5 Mar 2024

 

240300 Transmission Basslink - heading.jpg

Basslink is a critical piece of infrastructure and a cornerstone of energy security for Tasmania.  

Basslink delivers reliable and diverse power supply to consumers and businesses in Tasmania and Victoria, to the benefit of both states. In an average year, energy flows from Tasmania to Victoria are about the same as from Victoria to Tasmania.  

As a two-way electricity interconnector, Basslink does three important things: 

First – it provides energy security by providing access to additional sources of generation for homes and businesses in both states.  

Second – it provides each state with access to cheaper electricity. When the wind is blowing on the mainland and there is excess wind power available, Basslink brings it to Tasmania. And when the sun isn’t shining in Victoria, Basslink supplies energy from Tasmania’s world class deep storage capacity. 

Third – Basslink provides the connection through which Tasmania can realise its ambitions to be a leader in providing renewable energy to the rest of Australia. Basslink allows Tasmania to export its excess renewable power, particularly wind and hydro, contributing to the national transition towards net zero. 

240300 Transmission Basslink - image copy.jpg

APA acquired Basslink in October 2022 and our stated objective is to support communities, businesses and customers with an energy system that is reliable, affordable, and low emissions. That means our focus is on ensuring the lights stay on – in our schools, factories, hospitals and in our homes – in the most efficient and affordable way possible. 

The acquisition of Basslink added a third electricity interconnector to APA’s energy infrastructure portfolio, consistent with our strategy to expand our electricity transmission assets. 

The Tasmanian energy crisis of 2015-16 highlighted the important role that Basslink plays in maintaining energy security and protecting Tasmanian customers from high electricity prices.  

Following an outage in late 2015, which coincided with drought conditions, the Tasmanian electricity grid was islanded for a period of approximately six months. As shown in Figure 1, electricity prices spiked, and customers had to pay prices of up to $250/MWh, several times the normal rate at the time1.

According to modelling by specialist independent economists, HoustonKemp, if there was no Basslink and Tasmania abandoned its renewable energy targets, then Tasmania would require an additional $1.63 billion of new generation investment to meet its power needs over the period to 2050.    

transmission_basslink_graph.jpg

Figure 1 inflated energy prices in Tasmania when Basslink was not operational.

Basslink’s important role was again demonstrated immediately following the Victorian coal power station, Loy Yang A, going off-line on 13 February this year.  

Severe weather brought electricity lines down and tripped the state’s biggest coal fired power stations. This left more than 500,000 homes in Victoria without power.  

Along with gas-fired power generation, hydro power from Tasmania stepped up to keep the lights on in Victoria by transporting excess power across Basslink, benefitting both states.  

While regulation is not always the right answer, APA is confident that converting Basslink to a regulated asset will ensure that it operates in an economically efficient manner as an ‘open link’ that maximises the energy transported between Victoria and Tasmania to the long-term benefit of customers.  

It is for this reason that in September 2023 APA applied to the Australian Energy Regulator (AER) to have Basslink regulated. In contrast to the current framework in place, regulation will better align the interests of APA and customers, provide greater certainty of costs and revenues, and allow customers to have a greater say in asset operation through the five-yearly regulatory process.  

Australia’s other two interconnectors, Murraylink and Directlink, have previously been converted to regulated assets in the same way.  

Energy affordability, and how the cost of a regulated Basslink would be shared by customers, was a key theme in the stakeholder engagement we undertook in the development of our September 2023 proposal to the AER.   

As part of our stakeholder engagement leading up to the proposal, we held workshops and online focus groups involving more than 90 consumers in Melbourne and Launceston. We undertook an online survey with more than 1,200 consumers, and held meetings with industry and government stakeholders to further understand consumer preferences and help plan Basslink’s future. 

Our proposal to the AER was for cost allocation based on relative market size. Basslink’s costs would be allocated based on the number of electricity connections in each state. Under this approach, the cost to consumers will remain low at around $8 a year for Tasmanian residential consumers and just under $11 a year for Victorian residential consumers. 

The feedback we received was that of the options considered, the approach to cost sharing based on the size of the market was the fairest approach. Given customers in both states receive the benefits of Basslink, sharing the costs in this way is transparent and fair. 

APA is committed to the long-term development of Basslink. We look forward to working closely with communities across Tasmania and Victoria on the future of this important asset. 

1 Basslink submission, Offshore renewable energy infrastructure area proposal: Bass Strait off Gippsland, October 2022