Why isn’t Sun Cable run to Sydney instead?

The news is grovelling for the billionaires, via The Australian:

Two of Australia’s richest men will invest in an ambitious $20bn solar project supplying electricity from the Northern Territory to Singapore by a subsea cable.

Iron ore billionaire Andrew Forrest – ranked 8th on The List – Australia’s Richest 250 with an estimated $7.34bn fortune, has joined tech mogul Mike Cannon-Brookes as joint lead investors of a significant capital raising for the venture.

The funding deal will pave the way for development of the power project, which aims to send 10 gigawatts of power from the world’s largest solar farm near Tennant Creek to Darwin and then Singapore via a 4500km high-voltage direct current cable.

And the AFR:

“It’s really just a meeting of minds and a common purpose, and the broader recognition that we have a huge energy transition to undertake, which is a vastly larger task than people appreciate,” said David Griffin, chief executive of Sun Cable.

Mr Forrest’s private company Squadron Energy, which is also backing an LNG import project in NSW, and Mr Cannon-Brookes’ Grok Ventures are joint lead investors in the oversubscribed capital raising. The other investors have not been disclosed.

Mr Forrest said Australia’s potential to be at the centre of Asia’s transition to clean energy presents the Australian economy with enormous opportunities, “not just for reducing emissions but also for the economic march of our nation and global competitiveness”.

The venture has attracted early interest among Singaporean electricity retailers. Andrew Koscharsky, chief commercial officer of iSwitch, said the company was interested because Sun Cable could provide stable long-term power prices, in contrast to relying on imported liquefied natural gas.

The project is obviously admirable. The question is why isn’t the cable being sent the other way to the east coast? Power prices there are higher than Singapore. Here:

State Average Electricity Usage Rates (per kWh)
VIC 23.272c/kWh
QLD 23.545c/kWh
NSW 27.56c/kWh
SA 37.62c/kWh

There:

Yet Twiggy is busy building the very LNG import terminal in eastern Australia that is the key driver for Singapore to get the cable and away from the same gas!

Tennant Creek to Adelaide is half the distance to Singapore and that could plug into the National Electricity Market.

Why does Singapore get the good stuff while we get the shaft?

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by Houses and Holes (see all)

Comments

  1. Probably due to, amongst a thousand other things,……….. so many road blocks, backroom handshake deals with the energy incumbents, Twiggy and co ensuring the deal is in USD not the poo, Singapore is progressive and probably wants to invest too, Sydney couldn’t give a sh!t as long as house prices keep rising, etc etc etc

    • Well, big reason is eventually they need to raise $22b in debt and equity – this was just $50m to kick the thing off.

      Singapore has deep pockets (Temasek et al) and probably will kick the tin.

      There is also the not small issue of lack of interest from government on this.

  2. The project is obviously admirable. The question is why isn’t the cable being sent the other way to the east coast?

    I’m going to take a punt on “politics”.

    • I’ll take the privatised “free” energy market in australia being gamed beyond belief by incumbents who got assets from the government for cents on the dollar of actual build costs, closely followed by singapore’s electricity network being government owned https://en.wikipedia.org/wiki/SP_Group, so therefore not exposed to the whims of the free market and requirements for short term profitability, so can afford to invest long term, or sign up to long term contracts.

      Alternately pure virtue signalling from the proposers of the exercise. Happy to be corrected when they actually start building.

  3. I am going to take a punt on Reus being most accurate. Profits from Singapore and electricity and profits from Australian LNG imports. But cloak it in a veneer of environmental respectability lest the locals get fractious.

  4. If I was a narcissistic billionaire I would be investing spare change in the option that drew the most attention to me. Look at me, I am such a good citizen and leading the world in technology. Never mind the fact I avoid taxes and exploit workers by importing cheap labour.

      • Which one are you talking about? I don’t know Twiggy but know MCB very well. He’s consistent in that he is putting his private money to work in power, agriculture and transport where he sees there are cleaner technologies to make the world better.

        MCB isn’t funding the LPG east coast initiative.

        • Very naive Anon. Yet another multi-billionaire who owns a tax-dodging multinational company, who suppresses wages with claims of “skills shortages”. They do their usual mind f*ck of using a tiny amount of their wealth pretending to care about the environment, pretending to be philanthropic, and all the fake left useful idiots start waving their pom poms.

