Archive for September, 2011

Power price stress rising

This past week’s big feature for me has been the launch of the 2011 “Powering Australia” yearbook and the running of its associated conference in Melbourne.

While the highlight for the publishers and myself was again having the federal Minister for Resources & Energy, Martin Ferguson, launch the yearbook – which he described as “a thought-provoking overview of the trends and challenges facing the energy sector” – the big ticket analysis at the conference, for my money, came from Port Jackson Partners’ Edwin O’Young.

Two years ago O’Young produced research for the Business Council demonstrating why retail power prices were on track to double between 2008 and 2015 and, as is now widely acknowledged, they are well and truly moving in this direction. In the past four years they have risen by more than 35 per cent in inflation-adjusted terms.

Now O’Young is forecasting that end-user bills will double between 2011 and 2017, a thought to make more than a few politicians and industrialists grimace, let alone householders faced with yet more pressure on their hip pocket nerves.

(In this context, another conference speaker, Clare Petre, the long-serving New South Wales Energy & Water Ombudsman, made an important point: fuel poverty – defined as residential users having 10 per cent of their income swallowed by energy bills – is not a large issue here, but fuel stress now is; there are large numbers of households finding their budget problems, exacerbated by the rising power charges, extremely stressful and this, of course, is being reflected in the political polling and reinforced by the tabloid media attention new charges get.)

The big price driver of the past four years has been the charges flowing from the need to invest tens of billions of dollars in network upgrades and expansion.

By coincidence, Friday’s newspapers featured reports about how the Australian Energy Regulator will try to change the network rules to “rein in” energy bills, as the Australian Financial Review declared in its lead story.

However, O’Young forecasts that we are now facing a short-term future on the east coast – the next six years – where wholesale electricity costs start to rise sharply, too, both as a result of higher contract prices for coal and gas and because of the impact of the Gillard government’s carbon price regime.

He foresees the 2017 power bill reaching around 36.3 cents per kilowatt hour compared with 20.4c this year and 16c in 2007.

(Translated, this means that, if your household power bill for an average 8,000 kWh a year use of electricity was $1,280 in 2007, it has risen to $1,632 now and is heading towards $2,904 in 2017.)

The make-up of this bill would be 14.9c for wholesale electricity, 16.9c for network charges, almost a cent for mandatory renewable energy and 3.6c for retail costs and margins.

In his reckoning, network prices will rise from 7.5c per kWh in 2007 to 16.9c in 2017 and the increases are locked in by prior AER determinations until 2014-15.

The trajectory of wholesale energy prices, which have barely moved over the past four years, is for a rise from 7.1c in 2007 to 14.9c in 2017.

I sent this information to one of Australia’s leading business commentators on Friday morning and promptly got an email back saying: “I am reading this on my iPhone while having toast and coffee. You have given me indigestion. It raises all sorts of implications.”

It certainly does.

O’Young himself said at the conference: “While these increased costs need to be properly reflected in consumer prices, it is clearly vitally important that we do what can be done to ensure they are no more than necessary in the interests of consumers and businesses and of the competitiveness of Australian industry.”

Martin Ferguson acknowledged in his yearbook-launching talk that energy prices are often the most headline-grabbing aspects of market reform and for good reason – they affect almost every Australian.

He accepted that the short-to-medium outlook is for continued price rises over the next few years and called for the stakeholders to work together on solutions “in a genuine way.”

Like most in government and politics, at State and federal levels, he is focussed at present on the networks issue and looking to the Australian Energy Regulator to come up with rule changes that will help the situation.

“There is no easy fix. It is a matter of getting the balance right,” he told us.

However, it is clear from O’Young’s presentation that, while addressing the networks issues is a necessary step, the overall situation is not open to a fix that will really ameliorate Petre’s “fuel stress,” whether it is being felt by householders or business people.

Looking at wholesale prices, O’Young points out that a big driver is the enormous thirst of China, India and others for our coal and gas.

China alone expects to increase its coal consumption this decade by 60 million tonnes annually. (Australia exports 130Mt of thermal coal annually.) And India’s coal requirements are projected to rise 5.7 per cent annually, too.

As a result, he says, domestic coal prices will rise as miners’ contracts with generators come up for renewal.

At the same time the impact of the east coast LNG developments will see domestic gas prices rise – “by up to $4 per gigajoule or maybe more,” says O’Young – and the situation will be exacerbated by the transition from coal-burning to gas-firing plant to meet carbon policy demands.

He is projecting a 45 per cent increase in wholesale energy costs on the east coast before the carbon price kicks in – and says that a $27 per tonne impost could add a further $26 per MWh to the cost of coal generation and $14 for gas plants.

“Going forward,” says O’Young, “gas generation is likely to be the new marginal capacity to be installed in the NEM, substituting for existing coal. The level of increase from today (for gas plant energy charges) will be closer to $55 per MWh, or a doubling of wholesale electricity costs over current levels.”

This is serious stuff with big implications for households trying to balance budgets, businesses operating in the international arena, small businesses trying to keep their heads above water and politicians trying to win or retain government.

Queensland has two State elections in the pricing time frame being used by O’Young (2011-17), New South Wales and Victoria each have one and there will be two federal elections at least.

The three States are home to 80 per cent of power consumption, most of the coal-burning generation, most of manufacturing, most households and, of course, most voters.

It is going to be a bumpy ride and media reports encouraging the view that power prices will be “reined in” are not going to help consumers cope with the inevitable.

( Footnote: Copies of the 2011 “Powering Australia” yearbook can be bought from the publishers, Focus Publishing. RRP $29.95. Contact the publishers on 02-8923-8009 or email Sam Collier at

More moonshine than sunshine

Even minor adversity can have its advantages.

Trapped at Tullamarine airport on Wednesday night by Melbourne’s wild weather, I used part of the wasted time to pursue something that had been nagging me for a while.

Last month my attention was caught by local media coverage of a global news agency report, quoted here as saying an International Energy Agency analyst was forecasting that half the world’s electricity would come from solar sources by mid-century.

One local commentator for a major newspaper went even further, claiming the IEA had said that “solar PV and solar thermal plants could produce most of the world’s electricity by 2060.”

This seemed at the time wholly over the top to me.

More moonshine than sunshine, you might say.

I went looking then for the source, a speech to a conference in Germany, but the IEA had not put the presentation on its website.

My interest was resurrected on this week’s wet Wednesday night by reading a new local commentary suggesting that Martin Ferguson, the federal Resources & Energy Minister, could find it awkward to chair an IEA ministerial meeting in October when this topic came up, given the state of solar development here.

