Hydro Tasmania will not proceed with the TasWind project on King Island.
Chief executive officer Steve Davy said the feasibility work to date had clearly indicated the project was not economically viable.
The corporation will now focus its efforts on investigating the feasibility of a second interconnector across Bass Strait.
“The initial concept showed considerable promise but in the end the project simply did not stack up,” Mr Davy said.
The original TasWind concept announced in November 2012 was for the construction of a 600MW wind farm on the island, with the power generated to connect to the National Electricity Market (NEM) via a high-voltage underwater cable across Bass Strait to Victoria.
The first stage of a feasibility study has been underway for more than a year.
Mr Davy said Hydro Tasmania’s decision not to proceed further with the TasWind project was based on analysis showing it was not economically viable as a standalone wind farm project or as a staged connection to Tasmania. He also acknowledged changing economic conditions had seen the estimated capital costs for the wind farm alone increase by around $150 million.
Extending TasWind as a staged connection to Tasmania has also been estimated to be more expensive than other direct connection options between Tasmania and Victoria.
Mr Davy said the case for TasWind was highly dependent on being competitive through a high-quality wind resource, a highly favourable connection point to a load centre and attractive equipment and construction costs due to the scale of the project.
In the past 12 months, the original business case projections had been impacted by a range of factors, including a lower Australian dollar increasing the cost of equipment such as wind turbines, high-voltage direct current (HVDC) cables and converter station equipment, and impact on transmission efficiency as a result of loss of industrial load near the likely cable connection point in Victoria.
Mr Davy said it was no secret TasWind was under considerable pressure as a result of changing external factors. He said the accumulation of information throughout the past few months had led the board to agree to discontinue work on the project at its meeting in October.
While the eventual outcome of the current Renewable Energy Target (RET) negotiations at a federal level would determine the future of major renewable energy projects across the country, the board’s decision on TasWind was, in the end, driven by economics.
“Our investigations eventually found TasWind was not viable even if the RET was maintained at the existing level,” Mr Davy said.
“We have exhausted all avenues by which this concept could progress and now do not believe it appropriate to continue with the feasibility study. We will now focus our resources on further investigating the benefits and viability of a second interconnector as outlined in the Tasmanian Government’s recent state budget.”
Mr Davy said the second interconnector offered the best opportunity for Tasmania to maximise its position as Australia’s renewable energy powerhouse.
Hydro Tasmania had already undertaken preliminary work on the second inter-connector option. This had looked at potential market benefits, capital cost estimates, broad economic assessment of a range of options and their impact on Hydro Tasmania, and an initial evaluation of potential landing points and cable routes in Victoria.
Mr Davy said a second interconnector could provide significant strategic advantages for Tasmania, such as support for further renewable energy development, including increased output from hydropower and wind, as well as greater market competition.
However, it was very early days and any decision on proceeding to full feasibility was some way off.
Hydro Tasmania will continue to support King Island through its ongoing operations and presence on the island and its support for a range of initiatives and events such as the King Island Imperial.
Acknowledging the King Island community’s interest in the project, Mr Davy thanked locals for their patience during the community engagement phase of TasWind and the early feasibility work.
“We recognise the TasWind project has created significant community debate on the island in the past two years. We also recognise [the] announcement will be received with mixed emotions,” he said.
“Hydro Tasmania believed very strongly from the start that this was a project worth investigating and that the local community needed to be involved in the process.
“We wanted King Islanders to be given every opportunity to better understand what was being proposed. It is their island and their home.”