  5. Probably because Singapore agreed to pay for it. I expect it will have connectable terminals in Indonesia.

    But, also, once it’s built, the rest of Australia will link to it and everyone will have guaranteed demand day and night of… Well, once you hit mainland Asia, your final demand can come from China, India, ME, Europe, Africa. What’s that? 5bn people?

    5bn customers 24×7 – and everyone in Australia itching to link to you.
    That’s why.

  6. Why does Atlassian pay ZERO Tax in Australia? Why do they have their HQ in the US and are listed on the NASDAQ?
    Money. The fawning over this guy is getting a bit annoying. I hope we charge an arm and a leg for that land and add a sun tax on top of it.

    • This.

      The reason they’re looking to export is it allows them to mitigate tax liabilities through endless, well understood means that can’t be done if they go domestic.

      That said, I don’t blame anyone for using every trick in the book to avoid or minimise tax, if they do so legally. However, it shouldn’t be legal. Once again, it comes down to a gross failure of management, like most things in this dead dingo’s rectum. Until all the Jane and Joe A. Verage’s riot int the streets en mass for change, it won’t. Good luck with that.

    • Might seem like a silly question but: Why would you want to Tax Atlassian?
      What is the purpose of Corporate tax?
      What’s the purpose of R&D cretids?
      Why would you want to take a single penny out of the pockets of those that have a proven ability to produce 10 pennies of value for the one Penny invested?
      What’s CSIRO’s track record like for return on R&D dollars invested? (two winners in 40 years)
      What’s the Federal governments long term track record like (zero winners unless you count Politicians Mates )
      Atlassian founders definitely aren’t saints, but who in the real world is?
      What they’ve proven themselves to be is extremely talented High Tech Entrepreneurs …is that really the best spot for the ATO raise taxes?

      • Yes, the failing entrepeneurs aren’t much for raising taxes from.
        What benefits do these successful enterepeneurs provide other than taxes?
        Employing 457’s for cheap? Transferring profits to off shore tax havens?
        Providing second rate software to businesses?
        I’m not seeing any reason to subsidise them at the expense of the rest of australia.

      • The very existence of social democracy hinges on the belief that we , as a community, subsidise the foundational tenets you require to be successful in a capitalist world . So that the abilities that were fostered and realised by the community funded education , health, infrastructure and welfare safety net would be returned in kind upon the fruition of your potential.

        Atlassian would never have been created without the structural support of our society. Their ability to take necessary risks in life in order to attain success has been underwritten by Australian society since their forebears first set foot in the joint.

        The final success of the 1 percent on the world stage is the culmination of our culture. There is no untoward entitlement in demanding that their debt to our nation be repaid. The tax paid by Atlassian is then used by the representatives of the Australian people ( the government ) to then perpetuate a society which will continue to foster talent and success which benefits our society into the future.

        Any business person should understand the need for reinvestment and any business which has been built in Australia is required to reinvest in the system of which they were the beneficiary themselves by paying tax.

        That’s the intent on paper anyway.

        • Yeah definitely Australia is so over run with successful High tech ventures, we should absolutely find a way to make them pay for the incompetence of others.
          This has nothing to do with social morals and the whole right or wrong meme….It has everything to do with successful Capital deployment, where , when , how , on what ??? If you have someone that’s good at this you should logically channel money towards them…anyway them’s my thoughts

      • one fundamental questions rarely gets asked: how do these people produce 10 pennies of profit for the one penny invested?
        are you forgetting that the only reason these companies make any money is a artificial monopoly created by state via intellectual property rights – what it basically means is that a state (in the name of a questionable technological progress) allows market participants to charge customers more for their products.
        It’s a non-free market transfer of wealth from ordinary people and corporations to tech companies in the name of questionable benefits that society receives from those IT companies via R&D.
        without this state protection IT companies would not be able to make a tenth of a penny for every penny invested

        I think the existence of this “protection” deserves certain tax to be paid? what do you think?

          • looks to me you are missing fundamentals, who pays for the gains given by the state to owners of IP

            without state protection of IP rights Atlassian would not be making much money, would some on support and maintenance but not nearly as much as 10p

    • What’s this got to do with Atlassian? This is MCB’s private investment vehicle. Remember, he is only one of the founders and they don’t own all of it anymore. Those corporate decisions need to be taken in the interests of all shareholders. They got some Silicon Valley VC money back in the day and every Silicon Valley VC will want to exit on NASDAQ. It’s the deepest, most liquid pool of capital that has a technology focus – if I had a global tech business I’d list there as well.