Once more I visited the IEA website and this time the officer’s presentation was up on the “speeches” segment – except that it wasn’t his speech, just the powerpoint.

I also Google-searched the original news agency report and found he was quoted by it as saying: “Direct forms of renewable power such as solar thermal and solar PV would supply more than half the world’s electricity after 2060.”

Note the “such as” qualifier.

Returning to the power point, I found only one slide addressing this aspect – dealing with renewable energy use for power generation by 2050.

It features a bar chart with the total green power use for each region written on it – and the further breakdown below is my estimate based on the size of the various bars.

It asserts that 55 per cent of OECD Europe’s generation will be renewable in 2050 – of which (my estimate) almost two-thirds will be wind power and hydro-electric supply.

It says 45 per cent of US generation will be renewable – of which almost half will be wind and hydro and about a fifth biomass and waste.

For Latin America, it forecasts 87 per cent will be renewable – of which about 60 per cent will be hydro.

For China it predicts 34 per cent renewable generation for by far the largest regional power consumption in the world by mid-century – and about 40 per cent of it hydro power.

For the Middle East, 49 per cent (of which about 60 per cent will be solar) and for Africa 81 per cent, of which 60 per cent will be solar.

Now note that this list does not include OECD Asia (which includes us, New Zealand and Japan) or Canada or Mexico or India and so forth.

For starters, this is not a global forecast.

And, as presented in the IEA powerpoint slide, the percentage of renewables generation is barely half total production in the regions canvassed and very large chunks of it will be fuelled by hydro, wind and biomass.

In fact, so far as I can tell from looking at other stuff on the IEA site, this material draws on existing IEA modelling out to 2050 which, in its most optimistic (for renewables) scenario, seems to suggest that solar could account for a fifth of the world’s power generation mid-century.

There are other scenarios, in one of which nuclear energy plays a much larger role than today.

The 20 per cent solar perspective is radical enough; this other stuff, which seems to have taken on a life of its own this past month, is not actually being argued.

And the IEA modelling has been around for more than a year. The renewables outlook is not some wholly new revelation.

The IEA, I gather, is publishing a book on the “solar energy perspective” before the end of the year and this may be the reason the text of the recent presentation has not been made available.

On the basis of what is published on the IEA website, however, two things seem abolutely clear: (1) there isn’t a prediction that solar will fuel half the world’s generation in mid-century and (2) there is no solar-related reason for Ferguson to find the IEA ministerial meeting awkward.

Whether one agrees with the federal government or not, the Prime Minister’s recent claim that, if her policies are pursued, Australia will have 40 per cent renewable generation by 2050 ( a large part geothermal, she says, and five per cent solar) is not out of line with what the IEA is apparently saying about renewables for mid-century as opposed to what some opportunists here are asserting is being said about solar in order to push claims for more taxpayer and consumer-funded support.

As I have commented before, the corollary to what the Prime Minister used for carbon price legislation promotion – a goal of 40 per cent renewable generation in 2050 – is that 60 per cent will be fossil-fuelled, mainly gas-fired and heavily reliant (for greenhouse gas abatement purposes) on the success of carbon capture and storage development in the absence of a shift to nuclear energy.

As a contributor pointed out at the “Powering Australia” conference I chaired in Melbourne this week – and at which Martin Ferguson officially launched the 2011 “Powering Australia” yearbook – if we eschew nuclear and find that CCS is not commercially viable, the carbon abatement game gets a bit tricky.

Daffy consensus

At a time when the nation’s chief obsession is with the various codes of football and the media commentariat is focused on the illegal immigrant policy merry-go-round,it is not entirely easy to mount an argument that the most important thing happening is the passage of the Gillard government’s carbon legislative package through federal parliament.

This is true nonetheless.

One only has to read the submissions on the package and the evidence to parliamentary committees (there are two) scrutinising the bills to appreciate the risks we are all running at the government’s hands – aided and abetted by the Greens, who I think it is safe to say do not have the same interests as the vast majority of Australians.

Given that the supposed whole point of the legislation is to contribute to mitigating feared global warming problems, which requires a world-wide reduction in emissions, it is a salient fact that, according to evidence at the Senate committee, initial government modelling of Chinese emissions growth has had to be adjusted upwards by 1.8 billion tonnes annually (or treble Australia’s total yearly greenhouse gas output) to keep up with that country’s massive economic development.

An extra-ordinary Pollyanna mindset within the government is captured by Treasury’s view that, if all the countries that made abatement commitments at the UN Cancun conference meet their promises and continue to make cuts beyond 2020, the outcome will be “broadly consistent” with the 550ppm trajectory towards holding global warming at no more than two degrees Celsius.

A bawdy Irish uncle of mine was wont in his cups to proclaim that, if otherwise equipped, my aunt would also be an uncle.

I take leave to doubt that one in 10 of our fellow citizens is across the fact that our “clean energy future” actually involves rising domestic emissions over the next two decades notwithstanding the major changes imposed by the carbon legislation.

On the Treasury modelling, under the government’s policy, Australian annual emissions will be 621 million tonnes in 2020 – 43Mt higher than today versus a business-as-usual projection of 679Mt.

To meet the target of 160Mt abatement in 2020, more than 100Mt in credits will need to be bought abroad – and, as previously explained, I hold to the view that this requirement will be higher because of our energy demand growth this decade.

When the Kyoto protocol expires after 2012 and there is no binding global agreement to limit emissions in place to succeed it, a high likelihood, an Australian emissions trading scheme will be still more exposed to cost pressures.

On Treasury’s version of what carbon credit prices will be in 2020 and what will need to be bought abroad, Australian business will be spending $3.7 billion a year on permits from overseas, a “deadweight loss” for the local economy of considerable magnitude.

If the global abatement market envisaged by the government does not materialise, this could be much higher.

To quote a Treasury witness at the Senate hearing, “It is a general proposition that, if you use a narrower base to achieve the same amount of environmental action, it will raise the overall economic cost.”

There is also a significant risk lurking beyond this legislative process for the electricity sector and it hangs on whether, and to what extent, State and Territory governments will allow the full costs of the carbon programs to be passed through to consumers.

Rising electricity costs, and how politicians deal with them, are not just a local issue.

“White hot” unhappiness with power bills is to be found all over the place.

There is a large row about it in Britain at present – and it is a central issue in Ontario, Canada, where a provincial election is looming.

Ontario, which I have had the opportunity to visit a number of times, is to a certain extent a mirror image of New South Wales – if you will ignore such minor aspects as the weather and that Toronto is located on a big inland lake rather than, as with Sydney, on the ocean.

Many of the policy issues that Ontario has to wrangle (in the livestock sense) are similar to those in NSW.

