Federal

Nov 9, 2012

Marn’s minimalist white paper goes the market way

The federal government's energy white paper sensibly steers clear of government intervention and aims at getting markets working effectively. But there's not much in it for players.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Like most white papers, Martin Ferguson’s energy document is rather bland, for the most part unexceptionable and even anodyne — unless you’re a union potentially affected by privatisation, a rentseeking power utility or the state governments of New South Wales and Queensland.

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4 thoughts on “Marn’s minimalist white paper goes the market way

  1. Hunt Ian

    why Bernard thinks that Martin Ferguson’s disappointing and rather useless white paper on energy “sensibly” steers clear of government intervention is a mystery. Perhaps he is still contented with thumbing through first year economics texts, or perhaps he knows as little about economics as Martin Ferguson.

    Campbell Newman, the Queensland premier, is perfectly right when he says that the electricity distribution network is a natural monopoly and that he has no intention of privatising it. Although he says and does a lot to which I am more strongly opposed, this time not even the first year economics textbooks that inspire the Canberra bureaucracy can help out. There is even more of a problem here than the Labor Government found with the awful privatisation of Telstra. Splitting the network up would impose impossibly high transaction costs. Hiring it out would save labour maintenance costs because the government could hold a competitive tender for running the network for a limited period. This might save labour maintenance costs, at the expense of engineers and maintenance workers employed by the network, but it would also cost a lot to monitor and would pose security risks. It cannot be said that a monopoly is alright, as you might with the car industry, because competition from imported electricity would keep the distributor monopoly honest, as you might say with cars.

    Is government intervention “Stalinist”? Oh, please Bernard, silly associations (Oh, no! We don’t won’t to be like Stalin-government intervention in the network will lead tomorrow to mass murder and purges, we can’t have that) are not an argument for markets. Markets are not the be all and end all. They work pretty well with the price of bread but they have been hopeless with natural monopolies and oligopolies, of which there are many instances in distribution, real estate, education health care, agricultural infrastructure and other systems in Australia

    Does this mean the state governments are blameless when we look at prices? Not at asll. The same silly let’s have markets everywhere policy has produced profit fixing. If revenue for the “electricity providers” (salespeople and distributors) falls short, they can increase the price to give themselves their state government guarenteed return on their investments. How absurd this is!. Without clumsy, silly privatisation programs it would not happen and has no point.

    “Gold plating” the networks is a problem. Some of the extra cost is not the fault of State governments. The network has to be renewed. This used to come out of taxes but our governments think that their first year economics gospels tell them that higher taxes are “less efficient”. So now the cost of the replacing networks comes out of electricity bills. Those who consume more, pay more. This might be fairer than taking it out of progressive income taxes but there is probably not much in it, as those who consume more electricity usually pay more tax. It is, however, probably not fair to the ill or disabled who must use more electricity.

    Some of the “gold plating” comes from unused 99% of the time network capacity. There are many ways that could be handled, including by getting big users to cut back on high demand days or getting households equipped with gas fuel cells (as pushed by eg Blue-gen) that put in more power when demand is high (solar panels also work to some extent to reduce high demand in summer).

    Martin ferguson is not to be blamed for his silly energy white paper. A few fluffy gestures ate the market (oh, so sound, you know) are all his bureaucrats can supply, possibly because they they are desperately trying to distance themselves from Joseph Stalin.

  2. John Bennetts

    I have become used to Kean’s weary and repetitious rants against nuclear power. Give the bloke half a fact and it blows up into a tsunami of muddled opinion.

    For starters, Japan has not phased out its nuclear power industry and neither has Japan. Both countries have expressed political will to do so, concurrent with no affordable or technologically adequate alternative. So, Japan is slowly re-commissioning part of its fleet of NPP’s and Germany has pushed its deadline far beyond the political horizon of current players.

    I find it curious that one as experienced and as capable of acute awareness of nuance as is Bernard, that on this issue he doggedly hangs onto such a shallow, unsupportable one-eyed stance.

  3. Achmed

    In the late 1800’s a bloke named Telsa was experimenting with electricity from the atmosphere – it worked. Funding and the subsequent development of the technology to draw electricity from the atmosphere was withdrawn as the investors realised that there was no way they could profit from the sale of something that was freely available in the atmosphere. Gotta keep those coal mines making a profit

  4. John Bennetts

    Achmed, Tesla was far from the only person seeking to draw electricity from the clouds. US President Franklin experimented along these lines much earlier.

    There is very little prospect of commercialising an energy source which is extremely high voltage, operates extremely unpredictably and delivers energy only perhaps a hundred times per year, and then only for millisecond spurts.

    The impediment was not the coal industry.

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