LAKE MARGARET FEASIBILITY STUDY VOLUME 1: MAIN REPORT Prepared by: HYDRO ELECTRIC CORPORATION ARBN 072 377 158 ABN 48 072 377 158 4 Elizabeth Street, Hobart Tasmania, Australia Lake Margaret Feasibility Study This page left intentionally blank Hydro Tasmania Page ii Lake Margaret Feasibility Study EXECUTIVE SUMMARY Introduction and background The Lake Margaret Power Scheme, which began producing electricity in 1914, is one of the oldest hydropower schemes in Australia and is an area of outstanding heritage significance. It is an example of the pioneering period of hydro-electric development in Australia. Due principally to its private ownership and continuous operation for most of its life, the site has retained nearly all of its early infrastructure and equipment. The scheme consists of the following major assets: • Lake Margaret Dam (post tensioned concrete gravity dam). • King Billy pine woodstave pipeline, transporting water from the dam to the penstock. • Penstock. • Upper power station. • Lower power station, (decommissioned in 1994). • Lake Margaret Village, including seven cottages and a community hall. The site has been provisionally listed on the Tasmanian Heritage Register (THR) and is currently being assessed for National Heritage Listing. The provisional listing on the THR holds the same legislative requirement as a full listing, which means any redevelopment would require approval from the Tasmanian Heritage Council. Hydro Tasmania took over ownership of the scheme in 1985 from the Mt Lyell Mining and Railway Company and, until its closure in June 2006, the scheme produced approximately 0.5% of Tasmania’s total electricity output. The aging power station was closed on 30 June 2006, primarily due to safety concerns regarding the woodstave hilltop pipeline, which had been assessed as being at end of life and at risk of failure. Hydro Tasmania has commissioned this feasibility study to determine the best long-term strategy for utilising the energy potential of Lake Margaret with consideration to economic, heritage, environmental and social implications of the options available. Hydro Tasmania Page iii Lake Margaret Feasibility Study Preparation of this study has included the development of concept designs by Hydro Tasmania, review of those designs by Snowy Mountains Engineering Corporation (SMEC), and preparation of construction cost estimates and risk review by independent engineering consultants, Johnstone McGee and Gandy (JMG), with inputs from suppliers of steel, timber and fibreglass pipelines and suppliers of hydro-electric turbine/generator sets. International woodstave pipeline experts were also engaged to review the existing pipeline condition and provide estimates of replacement pipeline costs. This study has focussed only on redevelopment options for the upper station. Hydro Tasmania intends to review potential opportunities for the lower station in the context of the redevelopment option implemented for the upper station. Preferred options Hydro Tasmania has investigated a number of options for redevelopment of the Lake Margaret Power Scheme. Emerging from this current re-evaluation, the two economically favoured options are: 1. Minimalist refurbishment of the existing power station. 2. Construction of a new power station with a single generator adjacent to the existing power station. A new hilltop pipeline would be required for both these options. Both options are considered marginally viable. Implementation of either option would need a detailed Heritage Impact Assessment and approval from the Tasmanian Heritage Council. However, both can be designed to minimise impact on heritage value. Table 1 identifies likely up-front construction costs for both options and the expected range of internal rate of return (IRR). The rate of return is influenced by operation and maintenance costs, energy prices and prices for Renewable Energy Certificates. Hydro Tasmania Page iv Lake Margaret Feasibility Study Table 1 Economics of favoured options Upfront IRR Assessed capital cost 80% Option range range confidence % $M IRR 1. Minimalist refurbishment 11-13 6-13 9.5% of existing power station 2. New power station approx 17-20 7-13 11% 10 MW The following table identifies other factors that could influence the preferred option: Table 2 Rationale for refurbishment versus new power station Option 1. • Lower capital cost; lower equity requirements Refurbishment • Less time, expense, and uncertainty with heritage and development Pros approval matters • Earlier completion • Lower up-front capital cost. Option 2. • Higher NPV New Power • More renewable energy generated Station Pros • More certainty on future O&M costs • Easier to manage the safety risk with new equipment. Condition of current woodstave hilltop