The Ontarian Liberal government (their version of Labor in many respects) has “solved” the political problem of sharp power bill rises by unilaterally slashing about $C10 a month from them and meeting the cost from taxpayer funds. Their opponents are not arguing.

It has led commentators to complain of a “daffy consensus” that can only leave the power system in a lot of trouble.

Back here, Alinta Energy, in its CELP submission (that’s “Clean Energy Legislative Package” for those with acronym exhaustion), has warned that prohibiting retailers from passing through carbon costs will “negatively impact investment in low emissions technology” as well as affecting long-term competitiveness in the energy market “by reducing new entrant opportunity through insufficient returns being available to warrant investment.”

Nor, it adds, will this move “in any respect encourage households to modify energy use behaviour.”

Alinta points out that, where State governments act to limit the pass through of higher costs and the federal government nonetheless gives all and sundry compensation, there will be a windfall gain to consumers.

Popular no doubt, but dumb.

Again, as others are pointing out, under the CELP the Gillard government will return none of the revenue collected from black coal generators, whether owned by taxpayers or the private sector, in three States, NSW, Queensland and Western Australia.

The National Generators Forum asserts that this is a “deliberate decision” to damage or even destroy the value of these businesses, six of them owned by taxpayers (or about 60 per cent of the population).

Macquarie Generation’s submission raises an interesting angle on this aspect.

It notes that Treasury modelling of Rudd’s CPRS included detailed analysis of possible profit impacts on generators based on their fuel types – but there is no such analysis provided in Gillard’s “clean energy future” modelling.

The NGF has also queried what is really involved in the establishment of the Clean Energy Finance Corporation under the legislation.

The government proposes to borrow $10 billion over five years to set it up and estimates that the national budget will bear a cost of $944 million a year for administration, loans below the commonwealth bond rate and equity investments.

“There is no indication of what public benefit returns are expected,” the association says.

Think about this for a moment.

If, in any other sphere of government activity, there was a proposal to lash out about a billion dollars a year without explaining what economic or social benefits accrue, there would be a huge media outcry and the opposition would be in full voice.

But this measure is obscured behind the clouds of dust over the broader carbon argument.

Another “daffy consensus.”

Despite this considerable outlay, very little has been announced about the CEFC, its priorities or its governance.

If you saw it as a sweetener for the Greens in the negotiations with Gillard, Swan and Combet, would you be far wrong?

That’s a “daffy consensus,” too and one wonder what this year’s “world’s best finance minister” was thinking when he supported it?

And the generators are right when they remark that the CEFC decision is an important further shift in federal attititude to renewable generation: moving from allowing the market to pick the best mix of projects under the Renewable Energy Target to another intervention to pick winners.

This began with the “solar flagships” program, of course.

It is also inherent in the proposed arrangements to secure early closure of 2,000MW of brown coal generation.

This is nothing more or less than central management of production or retirement decisions by market participants.

Why not have a scheme that also enabled generators in NSW, Queensland and WA to tender for closure?

The NGF is correct, I think, to assert that intervention of this kind can only create new investor uncertainty.

In its submission, it says: “Over the past 20 years reform has created open,competitive markets delivering unprecedented investment in new generation capacity and stable wholesale prices.

“There are no major barriers to new entrant generators.

“Competitive neutrality has been essential to this success.

“There is an obvious risk of conflict when governments compete in markets they regulate.

“A lack of confidence in the openness and transparency of the market can deter private investors.”

In the States, it says, governments have wound back their direct commercial involvement in generation through privatisation and corporatisation – but the Gillard government is reversing this trend.

Is there an outbreak of Coalition complaint about this? So far, no.

More “daffy consensus,” then – even if only be default.

The real consensus in world in which we actually live, I suspect, would be found among the 60-70 per cent of us who do not see the benefit in Australia rushing out ahead of the world on carbon taxes and emissions trading.

Wind revolution, not

A candidate for one of the sillier headlines of the year is in today’s Sydney Morning Herald.

“A mighty wind shaping Queensland’s energy future,” it proclaims.

To which, in a single word, one may retort: “Tosh.”

And ditto to an introductory paragraph that says: “Queensland is on the verge of a wind energy revolution.”

As a further illustration of just how facile the mainstream media can be in reporting electricity issues, I note that a much more interesting newspaper story appeared on 15 September in Queensland’s North West Star newspaper and has so far not been picked up elsewhere.

It reported a statement by independent MHR Bob Katter that, following a meeting he had held with Treasurer Wayne Swan, “a letter has been provided (by Swan) in confidence to the CopperString consortium which is a confirmation and a reaffirmation of the $800 million allocated in the budget, almost half of which is for the transmission line.”

(It’s not “in confidence” now, Wayne, so could you publish it on your official Treasury website?)

CopperString is a proposed transmission line to run from Townsville to power-isolated Mt Isa, not only linking the mining town to the east coast electricity grid, but also opening up a number of prospects for renewable energy development in the corridor.

As one of her 2010 election promises, Julia Gillard committed $335 million of federal funds towards building the $1.5 billion transmission line, which will be 1,000 kilometres long.

Mt Isa’s electricity is supplied at present by the Mica Creek power station run by government-owned CS Energy, using gas piped 840 kilometres from South Australia’s Cooper Basin for the past 13 years.

I also can’t find any mainstream media outlet that has reported comments by APA Group chief executive Mick McCormack on 30 August in which he reminded us that his company and AGL proposed building a new 240MW gas plant alongside the Mica Creek power station, using existing transmission infastructure.

“We are puzzled,” he said, “that the competing CopperString project, apparently costing four times as much, continues to be promoted.”

Among the background papers being used in consideration of what should happen next is a report by Rod Sims, now ACCC chairman, noting the various benefits available from building a transmission line, but recommending that the link should only be pursued if it delivers the lowest-cost option for consumers.

The project developers are Leighton Contractors and CuString, a company owned by the O’Brien family.

Chairman John O’Brien is Katter’s brother-in-law. (Katter has reacted vehemently to past Queensland media comments about his family connection to the development, branding hints of conflict of interest “garbage.”)

Among the renewable energy prospects for the CopperString corridor is a 750MW wind farm proposed by Windlab – to be constructed at Hughenden, 290km from Townsville, at a cost of $1.5 billion.

AGL Energy is another player in potential Queensland wind development – having two projects, Crows Nest near Toowoomba and Coppers Gap between Dalby and Kingaroy, but they are not related to the fate of CopperString.

There is no “wind revolution” coming for Queensland, however.

