In August 2012 Australia imposed a carbon tax on fossil fuel generation, and almost immediately Hydro Tasmania took advantage by shipping large quantities of cheap hydropower to the mainland via the 500MW “Basslink” interconnector (image). But the shipments combined with a lack of rainfall in 2015 depleted the volume of water stored behind Tasmania’s dams – and then the Basslink interconnector failed. As a result Tasmania has now had to purchase diesel generators and reactivate its only gas-fired plant to avoid potential power shortages. Tasmania’s case is a classic example of how misguided government attempts to decarbonize electricity generation can seriously distort an electricity market.
First acknowledgements. What brought Tasmania to my attention was an article in the Marcus Review, and much of what I say here is repeated there. So why am I writing this post? Partly because the “Tasmanian crisis” merits a lot more publicity than it’s received, partly because I present some new data, and partly to give our Down Under readers a chance to sound off on a local issue which I’m sure some of them have strong feelings about.
Is there a drought in Tasmania?
We’ll get this out of the way first. As I’ve noted before just about everything bad that happens these days gets blamed on climate change, and the state of Tasmania’s dams is no exception.
ABC: Drought conditions hit Tasmanian farmers. After the hottest and driest spring on record for Tasmania in 2015, dams are drying up while dairy, beef and sheep farms are destocking.
Reneweconomy: Tasmania struggles with drought. The Apple Isle’s main source of electricity – hydro power – is being challenged by its driest ever spring, pushing reserves down to just 18.9 per cent.
the Tasmanian Government is refusing to call it a drought.
So officially there’s no drought. However, the one GHCNv2 rainfall record I can find for Tasmania that has data to 2016 (Hobart Airport, all the other records end in 2005), shows a drier-than-average 2015 and a declining trend in rainfall since 1958. This trend is most probably a result of shifts in ENSO patterns in the Pacific Ocean, but if it continues then watch out, Tasmania.
Figure 1: GHCN v2 monthly and annual monthly average rainfall, Hobart Airport. Data from KNMI Climate Explorer.
Tasmania’s electricity sector
Hydro Tasmania does a conspicuously poor job of supplying hard data on its operations so information is limited. Various sources of data have been used to compile the data shown below:
Figure 2: Tasmania electricity demand 2015. Data from Marsden Jacob Associates
According to Figure 2 Tasmania consumed about 10TWh of electricity in 2015. Average daily consumption was around 27GWh and peak load of around 1,650MW occurred in early June.
Tasmania’s installed generating capacity, including recently-purchased diesel units, is around 3,000MW according to Wikipedia . Note that the mothballed 208MW Tamar CCGT plant is now back up and running:
- Hydro: 2,341.3 MW
- CCGT: 208.0 MW
- Wind: 310.5 MW
- Diesel: ~100.0 MW
TOTAL: ~2,959.8 MW
And 3,000MW is enough to supply demand at a capacity factor of about 40%, all other things being equal.
But of course all things are not equal. Tasmania can only generate electricity from a dam if there’s water behind it, and there’s precious little left:
Figure 3: Storage in Tasmania’s reservoirs 2010-16, data from Hydro Tasmania
Between July 2012 and July 2014, while the Australian carbon tax was in place, power sales to the mainland through the Basslink interconnector lowered Hydro Tasmania’s dam storage capacity from about 7,700 GWh to about 4,100 GWh – a loss of 3,600 GWh. But this isn’t what did the damage. In July 2014, when the carbon tax was repealed, hydro storage was not that much lower than it was in 2010 and there was no immediate cause for alarm. But then came 2015, a low-rainfall year that didn’t replenish the reservoirs, and then in December Basslink failed. This mandated an immediate increase in hydro generation which led to the rapid drawdown of what water was left, as shown by the precipitous decrease at the right edge of the Figure.
Figure 4 gives a detailed picture of Tasmania’s generation over the period of the Basslink failure. Before the failure Tasmania was importing up to 40% of its power through Basslink, presumably to give its depleted reservoirs a chance to recover. But Basslink began to give problems early in December (note the thinning of the red layer) before failing completely, and to pick up the slack hydro generation had to be upped from 600 to 1,000MW, although by February it had fallen back to 600MW again because of the recommissioning of the Tamar Valley CCGT plant.
Figure 4: Tasmania generation by source during period of Basslink interconnector failure. Image from CEDEX.
How much money did Hydro Tasmania make on hydropower sales?
A cool $300 million.
Figure 5 shows Basslink interconnector flows over the period of interest. Note how the flows changed immediately to dominantly positive (Tasmania exporting) as soon as the carbon tax came into force and immediately back to mostly negative as soon as it was repealed.
Figure 5: Basslink flows before, during and after Australian carbon tax. The vertical dotted red lines show the period over which the carbon tax was applied. Data from Marsden Jacob.
The impact on Tasmanian electricity export revenues is shown in Figure 6.
Figure 6: Hydro Tasmania export revenues before, during and after Australian carbon tax. The vertical dotted red lines show the period over which the carbon tax was applied. Data from Marsden Jacob.
A question that arises here is whether Hydro Tasmania’s exports were planned or whether the Australian carbon tax automatically generated flows of cheap energy going north across the Bass Strait. According to O’Gorman & Jotzo (2014) it was all planned in advance:
With the knowledge that the (carbon tax) policy may be short-lived, hydroelectricity generators rushed to take advantage of higher prices in 2012/13. Once the carbon price was legislated in late 2011, some hydro producers conserved water until July 2012 when they were able to sell electricity at an inflated price (Hydro Tasmania 2013, p.22). The increase in hydroelectricity production in 2012/13-2013/14 was expected and was an example of the carbon price doing exactly as intended, making it more appealing for renewable generators to produce more power.
So whose fault was it?
If the last sentence of the quote above is correct and Australia’s carbon tax did exactly as intended then the lion’s share of the blame falls on the carbon tax. It can also be argued that Hydro Tasmania acted reasonably in taking advantage of the situation, particularly when it made $300 million without seriously depleting its hydro resources (Figure 3) – certainly if they hadn’t someone would be asking why they didn’t.
Where Hydro Tasmania fell down was in failing to maintain an adequate reserve margin. Their reserve margin consisted effectively of the Basslink interconnector, and interconnectors break, and Basslink broke. They also failed to allow for a low-rainfall year, which can happen any time and which happened in 2015. As a result they have had to purchase 100MW of diesel generators at a reported cost of $44 million and restart the Tamar Valley CCGT plant to avoid potential blackouts, which they claim are highly unlikely even while their staff are reported to be preparing for them.
Tasmania is in fact in a situation similar to Venezuela, where continuity (or in Venezuela’s case reestablishment) of electricity supply is contingent on rainfall eventually refilling the reservoirs. At the moment Tasmania’s reservoirs are reported to be at less than 15% of capacity, so the future is very much hostage to the weather. A few more dry years and Tasmania could be in trouble.
Finally, a link to Hydro Tasmania’s plans to extricate itself from its current predicament is provided here. It doesn’t read very convincingly.