pipeline Hydro Tasmania closed the Lake Margaret Power Station primarily due to safety concerns regarding the woodstave hilltop pipeline, which had been assessed as being at end of life and at risk of failure. As part of this study, Hydro Tasmania commissioned Sinclair Knight Merz (SKM) to provide a report on the condition of the existing woodstave pipe. SKM concluded that the existing pipeline had reached the end of its useful life and, therefore, continued operation of the scheme was, at a minimum, reliant on a replacement pipeline. Hydro Tasmania Page v Lake Margaret Feasibility Study In view of this analysis, Hydro Tasmania engaged Canadian woodstave pipe and barrel manufacturer, Canbar, to provide a report on the current woodstave pipeline and provide advice on construction of a replacement pipe. Canbar also concluded that the current pipe has reached the end of its life and should be decommissioned. A report was also commissioned on the specific condition of the timber in the woodstave pipeline. This study, by Acutel Consulting, included sampling and analysis of over 222 core samples. This report indicated that timber thickness and quality has deteriorated significantly, particularly in the top half of the pipe. Average thickness in the top half is now 29.6 mm with 33.4 mm in the bottom half compared to an original thickness of 48 mm. Although significant amounts of timber have deteriorated to the extent that any service life is problematic, there appears to be a salvageable quantity of King Billy pine that could be recycled for use as craft wood or other alternatives. Hydro Tasmania conducted a detailed condition assessment of the woodstave foundations and supports and concluded that the foundations are generally in poor condition. It is considered the existing foundations would be of little value as part of any replacement pipe construction. Woodstave pipeline replacement Given the condition analyses of the woodstave pipeline noted above, any redevelopment option would require a replacement of the current woodstave pipeline. Options considered for replacing the current woodstave pipe include steel, glass reinforced plastic (GRP) and woodstave. Investigations into these options highlighted the following key points. • In terms of durability and reliability, steel is considered to be the best option with an 80 year design life. • A replacement woodstave pipeline is considered to be higher risk than steel due to fire risk, and potentially less predictable service life. • Timber is still a suitable material and could be considered if the price is competitive with steel. The lowest budget price obtained for a new woodstave is comparable to both steel and GRP, but dependent on firm tender prices. Hydro Tasmania Page vi Lake Margaret Feasibility Study • The lowest price obtained for timber not requiring treatment was based on North American supplied Yellow Cedar, which is used in North America in pipe and barrel applications. • Consideration has been given to the use of King Billy pine and enquiries have been made with Forestry Tasmania, but, due to limited quantities and price, it is not considered a viable option. • GRP is considered to be the highest risk option with a 30 year design life and susceptibility to mechanical damage and fire risk. A replacement woodstave is likely to be considered as a favourable heritage outcome although steel and GRP are appropriate if considered in the context of keeping the scheme running and preserving other heritage values. The most practical alignment would be to use the approximate 1938 alignment, between the hilltop valve and the existing crossover of pipeline and tramway, and the original 1914 alignment between the existing crossover and the dam. This would allow for a straighter and shorter alignment reducing construction costs and pipeline losses during operation. The alignment would avoid the proposed locations for the preserved sections. A walking track would still be provided to the dam. Preservation of pipeline sections Hydro Tasmania proposes to retain three sections of the current woodstave pipe for heritage interpretation. This cost has been included in the estimates. It is expected that, once the water is drained from the pipeline, collapse of the timber staves will occur. However, it is uncertain as to when this would happen. Internal supports will be incorporated to stabilise the sections proposed to be retained for heritage interpretation. Detailed design will be subject to a Heritage Impact Assessment and will need approval from the Tasmanian Heritage Council. Hydro Tasmania Page vii Lake Margaret Feasibility Study Occupational health and safety considerations It is proposed for OH&S reasons to construct the new hilltop pipeline using a permanently installed