The Case for the NEG - Flawed?

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As one commentator put it 'More like Gold plating with platinum overlays and diamond highlights. ’

There was no good evidence that supported the projections though, they were just pie in the sky. I think I understand where you are coming from, that in engineering a degree of redundancy provides necessary security but that is not what happened here.

Yes it is when the network had passed from public to private hands and the new owners were not making a profit in a fair market but by rorting regulations, ie rent seeking.

It may be nothing new but that doesn’t mean it should be allowed to continue. It seems that we agree that this aspect of privatisation did not return the benefits that were touted for it. When will our leaders learn that there are natural monopolies that need to be effectively regulated or the public will be exploited mercilessly.

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No different to similar size business. They can’t access government bonds or such like which would mean they could exploit low cost loans. Coal mines historically have been seen as a reasonably low risk creditor as the value of the resource can be significant and collateral against any loan.

I used to also think it was the case, but in Queensland (not sure about other states/territories) and having seen what happens for the coal seam industry and coal industry, they pay for the costs of road improvement upfront. This is either by a cash payment to the local /state government for the work to be completed by them or through carrying out the work themselves. I like others saw say Main Roads or a local council doing the work and asumed that these government were paying for it. Speaking to council in the Surat and Bowen Basin quickly sorted out my confusion.

It is worth speaking to DTMR or the councils in areas where mining occurs to find out what happens.

The process they use is called the road user management plan (RUMP). It also includes resolution for operational damage/additional wear and tear.

They do because of the volume they transport. If they trasported less, they would pay more.

In central Queensland transport is using private operators on the QR network. It is a full user pay system.

This is a green myth. There are no payments direct to the coal industry.

Any funding goes to the consumer in the form of electricity rebates. The Queensland government recently had a $50 rebate on electricity along with pensioner rebates. While these paymehts may cause higher electricity use, they aren’t paid to coal industry to keep prices down.

Government MP have talked about payments to keep old power stations in operation, but don’t beleive that thisnis government policy. Maybe one day it might be if the shut down of a power station causes causes a major crisis.

There has been incentives to kove head offices to say Brisbane/Sydney through reduced honeymoon payroll tax rates for employees at these offices. I am not aware of any of these occuring in recent years for the coal industry, but have heard about reduced rates for other multinational/natiinal business.

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While an older story this ABC article explains some of the ways directly and indirectly the fossil fuel industry receives benefits. While other industries may/do receive benefits many are not involved in the direct use of fossil fuels for profit. Some/many benefit from the energy provided but as energy itself is neutral in this context eg if your power is produced by solar or by a coal fired generator your equipment will function without any difference. The difference comes from the release of carbon into the atmosphere by the coal/gas/oil burning.

Subsidies either directly or indirectly applied support the fossil fuel industry to continue to provide fossil fuel whereas if these same subsidies were applied elsewhere they would provide cleaner energy and better reflect the environmental costs of the fuels used. This has been studied by the IMF and they support a Subsidy reform citing among other things a reduction in air pollution and reducing CO2 emissions from changing how subsidies for energy are provided.

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Specifically for Queensland the SE of the state has a contestable supply while the rest is regulated.
Does the NEG affect each differently?

Does the NEG predict and allow for disruptive influences?
Or does the NEG block or limit competitive changes?

The linked opinion article from McKinsey & Company is one take on the future for domestic electricity supply.

https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector

There is a future where I might be able to sell electrical power from my solar/storage supply to a neighbour.
For the present I can only do this indirectly via my retailer who pays a discounted rate for feedin on new solar. Despite the fact that the energy transfer is direct, virtually lossless, and reduces the load on the network.

How might this play out given the NEG is supposedly going to deliver certainty to the existing investors and suppliers?

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There was many who disputed the Australia Institute report after its release, including government and the mining industry council…this is one from around that time…

I also recall the state government questioning some of the figures including transport assistance. I believe the AI used upfront capital cost figures rather than long term return an investment (which the state gaijs a profit from through transport charges).

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No vested interests there! :rofl:

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This has evolved into an ideological to and fro. First it is a given we have a small market distributed over a wide area. Historically government has run major infrastructure as a service (for better or worse but took responsibility) and treated all business with a wink and nod and as hands off as they could.

In recent times it became fashionable to follow the US in privatising everything they could as fast as they could, absolving themselves of responsibility to the Nth degree possible and still with that wink and nod oversight.

So what if private enterprise cannot ‘compete’ with the cost of government bonds? It is supposed to be a free market and they are free to complete with each other as well s with government. But they want special treatment to handicap governmental entities so they can compete with that wink and nod that delivers high profits and often ridiculous contemptible ‘attitude’ and so-called ‘service’.