The Bligh government has produced a paper committing the State to achieving 9,000 gigawatt hours of non-emitting electricity production by 2020 – which does not actually deliver the stated goal of (what else?) 20 per cent renewables by 2020 because consumption (now at 48,000 GWh a year) was at the time of the announcement forecast to reach 69,000 GWh by the decade’s end.

The latest Energy Supply Association forecast of system energy for the State – 75,600 GWh in 2020 versus 53,500 GWh in 2010-11 – suggests that the consumption outlook is still roughly what the government expects.

(System energy includes transmission line losses and consumption by the power plants themselves – it is actually what matters for calculating emissions.)

The key point, of course, is that Queensland electricity can be expected to be more than 80 per cent fossil-fuelled in 2020 and not hugely different in 2030 (although one has to bear in mind Origin Energy’s PNG hydro-electric project that is intended to deliver about 1,500MW in capacity to the Queensland grid at some point in the next decade, a concept that is still being investigated).

The next cabs off the generation rank in Queensland can be expected to be ERM Power’s 500MW Braemar plant and Origin Energy’s 500MW Darling Downs 2 plant. Both gas-fired.

As a result of the federal carbon program, there is also a $1.2 billion solar energy project proposed for Chinchilla in Queensland, expected to be built by 2015 with another $464 million of Gillard government funding.

Looming large in the background is the needs of the LNG projects at Gladstone.

As much as 3,500MW of generation will be required to run them when fully developed – and none of this capacity will be provided by the wind farms.

The moral of the SMH’s big wind story seems to be that you can frequently run copy emoting about higher costs of power to consumers – labelling outlays “gold-plating” with respect to networks – and then, because it furthers the “renewables revolution,” also emulate the hallelujah chorus over a development that is many times more costly than a conventional, local alternative and requires a very large taxpayer-funded handout as well as the higher prices brought about by the RET subsidy.

The bigger picture, no doubt, is the State’s needs for supply security, competitive power pricing and reducing the energy sector’s environmental footprint – but that doesn’t excuse the SMH’s latest effort or those by any other of the media goldfish doing their “Gosh, there’s a rock!” routine each time they swim round the bowl and encounter a renewables sector press release.

The Herald might even contemplate the thought that the Gillard government’s largesse might be better spent, from the perspective of its NSW readership, by contributing to duplication of the transmission link between its home State and Queensland, a project that might cost about $2 billion and provide a powerful (sorry) contribution to electricity flows between the two largest regional markets in the country.

In the real world

The overnight release of the latest 20-year projections by America’s Energy Information Administration should – but almost certainly won’t – throw a large bucket of cold water over the over-heated domestic debaters about carbon policy.

Read the media and you cannot escape the impression that the renewables energy revolution is not just around the corner, it is in the here and now – meeting a large part our electricity needs from solar power and wind farms is imminent.

The “clean energy future” is our promised land, provided we are prepared to spend billions a year buying emission credits from other countries. The Barrier Reef will be saved. Fremantle will not be eroded by rising seas.

Well, the EIA outlook to 2035 tells a rather different story.

World energy consumption grows 53 per cent between 2008 and 2035. Non-OECD energy use grows 85 per cent. Half the global increase is attributed to China and India.

China accounts for nearly three-quarters of the global increase in coal-fired generation – taking it from coal-burning generation of two trillion kilowatt hours in 2000 to more than six trillion kWh in 2035.

The EIA certainly sees renewable energy as a big growth market.

It projects a rise in its use of 2.8 per cent annually, the fastest growth of all – and foresees it providing roughly 15 per cent of global energy in a quarter of a century from now.

That’s a little more than an eighth of all the electricity produced on the planet – not exactly the picture the excited Greens and their camp followers are trying to sell us if we will embrace the domestic carbon price policy.

The EIA sees a world in which coal (27 per cent) and liquid fuels (including biofuels, 29 per cent) are the dominant players, with natural gas providing 23 per cent of energy needs and nuclear power seven per cent (up two per cent from today).

And here’s the big, bad news: worldwide energy-related carbon dioxide emissions rise 43 per cent between 2008 and 2035, reaching 43.2 billion metric tonnes, of which almost half is emitted in non-OECD Asia versus a third in the OECD.

In this world electricity is the big growth factor, outpacing the increases in use of liquid fuels, gas or coal.

There is no better dipstick for the world’s economic situation than power use – and the agency forecasts that by 2035 non-OECD countries will be consuming 60 per cent of global electricity generation, up from 47 per cent today.

Global demand for power is forecast to rise by 2.3 per cent a year to 35 trillion kWh a year in 2035 – one-sixth of which will be Chinese production using coal.

At present, says the EIA, China’s coal installation program is running at 900MW a week – in other words adding more than a Liddell power station a month to its fleet. (Liddell is the New South Wales plant the Greens desperately want to close.)

The biggest change factor in the power game over this period is the rise of gas at the expense of coal (a trend also forecast for Australia in last year’s national energy resource assessment published by Martin Ferguson).

Global generation of electricity from gas doubles over the forecast period to just over eight trillion kWh annually.

Looking at Australia and New Zealand together – this is an American perspective, remember – the natural gas share of generation is expected to grow strongly, rising at four per cent per year and cutting coal’s role back to 39 per cent in 2035 (in keeping with Ferguson’s assessment, which sees coal’s power share here reduced to 43 per cent in 2030 and gas generation rising to 37 per cent – and which, of course, means that fossil fuelled-electricity will still dominate in Australia with 80 per cent of the market in two decades’ time.)

Looking at the renewables sector, the EIA projects that its share of global power production will rise from 19 per cent in 2008 to 23 per cent in 2035 and four-fifths of this will come from hydro-power and wind power. Of the 4.6 trillion kWh of new annual renewable production forecast, more than half is attributed to hydro-power, with strong growth occurring in China, India, Brazil, Malaysia and Vietnam.

Not exactly the solar-fuelled Nirvana we keep getting told about.

This is what the IEA has to say about renewables: “Although (these) sources have positive environmental and energy security attributes, most renewable technologies other than hydro-electricity are not able to compete economically with fossil fuels during the projection period except in a few regions or in niche markets.

“Solar power can be economical where electricity prices are especially high, where peak load pricing occurs or where government incentives are available.”

As one would expect, a big driver for renewables in the next 20-25 years is non-OECD Asia.

The EIA projects growth averaging almost five per cent annually and sees renewables contributing just over a fifth of the region’s supply in 2035, a transition in which hydro-power plays a substantial role.

The wind power sector’s gold mine will continue to be China.

The agency forecasts an almost 40-fold rise in Chinese wind farm development, with output reaching 447 billion kWh in 2035.

What does it all mean?

First, if driving down carbon emissions is the be-all and end-all of energy policy, the planet is stuffed.

