The Case for the NEG - Flawed?

There are some references to business cases in the NBN Service Management by Taxation discussion thread. It seems topical. Of course there are always many sides to most issues, perhaps even a round table, but how about the veracity of business cases and assumptions?

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The NEG has been problematic from the beginning and no real modelling data has been supplied so the veracity of any statements whether for or against can really be assessed.

The vast majority of environmentalists, alternative/renewable energy experts, Climate specialists say that it will not encourage renewable/non carbon energy supplies. The LNP Govt say it will decrease electricity prices by around $550 per year (a little more than $10 a week) but others say on what data has been provided the saving is around $150 per year (a little more than $2 a week). The NEG also greatly encourages the retention of carbon burning processes for energy.

Taken as a whole the result seems to be still giving more weight to retaining Carbon burning and stripping away support for renewable expansion, and this seems to be the outcome wanted by the LNP cadre and their financial supporters. But this is not a great outcome for either our World or ourselves when weight is given to the impacts of releasing even more carbon into the environment.

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…investors in fossil fuels and their dividend streams. Electricity? A secondary issue. Next. Pollution? Not topical re the NEG. Renewables? Just reinvest those dividends.

(from a supposed cabinet leak) :laughing:

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They have a spreadsheet! :laughing:

Business cases, cost-benefit analyses and the like have been abused and subverted so often that they no longer have any credibility.

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Irrespective of whether one supports the NEG or not, something needs to be done in relation to energy management in Australia.

In the past the States have in effect run/influenced changes to a semi-National network (QLD-NSW-VIC-TAS-VIC). Many of these changes have been political and in some cases one-upmanship (who can have highest renewable generation capacity or CO2 reduction targets). Many decisions have been made in isolation without considering needs or impacts of states hanging off the same main grid. The NEG attempts to correct this, but there are other solutions such as the Commonwealth taking over full management and decision making in relation to the generation and grid… …plus many more options I am sure.

I am still unsure what the best solution is but the future needs to change otherwise there will be major problems in the future if the states continue to stick their heads in the sand.

If the status quo remains, all consumers will pay.

It is also interesting that Australia is fixated on removing coal/fossil fuel generation from its network, one of the few countries in the world adopting this approach. While we may be leaders in this policy environment, Australia will suffer unless the same approach is adopted world wide.

Australia’s efforts seem futile in the mean time.

The other thing is the more government intervention in the energy market, the higher price we all pay for power in the long run. I am not convinced the NEG, ALP policy or that bandied around by others are any better or worse.

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An interesting assertion. In my experience, prices skyrocket, mostly when government wants to privatise. They do it deliberately, to inflate the apparent value of the asset and encourage the private sector to buy. Then the private sector’s profit motive further inflates retail prices.

As usual, public sector ownership is most rational IMO. The role of the states is problematic though.

Whatever it is, it will be different - and probably won’t feature anything that the Coalition would recognise as “baseload”. Here are a couple of pointers:


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This is not correct. The recent senate report found a significant proportion of recent electricity rises is due to the State run distribution and transmission networks…and by the investment (gold plating?) of these networks. The higher the network asset value, the more revenue the states receive…a bit of a conflict of interest

Those ‘pointers’ have are vested interests.

Australia needs to have a real discussion on long term energy solutions, without prejudicing outcomes by ruling something in or out. Everything should be on the table, along with risks, costs, reliabilities, response times etc.

This has not happened to date as it is a political can of worms.

Past assessment and analysis has been prejudiced by vested interest groups, and potentially to achieve a desired (political) policy outcome.

Electricity energy is critical for Australia’s future, especially if one believes forecasts towards a higher electricity energy component of total energy use (to feed future electrical technologies which will replace existing non-electricity energies such as transport fuels).

Australia can’t afford to get it wrong like we have in the past. Making rash political decisions will only increase the future pain to the consumer.

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You do know what AEMO is, don’t you?

I know who AEMO (as well as the AER) is, their role and function. I am (un)fortunate to have dealt with them in prevous employment (in one of the State netwok GoCs).

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So you’re saying that the Australian Energy Market Operator has a “vested interest” in subverting the Australian Energy Market?

I never indicated that. The comment related to RenewEconomy.com.au, which is known to advocate and support push towatds renewable energy economy. The article contains opinions of Giles Parkinson based on the interview with AEMO.

So you’re saying that Audrey Zibelman didn’t say what Parkinson reported? Did you even read the piece?

We are not one of the few to reduce or try to eliminate fossil fuels (even with little Federal Govt support) there are many who are tracking towards elimination, nor are we doing anything significant at the Federal level to reduce Carbon burning (regardless of whether Coal, Oil or Gas it is all hydrocarbon burning). The biggest issue we really have to reducing Carbon use is the subsidies paid to fossil fuel companies. That money would be better spent on other things including renewables and research into renewables, health, & education. Of course the current Australian Govt does not agree to this and is not a member/supporter of the “Friends of Fossil Fuel Subsidy Reform”. The UNFCCC (United Nations Framework Convention on Climate Change), the IMF and a number of other eminent businesses and organisations also hold that cutting these subsidies will strengthen the change away from Carbon burning and thus emissions but under the NEG these subsidies will continue and may likely increase.

