Effective Competition – pro what!

What is your politics can be a confronting question. It is getting more difficult to answer the question – What do you do? If you answer too honestly it might make the next question even more confronting: Are you a pro-market forces person or a pro-business person? Initially the difference may not be obvious. But, there is a world of difference if you want to influence a result. The reason is a result requires someone to intervene to give you an edge in the competition for a position in the market. Whereas to get an outcome you might support effective competition to ensure the benefits of what you offer to the market are maximised.

As does happen when you start talking about something, along comes a story that illustrated the point very well, and being it is a political story relevant to today, it is worth making a reference to it: The message relates to whether we will we see more rent-seeking or less under Abbott, more of what The Economist magazine calls “crony capitalism”? Read more: http://www.canberratimes.com.au/comment/abbotts-choice-competition-v-cronies-20141019-1189dm.html#ixzz3GcjBa2XF

The opening lines being: “It’s still too soon to tell whether the Tony Abbott’s government is pro-market or pro-business, but so far the evidence for the latter stacks higher than that for the former.

The difference turns on whether the pollies want markets where effective competition ensures benefits to consumers are maximised and excessive profits minimised, or markets where government intervenes to limit competition – often under the cover of claiming to be protecting jobs – and make life easier for favoured businesses.”

Of course the background to this Canberra Times story is:

“Abbott and his ministers’ intemperate attacks on the Australian National University for its decision to “divest” itself of a few million mining-company shares for environmental or ethical reasons are a worrying sign.

Investors shouldn’t enjoy freedom to choose where they invest, regardless of their reasons? ANU is different from the rest of us even though its investment funds come largely from private donations and bequests? This from a government keen to complete the de facto privatisation of universities?

What is ANU’s offence? Bringing ethical considerations into investment? Or sounding like it believes climate change is real and we should be doing something real about it?

Abbott attacked ANU’s decision as “stupid” and believes “coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future”.

If ever there was an industry whose early decline could be confidently predicted – as it is being by hard-headed investors and bankers the world over – it’s steaming coal.

Yet Abbott seems keen to change the rules of the formerly supposed bipartisan renewable energy target in ways that, by breaking long-standing commitments to the renewables industry, would cost it billions and blight the future of its employees, all to provide the government’s coal and electricity industry mates with temporary relief from the inevitable.

The biggest problem with governments “picking winners” is that they quickly regress to picking losers, helping industries against which technology and other forces have shifted to resist the market’s pressure for change that would – almost invariably – make consumers and the economy better off.”

This where we think it gets really interesting: The review on competition policy is being considered. It becomes even more important to understand whether you are a pro-market or pro-business person. When you support the innovation of ideas you need to know whether the IP is protected when you make available for the market. It is the point of where you commercialise and the particular area where sound competitive principles are most important. It is where the regulation of intellectual property, such as patents, copyright, trademarks and plant breeder rights is critical.

Note we said ‘regulation’ and this implies that a form of government intervention in the market is needed to limit competition with owners of the patents and so forth for a limited period. It’s a necessary response to prevent market failure. However, another problem exists also – how do you encourage continuous improvements to incentivise new knowledge and ideas that progress the benefits?

No easy answer is the response. Maybe just too hard!

The Canberra Times article goes on the say: ” This makes it ripe for rent-seeking: pressuring politicians to extend the monopoly periods retrospectively (despite the lack of public benefit), to allow loopholes that permit phony “ever-greening” of drug patents that would otherwise expire, to limit poor countries’ access to life-saving drugs at realistic prices and to ignore blatant gaming of IP laws by two-bit operators that have never created anything.

Most of these excesses are at their worst in the United States with its easily bought legislature. The information revolution has made IP one of America’s chief export earners. And the free-trade preaching Yanks have made advancing the interest of their IP exporters their chief priority in trade negotiations such as the present Trans Pacific Partnership deal.

As always, we have a tendency to give the Yanks whatever they want. Trouble is, as Harper points out, Australia is and always will be (and should be, given our comparative advantage in world trade) a net importer of intellectual property.”

There lies our point: Australians have been one of the great inventors in the world. Yet something holds us back from being successful on our own country – Is it fighting cronyism!

 

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Long view, short term bridging – selling the network asset

What do you know about NSW and Qld privatising their energy networks? Worst kept secret was the reply. ‘They’ intend to divest of the high cost responsibility as quickly as possible. Yet, when you speak to ‘them’ they are stunned that it is possible – the standard reply is it is a position statement to be tested, not ‘yet’ policy. Typically, the form of reply is: ‘we have not been told, but we have been asked to consider what would happen if’. Our immediate thought is it is more proof the public and sector is now saturated with ‘micro managers’ and their work is to be without purpose other than pedant corrections of the efforts the junior staff to innovate.