Second, that suppliers of energy and of the equipment and services it uses are going to make squillions.

Third, that Gillard’s “clean energy future” – looking out to 2035, which is a darned long way – is actually one in which 80 per cent of our electricity is fossil-fuelled. And in which, on her own modelling, we will send several hundred billion dollars cumulatively between now and 2035 out in to the world to buy greenhouse gas credits without any tangible local economic benefit while global emissions go through the roof.

Not quite the picture you may be getting from the media coverage of the heated debate in Canberra and around the country.

And certainly not the picture that the ABC “Four Corners” program on the carbon debate portrayed on Monday night – appearing exactly as the EIA was publishing its report.

Acute sensitivity

Federal Treasurer Wayne Swan has garnered some media coverage with his weekend economic note claims about the impact of the government’s carbon price.

Somewhat remarkably, as the legislation is about to be debated in Federal Parliament, the Treasurer is still running with numbers based on a departmental model using a $20 per tonne charge – rather than the $23 on which the government has settled.

Even so, the model claims that the measure will drive up the costs of “electricity, gas and utilities” by 7.9 per cent in 2012-13.

Swan then lists a raft of everyday products and services (from booze to milk to furniture) where the impacts range from 0.2 per cent to 0.4 per cent. The average food bill for households, he claims, will rise about 80 cents a week.

As it happens, I spent part of the weekend reading through submissions to the Australian Energy Regulator about Powerlink Queensland’s bid for capex and opex in the period 2012-13 to 2016-17.

In the context of Swan’s assertions, I am struck by the Wesfarmers submission.

The company, which owns Coles, Kmart, Target, Bunnings and Officeworks among others, says that it spends $350 million a year buying electricity for its retail and industrial businesses.

In objecting to the level of increased network charges that will flow from Powerlink’s bid being accepted, Wesfarmers say this:

“While ($350 million) may be a small portion of our total cost of sales, this belies its strategic significance to us and to our customers.

“Our retail businesses all operate in very competitive environments where supply chain efficiency and cost reduction are a continual challenge.

“Significant rises in the cost of doing business such as we have seen in recent years for electricity puts pressure on these businesses. The rising price of electricity also affects our suppliers, amongst them many of Australia’s farmers, food producers and many small product and service providers.

“Our customers ultimately will have to bear higher prices for the goods that we provide if our internal efficiency gains are unable to keep pace with external cost increases.

“The AER will be well aware of the acute sensitivity in Australia to cost of living pressures in general and rising electricity prices in particular.”

This concern is being expressed about an expenditure bid that will, it is claimed, see Powerlink’s network charges rise over six years from $15.88 a megawatt hour to $31.28.

Federal Treasury says the 2012-13 cost impact of the carbon price (at the under-estimate of $20) will be $171.60 on the average electricity bill for households and $78 for for the average gas account.

The average home uses about 7MWh a year of electricity, a number pulled down by the use of gas in States like Victoria and South Australia.

So they say

Scanning the media, one comes up daily with a multitude of views and assertions about the electricity supply sector, not all of which make much sense. Some quickly become accepted “wisdom” as one writer picks up from another.

An example of the genre is talk this past week about the value of the government-owned electricity businesses in New South Wales if they are sold.

A leading political commentator in a major newspaper wrote on Saturday that selling the State’s generators and network businesses “could free up $50 billion” in value on the NSW government’s balance sheet.

Now where did that come from?

In all probability a claim a week earlier in an allied Sunday newspaper that “the sale of the poles and wires could earn the State $58 billion.”

On the other hand, several electronic media reports have canvassed a $20 billion value.

Given that something of an authority in this area, David Leitch, executive director of utilities research at UBS Securities Australia, estimated back in March (see “Golden wires” in the 71st edition of my Coolibah monthly newsletter) that sale of the NSW networks businesses (three distributors and the high voltage operator TransGrid) could be worth between $20 billion and $25 billion, these numbers are just a tad out of whack – which won’t stop them being repeated here and there.

The latest NSW privatisation hare has been launched by former premier Nick Greiner, now chairing Infrastructure NSW, who gave a broad hint at a business lunch in Sydney that the advisory body and he personally had made submissions to the Tamberlin inquiry in to the State electricity industry calling for all the power assets to be sold.

What the assets are really worth can only be speculative at this stage.

Leitch’s networks numbers for the networks seem fair enough, but the value of the generators depends on many factors, including what is actually available to be sold, how potential buyers will value coal-burning plant – 8,340MW of it constructed before 1985, the perceived impact of the federal carbon regime and how the ACCC may view the sale of Macquarie Generation (holding a dominating 4,070MW) as one business.

The Greens don’t want MacGen’s 2,060MW Liddell power station near Muswellbrook sold – they want it closed down.

What pressure could they bring to bear on the Gillard government if a foreign investor sought to acquire it?

Also needing to be taken in to account is NSW’s majority share of the Snowy Hydro business – with the federal and Victorian government’s holding 42 per cent.

Privatising the Snowy is entirely sensible from a business perspective – it was pursued at NSW’s behest in 2005-06 and then abandoned when John Howard took fright at the backlash – but a hard sell politically.

Some believe the business could fetch about $5 billion.

However, the chances of getting the present federal government, hagridden by the Greens, to support a sale are not going to be high.

Barry O’Farrell, of course, tied his own hands with an unnecessary commitment before the last State election that he would not sell the networks businesses.

He seeks to weasel his way round this now by asserting he is relying on Tamberlin to come up with advice on “the best course forward for the State’s electricity assets that will keep power prices low.”

This is one of those daft things politicians say when they are pursuing wriggle room.

There is no possible way of “keeping power prices low” over the next eight years, a period when the Coalition should retain office on the back of its massive victory last March.

During this time there will be a range of developments that serve to push up State power bills.

They include the impact of the present round of regulatory approval for network expenditure (totalling $17 billion between 2009 and 2014) and of the determinations for 2014-19 (which will still surely exceed $10-12 billion even with a different set of rules) – plus the effects of the federal carbon regime, of the renewable energy target and of the notorious Keneally “solar bonus scheme” before we even get to rolling out smart meters. As well, there are possible higher energy prices flowing from rising fossil fuel costs.

Without a majority in the Legislative Council, O’Farrell can propose anything he likes regarding power sales but may not be able to implement it. What he can’t do is change the direction of the price trend.

His best chance of making big ticket policy changes may not come until (if) he can achieve a majority in “LegCo” after the March 2015 election.

If he breaks his 2011 election promise about privatisation, in an environment where power bills continue to rise, how will he go at the polls in 42 months’ time?

