Hit from Basslink power cable failure $560m and rising: EnergyQuest

The economic cost of the failure of the Basslink power cable is more than $560 million and rising, but the remedy to avoid a repetition doesn't lie in an expensive second cable, according to consultancy EnergyQuest.

The latest figure is much more than previous estimates and doesn't include the lost production from large industrial gas users such as Rio Tinto, paper maker Norske Skog and South32, that had to cut back their electricity use.

The breakdown of the cable on December 20 cut the only high-voltage electricity transmission connection between the mainland and Tasmania, sending wholesale power prices up by more than fourfold in the March quarter to $177 per megawatt-hour.

But BHP Billiton and Exxon Mobil could be winners after pumping the most gas in at least a decade from their Longford, Victoria, plant  - partly to fuel gas turbines in Tasmania, according to an EnergyQuest report.

The Adelaide-based firm's calculation on the economic hit from the incident are based on the difference in wholesale power prices in the March quarter compared with a year earlier, multiplied by power volumes sold.

Tasmanian economist and Hydro Tasmania director Saul Eslake said he thought Dr Bethune's estimate was "at the outer boundary" of plausible estimates because the extra electricity cost to consumers would have meant extra revenue for th supplier, with no net loss to Tasmania. The Tasmanian government has budgeted for a $126 million cut in receipts from Hydro.  

The breakdown of the underwater cable, which is forecast to come back into operation later this month, has prompted a study into a potential duplicate cable, Basslink 2, which would cost an estimated $1 billion.

But EnergyQuest chief executive Graeme Bethune suggested other options may prove more cost-effective, such as keeping the Tamar Valley gas-powered generator on standby, an option also suggested by some industrial gas users in the state.

Gas came into its own in Tasmania in the March quarter, supplying 30 per cent of the state's electricity demand, up from virtually zero in the first quarter last year. Dr Bethune said gas could have helped more, but it took a month from the time of the breakdown of the cable, owned by Singapore-listed Keppel Corporation, to recommission the gas turbines at Tamar Valley. The state's power crisis has since been alleviated by rain, which helped restore water levels at Hydro Tasmania's hydroelectric dams.

"As the current crisis has shown, Tasmania already has a good energy security blanket in the Tasmanian Gas Pipeline, which was still only utilised an average 58 per cent during the crisis," Dr Bethune said.

"Any studies into improving Tasmania's energy security should not be limited to one option costing one billion dollars."

The highest previous estimate of the economic impact of the outage was a $400 million back-of-the-envelope estimate from Brisbane-based energy consultant and GlobalRoam director Paul McArdle, based on similar methodology of applying the increase in average prices to typical usage.

Sources close to Hydro Tasmania have played down the losses from the crisis, suggesting the state-owned electricity monopoly's costs will be closer to $100 million than $200 million when everything is taken into account.

The report also revealed in the March quarter, Queensland overtook Russia as an LNG exporter, shipping a record 3.8 million tonnes of gas, as all three Gladstone projects ran throughout a full three month period for the first time.

Total Australian LNG output surged 53.2 per cent in the March quarter to 10.1 million tonnes, with the first contribution also from Chevron's $US54 billion Gorgon LNG project in Western Australia. But LNG prices were down 36 per cent quarter on quarter because of the drop in oil prices, meaning export revenues from gas slid slightly to $4.469 billion, despite the jump in shipments.

smh.com.au