Government’s response? It varies from nothing to see to give it time to OMG how do we address or sweep away this mess we made?

In the case of a national electricity grid everyone is absolutely on that decisions should be made with the public interest as the priority, but that is where the ideological inclined vary. On the extremes one side espouses that ‘gold plated’ (over engineered) grid of yesteryear at whatever cost, and the other extreme espouses allowing private enterprise to solve the problem however they want with wink and nod oversight because it delivers profits and thus dividends to investors as well as making investment in the grid as efficient (eg as minimal) as possible.

I trust I have summarised the sides as well as put in my own postscript. I am not on the side of privatising infrastructure, especially on a continent like ours where there are 3 worlds to serve, metro, regional, and bush. Regardless of who one thinks should pay premiums for living in regions or the bush they are there to be dealt with.

Problem 1 is the defensive nature of government wishing to protect businesses operating under the wink nod protocols. The banks (and hopefully soon the electricity retailers) are being exposed for how they operate, but will that really change their long time behaviour beyond the specifics they are called out for? I suggest not.

Problem 2 is the self serving nature of our governments from top to bottom, left to right, that seem to lack internal expertise and refuse non-partisan expertise that can withstand scrutiny to defend recommendations.

Problem 3 is us. We elect governments and must do so as a basket of policies. We often do not hold pollies to task for records of outright lies, or outright incompetence, or outright self serving activities. About 78% of the electorate votes for ideology (eg welded on to a party) regardless of how they perform or not perform when in government. That leaves a small number to change government, many of thoser being quite ignorant and detached from public affairs. Here we are.

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Would it be best to say that there are vested interests on both sides of the argument?
Should we accept arguments that ‘cherry pick’ the facts or consider partisan opinions as balanced?

What’s important to me personally is seeing the decisions for the future based on sound evidence and measure requirements of the community.

Trying to rationalise the decisions of the past using the standards and needs of tomorrow may not be that helpful. No doubt what ever we agree today for tomorrow may be considered in ten years time to also be equally wrong.

The Federal Government is telling us we are asking for one thing here -lower power bills. Nothing more than that, and reasonably the privatised generators, distributors and retailers all need certainty into the future.

So please take the NEG, or say what it should be and deliver.

p.s.
Having worked as part of the mining industry for a lifetime I could suggest much of what has been said has some basis in fact and empathise with many of the viewpoints. I could further discussion by adding comment in the rear view mirror. It’s doubtful it will further understanding of what the NEG is offering in any practical sense. We are where we are.

Debating public vs private ownership is a worthy debate if it is forward looking. Is it part of the NEG? Is it that we also need to consider independent small scale ownership and operation of electrical power distribution? A solution that only connects and purchases from a national grid on an as needs basis. A proposal that devalues the current base load business model. And snubs large retailers?

It is perhaps a worse situation if you live in Qld that NSW notably has not been investing in generation (public or private) and now depends on other states who have invested to keep their lights on.

Is it that the NEG is more an act of political expediency to compensate for the short sighted policies in NSW and elsewhere?

Whatever the NEG should not be rushed?

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But it will be. From a political point of view it must be bedded down and the dust settled before the next election
which is May 2019 at the latest, to my thinking it has to be done in the next few months so that we can all be sent off to enjoy the Xmas silly season with no worries.

While I agree that some stable plan is essential I can’t see enough people getting behind this one due to lack of detail and lack of evidence for its claims.

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It certainly seems topical:

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I have opened a new thread in Public vs Private vs Public-Private Partnerships, a more appropriate place to discuss the benefits of public vs private vs public-private partnerships owning infrastructure.

It is On Topic as applied to the ramifications of the NEG, but it is tempting to stray beyond it.

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Sadly:

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@Drop_Bear, I edited the thread name above but need to check on access.

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You should have access now @Drop_Bear :+1:

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Thanks, it seems to be working. Now, do enough others have access to make it viable?

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There hopefully should be enough for a good discussion @Drop_Bear :slight_smile:

I’m also happy to explain more about the departure lounge, feel free to shoot me a private message if you’d like further info.

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The NEG is about power prices, right?

“NEG modelling data are approximate, derived from measuring graphics provided in the ESB report.” [my italics]
This is laughable for policy modelling!

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That (the NEG) is not a plan.This is a plan!

AEMO has prepared this inaugural Integrated System Plan (ISP) for the National Electricity Market (NEM). The ISP was recommended by the Independent Review into the Future Security of the NEM (Finkel Review).

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It seems they’re still making it up:

The Energy Security Board has admitted that it is still not yet settled on the design of the reliability obligation within the proposed National Energy Guarantee, and will canvass significant changes to its design in a new options paper to be released later this week.

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I doubt much can be added to this one.

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