  7. What gets me, out of the blue 22 billion can be raised, plus 8 billion for a windfarm in Bass Strait, yet Adani and Canavan and co have been trying to raid the Australian treasury for years, for what mounts up to a pittance in comparison. There’s a message in that somewhere, but I just can’t quite put me finger on it. Help me out Reusa

  8. not only that it could go to Sydney but more importantly it could be build closer and without need for expensive cable but rather multiple overhead lines into the existing grid – that would cost less and provide more redundancy

    • Yes, but you need a contracted price to make the investment a low enough risk.
      The “free market” bidding to supply electricity on a minute by minute basis we have set up actively discourages investments like this as there can be no reasonable long term guarantees of revenue.
      Singapore with it’s non privatised system can provide that long term certainty.

      • LOL. a capitalist dreamland wins by not having energy market – irony of capitalism

        BTW. most of our plants operate on long term contracts, spot price only covers few % of demand

        • Pretty sure that it’s illegal to sell into the NEM at anything other than spot rates.

          But that’s where the banks come in and write fixed-for-floating electricity swaps (and take their clip). That’s how wind farms etc are financed.

        • https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets

          “Forms of contracting in the national electricity market
          Contracts in the national electricity market are traded either on the ASX or bilaterally. Swaps and caps are two examples of core contract types.

          Swaps
          Under a swap contract:

          A swap contract trades a given volume of energy during a fixed period for a fixed price (normally 1 MW for a quarter at the strike price).
          The variable wholesale market spot price is, in effect, swapped for the fixed strike price.
          The contract is settled through payment between the counterparties based on the difference between the spot price and the strike price.
          Caps
          Under a cap contract:

          A cap contract trades a fixed volume of energy for a fixed price when the spot price exceeds a specified price.
          It provides electricity purchasers with insurance against high prices.
          The standard contract traded in the market is a “$300 cap”. This means the seller of a cap is required to pay to the buyer the difference between the spot price and $300/MWh every time the spot price exceeds $300/MWh during the specified contract period.”

          Looks to me like all of it is sold onto the market at spot, and variations are contracted outside and paid externally to the NEM. Nothing like adding financial derivatives to make something stable and transparent.

  9. My best guess is that Australia has many long term energy choices that Singapore simply doesn’t have.
    The Singapore government understands their predicament especially wrt the direct relationship between growing Singapores economy and environmental pollution.
    Singapore simply can’t continue down the Fossil fuels road, whereas Australia still has choices.
    The long term viability of this venture depends on the possible alternatives for Energy production. and their relative costs (including all Externalities).
    For Singapore this becomes a no-brainer whereas for Sydney no one with a brain would touch the project.

    • Moron, your best guess is rubbish, as usual. Singapore depends on oil (Tepis) so much so that they penalize or disincentivise the use of electric vehicles. A far better guess would be that the PAP is nowhere near corrupt as the LNP coal-ition, which would go a long way to explain why SG without water, food, energy, resources has the unemployment rate of 2.2% (with half of the population foreign). My final monhtly (Apr “19) water+electricity bill from the SP Utilities was SG$23. It was HIGHER than usual because they over-estimated the usage after I moved back to the “dead dingo rectum”.

    • don’t get the need to have panels 5000km away
      to get 2.5GW generation (planned size of the sun cable link) in Singapore one needs to cover around 20km2 (4x5km) with solar panels
      that’s not much and can easily be achieved even in Singapore (warehouse roofs in western industrial side, Jurong Island, port terminals, around changi airport, …),
      Jurong Island alone is 32km2
      price difference for cable and losses would be able to fund larger battery storage, and provide much more reliable supply

      • Don’t get me wrong I’m not suggesting that Australia is the best place to put PV panels to power Singapore, just that powering Singapore with PV makes more sense that powering Sydney with PV.
        Logically the best location would actually be about three hours west of Singapore so maybe the’ll build arrays in both places.
        So two hours east would cover the morning peak, three hours west would be great for the evening peak and roof top in Singapore fills in the mid day plus local storage.

      • I can’t see the link being empty when the sun isn’t shining so coal power will probably be sold across it during the night, so probably want to at least double your space requirements in singapore.

        • Really good point.
          atm Singapore is importing LNG to make Electricity locally, why do this If you have an extension cable that’ll stretch all the way to Australia?
          Burn the NG here instead of compressing it to send it to Singapore, maybe that’s the real game plan.

