Rising electricity prices as a significant political problem
The Tasmanian government has correctly identified rising electricity prices as a significant political problem, but failed to provide a long-term solution. With a state election expected early next year, the recent state budget sets aside more than $100 million to subsidize electricity prices for the next year. $70 million of this is forgone revenue to government from the publicly-owned Hydro Tasmania, flowing from the decision to cap electricity price increases at 2% for 12 months.
At the same time Tasmania has substantial hydroelectric generation capacity and excellent wind and solar resources. Prime Minister Malcolm Turnbull has said that he wants to see Tasmania become a ‘battery for Australia’.
Rather than spending more than $100 million to reduce electricity bills in the short term, this paper proposes to invest in building new, distributed solar and wind generation which will make Tasmania self-reliant and reduce bills over the long-term.
In a carbon constrained world that is transitioning to renewable, Tasmanian consumers and businesses should be enjoying significantly lower power prices and higher than average energy security.
Tasmania’s reliant on the NEM (National Electricity Market) means that its supply and pricing is tied to ageing coal fired power stations, a lack of investment due to policy uncertainty and trading rules more favorable to inflexible coal power. It is not taking advantage of its responsive hydroelectricity assets and cost effective generation technologies like wind and solar.
This paper proposes a long-term energy strategy for the state, where Tasmania is again self-reliant through integrated hydro, wind and solar generation.