take the first part of that question if I may, just around Marinus being a massive financial burden on the Tasmanian taxpayers in some form or another. I cannot let that stand without at least addressing that because I think -
Dr WOODRUFF - Provide us the data that shows it is not.
Mr DUIGAN - Marinus Link is a hugely important piece of infrastructure for Tasmania. We are approaching a time where our energy needs will become imbalanced -
Dr WOODRUFF - It has got nothing to do with money.
Mr DUIGAN - We rely heavily on climate for our energy security. We know that that is a challenge. We know those things. The do-nothing option for Tasmania is hugely problematic.
Dr WOODRUFF - My question to the Chair: has TasNetworks signed any contracts with private entities related to the Marinus project? Can we have the details of those, please? Not the commercial-in-confidence details.
Mr GILL - The result of a lot of the interactions we've had during our procurement process has been that we've had a reservation agreement established with a supplier. In the market at the moment, if you want to get a project the scale of ours built and you want to do it with a limited number of suitable quality cable manufacturers in the world, you've got to reserve a space years ahead in their factories. That has been done and -
Dr WOODRUFF - How much has been put on the line in that contract for that cable spot?
Mr GILL - I'm going to hand to Sean and Michael to see what we are able to identify at the moment in terms of numbers.
Mr McGOLDRICK - What I can say in general is that 33 new contracts were in this year to support project Marinus last financial year, 83 contracts are active across the project as at the end of June -
Dr WOODRUFF - So 33 and 83?
Mr McGOLDRICK - Yes, 83 are active. There were 33 new contracts so in total it is 83 and all of that would be with private entities because a range of different services are required to go through the development and approval phase of this project. There is a range of different providers -
Dr WOODRUFF - Can I take that list on notice or can you provide that to us now?
Mr McGOLDRICK - In terms of the total spend, you understand that the current contract value going up towards final investment decisions is projected to be $98.5 million. Actual spend last financial year was $32.7 million for Marinus Link and total spend with Tasmanian businesses is approximately $11.7 million and 21 of those businesses are Tasmanian, so already Marinus Link is specifically inputting into the local economy here and it will continue to do so to the tune of hundreds of millions of dollars through its development and approval and indeed construction phases.
The range of different services are engineering firms, legal firms, firms who work on specifically environmental issues, land access and management. These are companies that are well known in Australia and we're going to be spending money with them necessarily to develop the project at least for the next year and then further into the construction phase.
Dr WOODRUFF - Mr Gill, RecFIT (Renewables, Climate and Futures Industries Tasmania) has listed Whaleback Ridge as a project that is required in order for Marinus to go ahead. Your company has done work on Robbins Island, in terms of the north west transmission line. Have you done any work or been in conversations, or made any commitments with the proponents of Whaleback Ridge in terms of developing a transmission route for their proposal?
Mr GILL - I will start by saying that it is our job to work with both generation proposers and load proposers in the island to work out what the best way is to get their projects able to operate within our grid. I will pass to Sean, who does all of the interactions with these proponents to talk more about that particular request.
Mr McGOLDRICK - Last week, in line with our meeting with all of the proponents who may be impacted by the decision to stage the North West Transmission Developments, we met with the proponents of Whaleback Ridge. We had a very good conversation with them. We were informing them about the decision and making sure that they had the necessary information to consider the implications for their business. I am expecting in due course they will think through that and come back to us.
Just a word about the process that we do for all proponents: when developers are active and they wish to connect a generational load to our business, they come and talk to us. There are multiple-level engagements. We do connection studies, we exchange models, we have broad discussions. Over time these become much more serious and much more thorough. Eventually, it winds up with a formal connection application being made. When that is full and complete, it achieves a certain status in the national electricity rules. That allows us to go forward and put it into our plans. We can talk then with the Australian Energy Regulator about cost recovery in that regard. It is quite a layered process from very initial engagement - thought bubble almost, right the way through to some very detailed studies, all the way to signing a formal connection agreement.
Dr WOODRUFF - I understood Whaleback Ridge did not need Marinus for their project to go ahead but it sounds like Marinus needs Whaleback Ridge. What is the role of TasNetworks? Are you spruiking customers for Marinus?
Mr McGOLDRICK - Decidedly not. It is up to Whaleback Ridge to make a decision about where and how they want to connect on the network. They have a particular view of their own development. As I understand, it is complex development that involves both generation and load. I wish them the very best of luck in developing that. And when they know their requirements to connect to our grid, they will make a formal connection application and we will do the detailed work to connect them. It may need transmission reinforcement. It will certainly need the transmission connection, given where they are physically located. It may need deeper reinforcements. It may trigger earlier development of stage two of Marinus, perhaps. We don't know until we get the detail that we need to carry out connection studies and connection applications. But certainly not spruiking Marinus.
When I met with Whaleback Ridge last week it was just to inform them of the decision and they could think through the implications for the business. The engagement between Whaleback Ridge and TasNetworks heretofore is in and around that - 'what are you planning to build, what is the modelling of it, what is the detail behind it?, so we can look and see how that might connect to our network. So, very outline conversations at this stage.
Dr WOODRUFF - Okay. And what about Derwent Valley? There's a project for 150 megawatts proposed for a wind farm in Derwent Valley, which is in your annual report, proposed by West Coast Renewables, I understand. Can you provide an update on that project? Do you have a detailed map of the proposed location and what the discussions for transmission would be from there?
Mr McGOLDRICK - First of all, in terms of a detailed map, I'd direct you to the proponents themselves. The information that we have we put into the annual planning report; what exists there is what we can put out in the public domain.
Dr WOODRUFF - So there's been no discussion about transmission line routes?
Mr McGOLDRICK - I'm certain there has been some outline discussion, like we have with many other proponents, but I'm not aware of detail of that discussion and it's very early days.
Dr WOODRUFF - Is there anything that's been proposed?
Mr McGOLDRICK - Like many developers of both generation and load, they have a long and difficult path to get through, various different stages of their development. Things can change; they can decide to do it later or do it differently. We're in constant conversation with them, mostly over years, to try and get a suitable connection to the network that will meet their needs.
The proponents that we've been talking about, those two proponents you've mentioned, are good examples of that long process that we go through. Deep engagement at officer level, at executive level; we talk through these things. It's part of the process of reaching a formal connection application, which then gives a status to the project in terms of connecting to our transmission grid. We can then bring that forward through the regulatory process and make sure we allocate the costs appropriately between ourselves and the entity that's connecting.