Losing the Legislative Assembly election in 2015 is as near to impossible as anything in politics can be, but the critical element for the Coalition will be gaining a Legislative Council result to enable O’Farrell (or his successor) to implement policy in a second term.

The first genuine stepping off point for the government with respect to electricity policy will be delivery of Tamberlin’s report at the end of next month.

Soon thereafter the government needs to come forward with a well-reasoned, all-encompassing plan for electricity supply in NSW out to 2020 or 2025 set in the context of the State’s overall infrastructure requirements.

It needs to take in to account that the latest available forecasts for the State (which include demand in the ACT), as published in the Energy Supply Association 2011 yearbook, predict the need for energy supply will rise from around 77,000 gigawatt hours annually now to about 90,000 GWh in 2019-20, with summer peak demand accelerating from 14,000MW now to around 18,000MW, and with all this implies not only for generation requirements but also for network development.

It needs to plan for several hundred thousand more people living in the State, most of them in the Wollongong/Sydney/Newcastle corridor, already the single largest load centre in the country, and for tens of thousands of more households and related services.

Of course, the nay-sayers and ideologues in the political arena, the starry-eyed in the environmental movement, those pursuing their own particular business desires and the chin-waggers in the commentariat will continue to sound off and dominate media coverage.

Us Outdoors can only cover our ears and hope that O’Farrell and his team have learned from a bit of a shaky start in their first months in office and will bring some discipline to bear in making decisions about electricity strategy that resonate through the decade and beyond.

The last serious attempt to produce an energy white paper was made by Bob Carr back in December 2004 – and it only got as far as a green paper that I strongly suspect was a cut-and-paste job from several advisory sources.

It began well, however.

Like this: “The security of energy supply is a critical issue for the future of NSW. As the population and economy grow there is an ongoing need to ensure that households, businesses and industry have access to a reliable, affordable, sustainable and secure electricity supply.

“The consequences of demand growth include increasing emissions, diminishing generation and network reserve capacity and increasing costs for consumers.

“Engagement at the national level to achieve energy security and combat climate change is necessary but not sufficient. NSW must continue to improve and clearly articulate its own policy settings.”

My suggestion is that the fourth premier since Carr adopts this statement as his own and starts to plan and say things that will enable him to do what Carr (and his three Labor successors) could not do – deliver against this perspective in the State’s interest.

Carr’s green paper summed up the challenge for government like this: “To set energy policy in a way which maximises net public benefit by ensuring security of supply, encouraging private investment, providing a simple and efficient planning and environmental assessment framework, reducing greenhouse gas emissions and other environmental impacts and maintaining competitive energy prices.”

Easy to say. Hard to do — but it is what O’Farrell’s government has to deliver.

A light in the West

There is no escaping from the fact that it costs a motza to keep electricity delivery up to scratch in a fast-growing network.

A lot of the noise we have heard in recent months about “gold-plating” and “gouging” displays a fundamental lack of understanding about this point, and not least about the fact that, like people, networks grow old and all sorts of physical disabilities afflict them.

(Having turned 69 this week, I know of what I speak even without reinforcement from my smallest grandson, who informs me that I am “wrinkly, wobbly and weird.”)

The reality of network life has just been driven home again by Western Power, the government-owned utility that provides transmission and distribution services to Western Australia’s “SWIS.”

The south-west interconnected system stretches from Albany in the south to Kalbarri in the north and Kalgoorlie in the east. It has more than 96,000 kilometres of powerlines, 630,000 wood poles and almost 14,000 sub-stations.

And it stands alone. Unlike most of the developed world’s networks, the SWIS is an islanded system because of the geographic isolation of WA.

In power generation terms, the SWIS is a lot smaller than the major east coast markets – handling just over 17,000 gigawatt hours in 2009-10 versus 50,000 GWh in Queensland, almost 48,000 GWh in Victoria and nearly 73,000 GWh in New South Wales.

Its projected rate of growth, however, is not small – forecast in the latest Energy Supply Association yearbook to be more than 44 per cent over this decade, not much less than the 49 per cent flagged for east coast sprinter Queensland and nearly double the system energy growth projected for NSW.

There is a price to pay for growth at such levels, the more so when coupled with the need to replace aged assets.

In Perth’s western suburbs, for example, most of the sub-stations were built in the 1950s and 1960s. They will need replacement over the next decade.

Western Power is now fronting the State’s Economic Regulation Authority – the “national” regulator, the Australian Energy Regulator, deals with the east coast (aka the “national” energy market) – in search of approval for $5.81 billion in capital outlays over five years between 2012 and 2017.

(The “almost $9 billion” figure reported by the ABC includes the $2.714 billion the utility is seeking in operating expenditure – which will actually bring the total sought to $8.523 billion, but what is $477 million when you are the national broadcaster?

(Elsewhere the media have blended capex and opex without apparent understanding of the difference.

(A WA newspaper headlines that the outlays are to go on “poles and wires.”)

Western Power managing director Doug Aberle says the network operator is seeking capex approval to spend $3.373 billion on dealing with demand growth (connecting 130,000 new customers and meeting rising demand per consumer) and better protecting the SWIS against outages, $1.222 billion on safety outlays, including replacing or reinforcing 164,000 wooden poles plus more than 1,000km of cables and bushfire mitigation, and $1.214 billion on maintaining reliability standards and improving them in rural areas.

Aberle points out that the SWIS needs to deal with many high and extreme fire risks.

Of course, outlays of this level will result in customer price pressures – and the Labor opposition, which dodged power price rises for years while in office, has been quick to carp about “taxation by tariff,” but this is just so much political gibbering.

What, one wonders, is the alternative?

As I wrote in “Business Spectator” on 15 September – see “Sims faces a power shortage” – back east, when the rule changes and other regulatory rigor proposed by the ACCC and the AER have had their sway, there will be no change in the $35 billion capex outlays already approved out to mid-2014 and the likely expenditure for the following five years in the “NEM” will still be north of $20 billion, with inevitable flow-throughs to end-user bills.

Much of the $5 billion cut from bids by the AER in the last round of determinations simply comes back in the next round because the proposed work has to be done sooner or later.

Speaking at a conference in Canberra on 13 September (his talk is up on his ministerial website), federal Resources & Energy Minister Martin Ferguson yet again made the fundamental point that seems to roll off media and other commentators like water off a duck’s back: “Network costs will remain a significant driver of electricity prices in the years ahead.”

As Ferguson points out, part of the role of government (federal, State and Territory) is to ensure that consumers do not pay more than they need to for their power supply. The ACCC’s Rod Sims said something similar around the same time.

This keeps getting interpreted as government and regulators “fixing” the power price “slug” – media headline writers like short, punchy words – but there is no “fix.”