          • could be done but there are few issues like reliability of HVDC systems, transmission losses (my guess would be over 10% for this cable) vs LNG conversion plant efficiency of over 90%,
            also SG already has and would need to keep enough gas powered capacity to generate enough power when cable is not available so building new plants in NT that run only during time would be unnecessary capital cost

        • there are no coal powered stations in NT, and NT grids are not connected to the other grids in Australia
          so getting coal powered electricity out via this cable would be quite hard

          • So replace coal with? whatever the are currently using for power in NT. Or be pedantic. Might want to also increase the solar array in singapore for cloudy days, “Rainfall is plentiful in Singapore and it rains an average of 167 days1 of the year. ” so potentially another doubling, because cloudy in NT, just pull from the grid.

          • that is an option but not without building new generation in NT because current generating capacity in NT is so comparatively small
            so option is to build new plant in NT and run it for half a day when solar is not available and keep existing plants in SG shut down – sounds like a waste (keep in mind that capital cost is large part of generating cost)

    • “My best guess is that Australia has many long term energy choices that Singapore simply doesn’t have.”
      Australia gave up on long term energy planning decades ago.
      Mr market is at the wheel. https://en.wikipedia.org/wiki/Australian_Energy_Market_Operator
      “In 2017, AGL Energy reaffirmed that it intends to close the Liddell Power Station in 2022.[4] The closure of this and other coal-burning power stations in Australia has led to the former Prime Minister of Australia, Malcolm Turnbull, to seek advice from AEMO on extending the life of a number of them,[5] to head off future power shortages.[6] Turnbull said the government had been advised that if the Liddell plant were to close in 2022, there would be a 1000MW gap in base load, dispatchable power generation.[5]”
      We don’t even have short to medium term planning.

  10. There is a plentiful supply of empty, sun-filled desert. We are not talking about a finite resource like LNG. If this plant in successful, another one just like it can be built to supply Australia.

    • Good point – we’re not running out of empty desert just yet!!

      Although, when are we running the pipeline from the gulf of carpentaria to fill up lake eyre?? Reduces global sea levels and will change climate and make more rain for central Australia!

  11. i bet all the profits on the operation will be routed through tax havens so the Australian tax payer gets shafted. Meanwhile, there will be some backhander going on in NT to ensure it happens (probably some local body politicians get new driveways….)

    • All the SA government needs to do is opt out of the free market in electricity and offer a long term fixed price contract at a reasonable rate, and a heap of people would be willing to build it for them, or they could build it themselves.
      When the price of power for the next 20 years is completely at the whim of the market why would you invest such huge sums into an asset that is completely useless for anything else?

  12. David WilsonMEMBER

    Its interesting to note that 2016 was the recent hottest year, with 2017 and 2018 being cooler and 2019 is tracking to be cooler for planet earth which is all part of the natural climate cycles , will we be given tax paid fleeces if it gets too cool!
    As for solar panels what an absolute farce, they are 18% efficient over a year, require massive new infrastructure to hook them up to the grid and are useless without battery, coal fired, gas or hydro backup so cause massive inefficiency and additional energy costs that are killing our economic advantages and putting up the cost of living for all.
    Solar panels also heat the air around them by 1.5degrees above ambient temps so add to atmospheric warming and replace valuable farming land and thus also displace wildlife and cannot compete with coal and gas etc without massive government subsidies all paid for by energy users and taxpayers … rnass stupidity comes to mind.

      • David WilsonMEMBER

        Yep started going to the outback in the early 1960’s scrub cutting to feed sheep near Tilpa in the middle of a long devastating drought , I have also run cattle and have recently returned from a 15,000 k trip through western Qld, NSW, SA and NT.
        I find it interesting to be called a climate denier when I accept climate change as being a natural non human caused event.
        As. Man famously once told me “ it always rains at the end of every drought “.

  13. If you asked me why “Singapore instead of Sydney”… I had an opinion but didn’t answer it.

    Then you guys posted “Victoria mulls taxing electric vehicles”. It’s a locked article so I’ve come here….

    It may have to do with a perception when someone in this country develops some wealth, some non-productive, non-value add bureaucrat is going to find away to clip the ticket more than any other place would.

    Would you blame anyone who came to conclude “if I can find a way to deal with the Australian marketplace as least as I possibly can, I will take that option”?

Leave a reply

You must be logged in to post a comment. Log in now