This has potential investment relevance to various companies operating in Tasmania. The following is, however, primarily technical (electrical) rather than financial.
Tasmania's electricity is predominantly supplied from 30 hydro-electric power stations which entered service between 1906 and 2004 (earlier schemes operated as early as 1893). These stations generate some 60% of the total renewable electricity produced in Australia and produce twice the energy output of the Snowy Mountains scheme.
Just one problem...
At present water storages are approximately 22.8% full. Whilst levels have risen slightly since modest rain last weekend, the overall trend is flat since reaching this level in May. May through October is the wet season in Tasmania and by now it would be normal to expect levels to be rising. They rose slightly and have since fallen slightly. It was yet another clear sunny day in Hobart today - not at all typical for July.
The storages are large and do not "fill and spill" every year like a farm dam does. For example, Great Lake holds 5 years worth of average inflows when full. Lakes Gordon and Pedder combined hold 2.5 years worth of inflows which is 27 times the volume of Sydney Harbour.
At present all electrical loads are being supplied in full. Available peak generating capacity continues to exceed peak load by a considerable margin (as is relatively easily achieved in a hydro system). The threat is of a supply shortage at some future date (possibly September if rationing is introduced as a precaution).
Solutions? Since the problem is an ENERGY constraint and not a peak power constraint, any supply side solution necessarily involves large energy flows. Likewise any form of load shedding necessarily involves outright demand reduction. Simply shifting loads to off peak time would achieve practically nothing. This is not about a blackout on a hot (or cold) day but rather, a potentially significant shortfall in total generation over an extended period the likes of which has not been seen in Australia for some decades.
Available gas-fired and wind power is being fully utilised. However, this still leaves the state 80% dependant on hydro on an annualised basis. If storage levels continue to fall and reach critical levels (simply staying flat would be regarded as critical by Spring since Summer is normally dry and levels normally fall then).
So, what does this mean?
Physical options for boosting supply in the short term are, in practice, limited to diesel engines or gas turbines, neither of which are particularly cheap in the configuration (open cycle in the case of the gas turbines) that they would need to be used. Any such emergency plant would necessarily be very hastily constructed - likely in a matter of weeks which makes gas somewhat difficult.
If any emergency gas-fired plant were to be used it would certainly use gas transported across Bass Strait by Alinta and sourced physically from the Longford plant in Victoria (Esso/BHP). Alinta is also the most likely supplier (on a lease basis) of any such plant IMO.
Load. About 63% of total generation is used by Major Industrial (MI) customers. The largest being Comalco (alumiunium - owned by Rio Tinto) which uses some 24% of total generation (including transmission losses). Next comes Zinifex Hobart Smelter at 11%, Norse Skog (paper) at just under 8% and then TEMCO (Tasmanian Electro Metallurgical Company - a local unit of BHP Billiton which is the sole Australian manganese alloy producer and exports to around 70 countries) which also uses around 8%.
So, 4 customers use half the total supply. Another 16 or so including various mines, Cadbury, the Burnie and Wesley Vale paper mills and so on use a furthur 13%. The Zinifex Rosebery Mine is included in this.
Of the remaining 37%, around half is used for household heating and hot water. 98% of Tasmanian households have electric hot water, close to 100% cook with electricity and electricity is dominant for heating (and actively promoted due to the disgusting smog from the wood heating alternative). Politically, this load is untouchable.
Then comes small business. Even there, a substantial portion goes into space heating.
By now you have likely come to the conclusion that refrigeration, lighting, washing machines, computers etc. use only a small fraction of the electricity generated in Tasmania. This is correct. By the time it becomes clearly necessary, in Spring, cutting space heating would be substantially ineffective anyway.
So, in pactice, the ONLY option to meaningfully reduce load simply has to involve the "Big 4". That is, Comalco, Zinifex, Norske Skog and/or TEMCO will be forced to reduce production.
What about emergency power? The cost of diesel is prohibitive given the end use of the power produced. The fuel cost alone would exceed the value of aluminium, zinc etc. produced. A temporary gas-fired plant would be viable only with government subsidy. Remember that any such plant would necessarily operate 24/7 - we are talking about millions of litres of diesel. Easily a million litres a day in fact. Not cheap.
Whilst the existing gas-fired power station is operating flat out, BHP are selling more gas. The plant is adding about 10% (annualised average basis) to normal Tasmania/Victoria gas demand, most of which is supplied by Esso/BHP. Since the SA/Vic/Tas/NSW gas systems are interconnected, Santos and the minor Cooper Basin producers might also be getting a minor benefit though that is less likely.
Alinta will not be gaining from transporting additional gas to the existing plant. It has fixed contracts covering that. It would only gain if a new (temporary) gas-fired plant were used.
Comalco (Rio Tinto), Zinifex, Norske Skog and TEMCO (BHP Billiton) are potential losers from power rationing. As a company, Zinifex would be by far the hardest hit due to the significance of the Hobart plant to their operations. The underlying commodity markets could also be impacted if the reduction in output were significant and sustained. Zinifex Hobart is a significant producer - 256,000 tonnes per annum. Likewise TEMCO is significant in its' market.
I will let you know when the situation becomes clearer. At this stage there is a POSSIBILITY of a problem only but I must say that the rainfall trends since late June are concerning.
This comment is general only. It's up to you to decide if/how it affects your investments and what to do about it. I am happy to answer any technical questions on the subject however.