Keeping prices artificially low is not a solution, says Ferguson. This only leads to more concentrated periods of price increases.

Exactly right and exactly what his Labor colleagues in the West spent years doing to the present detriment of suppliers and consumers – which won’t stop the current crop of opposition MPs in Perth from jeering from the sidelines.

As Ferguson said, rising network costs, primarily in distribution, and the big investments needed overall in power infrastructure are responsible for about half the electricity price rises of the past few years.

(And, of course, governments, including his own, are adding to this cost burden by imposing a carbon price and other emissions-related requirements, such as the RET and “solar bonus” schemes – while lurking in the wings is the prospect, perhaps the certainty, of higher fuel prices for both gas and coal.)

Improving the balance between the need to invest in networks and the cost to consumers is unarguably a good idea, so long as those in authority remember that this cost is at its worst when it is the price of supply failure or inefficiency.

Getting policymakers’ heads around the need to ensure that the welfare net is well prepared for those who will genuinely struggle to deal with these higher costs – the hundreds of thousands of households trapped in so-called “fuel poverty” – is an even better idea.

Looking after them properly and also pandering to middle-class mendicants is beyond government budgets – but the the balance of votes lies with the greedy rather than the needy.

Many of those in the community incensed by rising power bills are not “poor” and are spending far more on alcohol, cigarettes and entertainment per week than on utility services.

Pandering to them for votes is a race to the bottom – with attendant risks for the ongoing reliability of an essential service.

Apart from the ACCC and AER’s rule-change proposals, the federal government signalled back in July (when announcing the carbon price legislative package) that it would launch an independent review to benchmark network efficiency.

Fair enough, but what we need most right now, I think, is for the intermediaries between policymakers and the public – the media – to present the situation as it really is rather than playing shock jock games and regurgitating the self-serving mouthings of some in politics and some just playing politics.

Senate sideshow

Not all the debate about the carbon price regime involves the big stage and the top name players.

One of the more interesting sideshows over this year has been the hearings of the Senate select committee scrutinising the proposed carbon tax, chaired by West Australian Liberal Mathias Cormann (who is also the Coalition’s Assistant Treasurer spokesman).

The Hansard reports of the committee are all to be found on the Senate website, the latest being a hearing on 1 September.

Little of this material finds its way in to the daily (or weekly) media so all sorts of information goes through to the keeper.

Looking at the Hansard for the hearing in Geelong this month, I think the following is of some interest.

First, Andrew Richards of Pacific Hydro, which is owned by Industry Funds Management (which in turn has 5 million Australian superannuants as shareholders), told senators that there is a strongly held view that the renewable energy target will not be required beyond 2025, depending on what happens with carbon pricing.

He agreed with Cormann that “if the carbon price is high enough and pushes energy prices high enough, then there is no need for an additional requirement to have a minimum target for renewable energy.”

I am not sure that too many others in the renewables camp will put up their hands for closure of the RET once the ETS is in full swing; some indeed are arguing that, because of the slow progress of the past two years, it may be better to increase the target to 25 per cent by 2025 rather than 20 per cent by 2020.

In another response to the committee, Richards estimated that the new entrant price for brown coal development in Victoria today is around $45 per megawatt hour versus $60 for gas and $90 to $110 for wind.

Then there was the evidence of Danny Price, managing director of Frontier Economics, who focused on the “surprising” use by the Treasury in its base case modelling of the assumption that the rest of the world will have a carbon charge in place.

“The base case is meant to reflect plausible reality,” said Price, “and I do not think that anybody would imagine the rest of the world is going to put a carbon price in place. To me, this is more an attempt to manipulate the outcomes of the model than to try to openly and transparently understand the effects of a carbon tax. The way the base case has been formulated is a pure artifact of a very key assumption – not many people really appreciate this.”

He added: “We (that is, Treasury) have not done what should have been done – look at a world where the rest do not have a carbon tax in place.”

One of the highly unpopular (with the government) things that Frontier Economics found in its modelling, using the Treasury approach, is that the Hunter Valley and the Illawarra in New South Wales plus some Queensland areas suffer an absolute decline in growth under the Gillard/Brown carbon regime.

Price also drew attention to “gross misleading” use of the Treasury model results.

“The Minister for Climate Change regularly promotes the fact that the model shows there will be strong jobs growth, even with a carbon tax,” he said. “But this is a model assumption not a model outcome.”

In the Hunter Valley, under the regime now proposed, there is a prospect of 36,000 jobs being lost.

Price commented that Frontier Economics had been criticised for scare-mongering in raising bad sub-regional outcomes.

Treasury and the government, on the other hand, had sought to disguise regional impacts “by taking a sort of national average.”

Treasury, he pointed out, also modelled a carbon tax less than the one the Gillard government announced.

Price’s colleague Matt Harris chimed in that the Treasury attempts to pre-empt criticism of its global carbon price assumption by arguing that, if fewer countries take action, the worldwide cost will be lower.

This, he said, is not necessarily the case. If the US does not take action, there will be lower net demands for permits and the price might be lower, but if the stand-outs are countries like China and India, there might be fewer permits and upward pressure on the carbon price.

Cross-examined by Labor’s Senator Doug Cameron, a former unionist who has adopted the role of the government’s pit bull at these hearings, Price rejected a suggestion that he was saying there would not be jobs for today’s kids in a carbon regime future.

“No,” he retorted,”that is not what I said. I said jobs growth would continue but there would be fewer jobs than there otherwise would be and at lower wages than they would have been otherwise.

“There is jobs growth and there is income growth but they both grow at lower rates and in some regions jobs go backwards.”

As he observed, this is not something the Treasury and the government readily reports.

Answering a question from South Australia’s Senator Nick Xenophon, Price said it was concerning that significant, long-term investments in new generation across Australia were not being planned.

What investors are doing, he said, is “hedging their bets by building small increments of mostly gas-fired generation which will result in very big increases in prices.”

No-one in their right mind, said Price, would lay down the billions of dollars needed for new baseload generation in an environment delivering a transitional carbon tax moving towards an emissions trading scheme with unknown outcomes.

He observed caustically that, contrary to assertions that the government is delivering certainty for business, “a scheme that is transitional moving to a scheme that is ill-defined is not going to create certainty.”

Price told the committee: “These (generation investors) are my clients. I have been doing work (with them) for 25 years. None of them is talking to us about investment in new baseload generation.

“They are all investing in small peaking plant that they can potentially convert later on and that will mean that electricity price will continue to rise because they are quite expensive to run.

