Energy industry voices have warned that the business case for Marinus Link could become increasingly untenable if power-hungry businesses such as AI data centers continue to expand across Tasmania.
Singapore-based company Firmus Technologies, led by co-founders Oliver Curtis and Tim Rosenfield, plans to use a significant portion of Tasmania’s energy to power three AI data centers in the state’s north.
More than 100 megawatts have already been secured in the St Leonards area, which is currently under construction.
St. Leonard’s AI data center generates the “AI tokens” needed for tools such as the generative AI chatbot ChatGPT. (Provided by: Tasmanian Government)
Two more Farmas centers are planned. One is in Bell Bay, north of Launceston. The other is in Wesley Vale in the north-west of the state. Power requirements across the three sites are estimated at 400 megawatts, which would represent about two-fifths of the state’s total electricity supply without additional generation.
These high energy demands were enough for the head of the federal agency tasked with advising the government on climate change policy to express doubts about another energy infrastructure project, Marinus Link.
The $5 billion project will link Tasmania and Victoria with a 255-kilometre undersea cable, allowing for expanded energy trading between the states. (prismian group)
“Look at Tasmania, for example,” Climate Council Authority Chairman Matt Keene said during a Q&A at the Morgan Stanley Australia Summit in Sydney last week.
”It must be said that if the Farmus proposal, or any other data center proposal in Tasmania, were to come up, it would call into question the business case for Marinus Link. That’s the reality.”
“The market is evolving,” Keene continued, speaking at a multi-day global investment banking summit that brings together business leaders, investors and analysts.
“To realize this opportunity, government policy will need to keep pace with these rapid changes.”
Mr. Farmus declined to comment for this story.
Prime Minister Jeremy Rockliffe (centre) with Firmus Technologies co-CEOs Tim Rosenfield and Oliver Curtis. (Provided by: Tasmanian Government)
‘You can’t do both,’ say energy experts
The $5 billion Marinus Link is a proposed 1,500 megawatt two-way submarine data cable between Heybridge in north-west Tasmania and Victoria’s Latrobe Valley.
The development, jointly funded by the state and federal governments, will allow energy to be transmitted between states and into the National Electricity Market (NEM).
The project promises to allow Tasmania to import low-cost renewable energy, while storing hydropower and allowing it to be exported to the mainland if needed.
In February, the Australian Economic Regulator gave the green light to the first stage of the project.
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Hydro Tasmania’s claims that the Marinus Link submarine Bass Strait cable would add $450 million a year in profits to the state “now look quite questionable”, an energy analyst said.
While the Tasmanian government remains firmly committed to the project, Goanna Energy energy analyst Mark White said he believed Tasmania’s energy commitments for data centers weakened the business case for the project.
“We expect there to be a trade-off between supporting customers on the island and profiting from arbitrage around Marinus Link,” White told 936 ABC Hobart.
“In effect, there is a limit to trading capacity and if the decision is to use that capacity to stabilize renewable energy in Tassie, then that capacity does not need to be traded on the market.
“You can’t do both if you have to allocate that energy to local businesses.”
A stylized 3D graphic of the proposed Marinus Link project. (Provided by: Tas Networks)
A Marinus Link spokesperson said increased investment in data centers further validates the need for this project, which will enable new investment in renewable power generation and major load infrastructure.
“Importantly for Tasmania, Marinus Link will enable us to operate our hydropower assets more strategically, storing energy when renewable energy supplies are abundant and delivering energy whenever it is needed most,” the spokesperson said.
Possibility of electricity price hike, report revealed
Tasmania’s cool climate and access to renewable energy make it an attractive location for investment in AI data centres, even as some of its major industrial energy users face an uncertain future.
Separate to the Farmus proposal, Australian mining company Greenwing is also investigating the possibility of expanding its data center in Tasmania.
Greenwing wants to restart its dormant Que River mine, about 75 kilometers south of Burnie in Tasmania’s north-west, but said its long-term plan is to assess whether the site could host third-party data infrastructure, such as a data center or artificial intelligence (AI) infrastructure.
Data centers are rapidly expanding across Australia, with 162 locations in operation and more than 90 in the pipeline, according to a recent Climate Council study.
Farmus Technologies’ AI factory in St Leonards is scheduled to be operational early next year. (Provided by: Tasmanian Government)
Grid-scale battery storage across the NEM is also expanding rapidly and accounts for just under half of the total capacity in the NEM pipeline, according to the Australian Energy Market Operator (AEMO).
A new report by the Bob Brown Foundation’s Victorian Energy Policy Center finds the rollout of affordable and efficient batteries has blunted Tasmania’s competitive advantage in cheap energy storage, further undermining the business case for Marinus Link.
The report predicts that if Marinus Link goes ahead with its plans, Tasmanians’ electricity bills will rise in the form of higher network tariffs.
It was also found that the state has only a small surplus of energy available for export beyond its current production capacity.
He said expanding data center development in the state would not be possible without “catastrophic demand contraction” such as the closure of major industries Liberty Bell Bay and Nylstar.