The Govt is required so that in energy markets they ensure access to all, the line that is often thrown out that says Govts should not be involved or have very little oversight is a Conservative policy for no regulation and has been proven time and time again in essential services to be a failure. Without that Govt involvement we would have great service in densely populated (thus profitable) areas and little to nothing elsewhere. The people who push for the less regulated and thus “cheaper” alternative larely do not live outside the larger urban areas and they help bring about things like the MTM NBN, sort of the “I’m all right so who cares about the rest” attitude in many but not all cases.

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That somewhat derisive statement toward quality of infrastructure is consistent from one side of politics (or perhaps one ideology). Using an analogy Mercedes was once a gold plated automobile that was over engineered and very expensive; it lasted decades and was very reliable.

As that gold plating was removed and it was engineered to ‘just enough’ standards it is no longer the hallmark of excellence it once was, but still commands a premium price on its past laurels as well as a status symbol.

I am not picking on Mercedes as they need to compete, vehicles are more throw away with planned obsolescence then ever, they make a good product, and all is relative. But regarding power I would rather have an over engineer robust electricity reticulation system than one built and maintained to the minimum standards.

A government can gold plate, a business cannot do more than maximise its profit and work to the minimum standard that does that.

I suspect we can agree that we have different world views, including on the value of government owned infrastructure in a small market as physically large as ours.

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I assume you mean the subsidies which are fuel/diesel excise exemptions which all non-road vwhickes are excempt as the excise was to contribute to transport/road funding. The other reported subsidies include cost to the taxpayer for land which may not have heen adequately rehabilitated (this has been addressed mostly through State legislation such as bank guarantees and/or rehabilitation contributions), tax deductions (such as for research and development and writing off capital depreciations and operating costs -no different to ahy other business) and use of publically funded infrastructure such as ports and rail (which is a user pay system and costs is dependent on volumes and distance - no diffferent to any other business using similar assets).

If these are considered true subsidies (which it could be arged they aren’t), the total value is minor compared to the worth of the coal industry.

What is also often ignored is coal is subject to state royalties, which runs into the $10s billiions nationally. These royalties in effect replace taxes which would have to be imposed on other industries/the taxpayer to deliver the same level of public services.

I am all for all the above be removed so that the coal industry is seen not to benefit, but if this occurs, it should be rolled across the whole of the economy for any husiness (including renewable energy sector).

The only real cost which is not borne by the coal industry is the cost to pollute or emit. If these costs were included, the cost of coal fired geenration would increase and impact on electricity prices. Maybe the royalyies and operating licence fees paid to the state could be seen to cover such costs?

I don’t really like this term, the better term is possibly over investment.

It was ‘easier’ for the network providers to respond with peak demand rather than deal with what was causing it, and thus managing/reducing it.

Only the states? Not the Commonwealth? That would be only the Labor states, of course! :rofl:

The senate report is an intensely political document. The epitome of vested interests.

Indeed.

In principle, all things are possible. Substantiating it is up to you. For mine, the damages done both locally and globally by the mining and use of coal are such that I doubt that the miners pay anywhere near enough.

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No not only those, there are subsidies given as an example in the form of lower loan rates, paying for transportation route upgrades that only benefit a fossil fuel company, cheaper transportation costs than would be paid by any other commodity producer, they also give funds to fossil fuel producers to help keep the real cost to the consumer down (though we all pay this in taxes so really just hiding the cost).

The impact of restoring the environment to something approximating what it was before the mining is far more than any business has to set aside or has paid. It is the taxpayer who then covers the shortfall (which can be significant). As to pollution, yes it should be costed and the cost would negate almost any perceived benefit that some may see. Short term gain for a select few and long term pain for the rest is mostly what has occurred, and for politicians and some others to continue thinking that fossil fuel is a way to grow a country is becoming less well thought of internationally.

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The term ‘gold plating’ in this case is to do with creating a more robust network, the analogy with a very reliable car is inappropriate. Perhaps in that sense it is a misnomer.

It was all to do with extracting more money out of the public under a set of rules that guaranteed increases in charges to pay for new infrastructure. If the networks were in decay and the public needed to fund upgrades it would have been fine.

The problem is that the infrastructure was not needed. It was based on projections of increases in demand when demand was level or reducing, or providing additional redundancy where none was required. It was a money-making misuse of the rules that spent money ‘fixing’ problems that did not exist.

Not in this case, the networks are a business that was not maximising profit within a competitive market but rent seeking, that is using regulation to commercial advantage outside normal competition. In this case to the cost of the customer.

There were two faults in this abuse. One was government that set up the rules that could be abused and the second the companies that took advantage.

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Semantics? The Mercedes was reliable because it was mechanically over-engineered and thus more robust than its contemporaries. That would be gold plated engineering standard, in context.

One of the worrisome bits of that approach is that if one does need more power it takes quite a while to plan, budget, and deliver it. My vote would be to go with the best projections you have and hope they are correct while erring on the high side.

Maximising profit is not core to a discussion when it was all public infrastructure.

I do not agree privatisation was necessary, I do not think it has brought a single benefit to anyone but shareholders and some foreign operators, yes it was done very poorly (to be generous to those responsible), and business operates by pushing whatever rules are in place. What a revelation is that?

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