“I am the first port of call for potential investors in new power generation or in acquisition of generation,” he boasted. “They do not go to bankers and lawyers first. They come to us because we are the ones who look at the risks of opportunities.

“I am telling you that the level of interest in new baseload generation has fallen off dramatically over the past four or five years.”

In this context, if you visit the committee Hansard on the Senate website, it is worth flipping back to the 10th hearing in Canberra last month for a dissection by economist Henry Ergas of the government’s proposals. In particular, his response to the argument that we need the government’s scheme to give generators certainty.

“I agree,” said Ergas, “that they face uncertainties including those associated with the future international framework for climate change.

“Unfortunately, these uncertainties cannot be wished away.

“They are a fact of the current global situation. Imposing a scheme such as the one proposed to reduce the cost of capital to electricity generators only shifts the risk on to the community, who may not be the party best placed to bear it.”

Over the next two months, the media focus no doubt will be on the government backed by the Greens rushing the carbon legsilation through the parliament. The Senate committee’s Hansard provides some solid counterpoint to the essentially banal coverage we will have to endure.

In the longer term, we may come to realise evidence to the committee carried a great deal more weight.

Powering Australia

How many members of parliaments do we have in Australia?

Note the plural.

It is a number that tends to be beyond most people I ask. Even a federal minister expressed surprise when he found out.

All those answering “too many” are automatically struck out!

The number is 834, including 236 in the federal parliament – with New South Wales having 135, Victoria 128, Western Australia 95, Queensland (with only one house) 89, South Australia 69, the Northern Territory 25 and the ACT 17.

(It works out to one for roughly every 26,000 of us living here, so in that sense it is not perhaps as “too many” as some would think, especially when you take in to account the huge amount of legislation and regulation they oversight – which everyone thinks is far too much “red tape” until it is proposed that a bit they like is ditched.)

The reason I know the number is because I have been sending them all electricity information for most of the past 20 years, initially, when running the Electricity Supply Association, despatching “Electricity Supply Magazine” (which was bi-monthly or monthly depending on the vagaries of the economic climate over 12 years) and more recently the “Powering Australia” yearbook.

They are all about to get their fifth edition of “Powering Australia.”

The 2011 yearbook will be published at the end of this month and officially launched in Melbourne by the federal Resources & Energy Minister, Martin Ferguson, at a “Powering Australia” conference.

Ferguson, who has kindly launched each edition since 2008 (the first one appeared during the 2007 federal election), described the book last year in terms I particularly like: “a catalyst for the kind of robust dialogue between industry and policymakers that is critical to ensuring Australia’s future energy security.”

Contributing to this dialogue by communicating with every MP in the country was a strong part of the raison d’etre for establishing “Electricity Supply Magazine” in 1991 and I was sorry to see the new Energy Supply Association drop the publication after my retirement at the end of 2003.

Electricity supply issues touch every parliamentary constituency in the country, sometimes creating fierce local as well as national debate, and having a reference at hand in MPs’ offices that talks about the industry without the stridency and “angles” we get in the day-to-day media coverage is surely a good thing.

Getting the electricity supply companies to financially support such ventures is not easy, however. It is no secret that “Powering Australia” – published by Focus Publishing, a division of CommStrat – has had to run hard to earn enough to appear each year.

Things were never easy with “ESM” either, but the big selling point then was that it was also sent it to more than 2,500 industry executives and marketed to the goods and service companies as a book read by people who signed more than $6 billion in cheques each year. (This number would be at least $10 billion today, I reckon, a contribution to GDP that tends to get overlooked rather too often.)

It and other commercial activities ESAA pursued (other publications,conferences and the like) enabled me to tease the association board of directors at budget time every year by responding to the inevitable question about who was paying the largest membership subscription: “I do – and by a very long way.”

The serious side was the dialogue we had going with MPs about supply developments and energy policies through “ESM’s” strong readership at a time of major structural change in the industry.

(“When,” I got asked by one,” will all this change stop?” My reply of “Never” was not seen as especially comforting although events over two decades prove that it was accurate.)

I think that “Powering Australia” today is providing a genuine service with a book that MPs and their minders – as well, of course, as the others in its 5,000 audience – can use as a broad reference.

This year, as in previous editions, the yearbook, to quote Martin Ferguson again from 2010, “touches on some of the shared challenges we face.”

The conference to mark its appearance – in Melbourne on 27 and 28 September – will pick up on a number of these issues.

We have lined up experts to speak on the low-carbon technology challenges, the role of R&D, the skills shortage issue, the need for new transmission developments, energy prices, including the controversial proposals for time-of-use charges, customer concerns, the emergence of wider fuel poverty, South Australia’s “green grid” concept, the prospects for wind power and for solar energy, the huge potential future for gas generation, issues affecting nuclear and geothermal power, the future of carbon capture and storage plus what may turn out to be the issue du jour of 2012-13: the future of the Latrobe Valley under a carbon regime.

Overhanging all this is a point well made by economist Jon Stanford, who is a contributor to the 2011 yearbook: “We cannot be confident (in the present environment) that the private sector will provide the necessary investment when and where it is required to guarantee energy security, nor that the investment that is undertaken will necessarily be efficient.”

This is the issue that should occupy more time than it does in media coverage and political debate, although it would be fair to say that recent newspaper and electronic media reports are throwing up aspects of energy security more often, unfortunately sometimes in lurid and not especially helpful terms.

The current coverage of solar power costs as heading towards parity with coal are a good “off the wall” example.

I am looking forward to the discussion in Melbourne at the month’s end and to reader reactions to the yearbook.

Equally, I am looking forward to getting to grips with the contents of the 2012 edition.

The next financial year and the one after that are going to be huge for electricity supply.

Not just because of introduction of the carbon price regime (if we get it) and because of the impending federal election or next year’s Queensland election, but also because of the flow-on effects of the Tamberlin electricity inquiry in NSW, the IPART solar FiT inquiry, the negotiations to close some brown coal power stations, the growing awareness that meeting the 2020 RET target is a bigger hurdle than anyone expected, the rolling maul of the coal seam gas debate with the rural and regional communities and the new, aggressive approach of the ACCC to electricity issues (see the lead item in the Coolibah September newsletter just published on this website) to name but a few.

Major decisions affecting investment in generation and networks will be made in the next two years.

We do, indeed, live in interesting times.

(Footnote: anticipating phone calls and emails, can I let you know that, yes, you can buy a copy of “Powering Australia” yearbook.

(Contact Focus Publishing on 02-8923-8009 or email Sam Collier at

(To find out more about the “Powering Australia” conference, call Kim Coverdale at Hallmark Conferences on 03-8534-5017 or email her at

(There is also more information on the “Powering Australia” website at .)