We now hear you say – how could synergy be possible in that sort of workplace? Reality takes over – it is not possible to have synergy as it involves a need for common purpose. In those sectors what is actually happening is the portrayal of a fictional character as being real. You see for the networks companies, they are operating on a model that has reached the end of its economic life. They must change to survive or to be counted as an asset. The secret word here is ‘asset’.

Co2Land org has always been told that if the bankable is present then there will be an opportunity for business. This is not meant to be a profound statement as such, but a good indication that in the background changes are afoot and plans are being set for change. Why is this important in this post?

The day after our discussion the following story was published 8 Oct 2014:

http://www.afr.com/p/special_reports/energy_security/strong_appetite_for_energy_sector_zmEISUe8FvDkd9uxACcK6M?utm_source=outbrain&utm_medium=cpc&utm_campaign=outbrain_amplify – Strong appetite for energy sector privatisations.

“This content is produced by Commonwealth Bank in commercial partnership with The Australian Financial Review.

Australia’s energy and utilities sector is moving towards its most significant period of privatisation since the Victorian and South Australian experience in the 1990s and early 2000s.

Subject to election outcomes, the governments of New South Wales and Queensland have indicated a desire to sell their mature electricity network assets in order to free up funds for new infrastructure projects.

Both states plan to privatise their electricity networks and in addition, Queensland may sell its power generation businesses.

Across the two states, six electricity network companies are being privatised, with Ausgrid in NSW the largest.

Each government has appointed advisers and indicated that if they are re-elected the process will begin almost immediately.

The NSW program is expected to end in the middle of 2016 and Queensland is expected to finish six to 12 months after that.

The scale of the programs with more than $50 billion in assets coming onto the market at the same time presents potential challenges, says Simon Ling, managing director Debt Markets Commonwealth Bank.

“Given both electoral cycles are running on similar time frames, there are market liquidity considerations and constraints depending on the size and the timing of the assets coming to market.”

Both states are engaging in asset turnover – selling mature assets now in order to invest in new assets for the future. They each have commitments for new road and rail infrastructure, and they also want to be able pay down debt.

Fortunately, the timing is beneficial. There is a lot of interest in the market from domestic and offshore super funds, pension funds and infrastructure investors.

However, given the scale of the programs there will be pressure on banks to accept a larger exposure than they would typically take on an interim basis, before longer term funding plans can be put in place.

In terms of the structure of the financing, Mr Ling says, “We expect that the arranging banks will have appetite for significant holds on most of the assets and the balance will be syndicated out to local and international banks with interest. There will also be a need for a short term bridging component to the bond markets.”

Challenges

In programs of this size it is important to appreciate the challenges faced by the governments and financiers.

For NSW and Queensland, the first order of business is certainty of execution. Governments need to be sure that there is enough liquidity in the market to get the deals done.

And of course the other big priority is to deliver the optimum price and return for their communities.

“That comes back to the question about sequencing,” says Mr Ling. “The governments are going to have to be sensible with sequencing because if they want certainty of execution and price tension they need to be careful how they bring this to the market.

“The good news, however, is that there is more than sufficient appetite for this.”

Domestic banks will run multiple teams supporting a number of key bidders in order to increase chances of successfully backing the eventual winners.

For banks, the key risk is the large exposure they will have to take at the close of the transaction, given that the largest companies could require senior debt acquisition financing around $10 billion.

“Once again there is cause for optimism. Global demand for these assets means that ultimately the debt will be able to be placed widely around the world,” says Mr Ling.

Who will invest

Most of the demand for these assets will come from investors looking for low risk, stable assets and regulated cash flows to invest in. Offshore bond markets are also expected to be more receptive and active in this latest round of privatisation than compared to the Victorian and South Australian programs, for instance.

US private placement investors are very familiar with regulated assets in Australia and are expected to have a large appetite for these new opportunities when they come on the market.

In the US, UK and Europe assets such as these would appeal to local capital markets because there is a very highly developed long end to those capital markets. The long dated market in Australia is less developed, therefore core long term funding will be dominated by offshore investors who recognise the unique opportunity to invest in these high quality infrastructure assets operating within a stable regulatory environment.”

All this sounds so admirable, why are we suspicious? Well the answer may come in the form of the inquiry into the senate’s power price inquiry. The Business Speculator asked, “Is the Senate’s power price inquiry a useless witch hunt?” This story is by TRISTAN EDIS 3 OCT, http://www.businessspectator.com.au/article/2014/10/3/energy-markets/senates-power-price-inquiry-useless-witch-hunt?utm_source=exact

The story quotes: “The Senate has agreed to launch a far ranging inquiry into the effectiveness of regulation over monopoly power network businesses to assess the extent to which consumers may be paying too much for poles and wires.

In addition, it will also examine whether the arrangements for the connection and pricing of network services discriminates against households and businesses that generate their own electricity – for example, via solar PV systems. (The full terms of reference are provided at bottom.)

This inquiry comes on top of countless other reviews and inquiries, with timeline below, including a Senate inquiry looking into electricity price rises just two years earlier. This naturally draws the question, what will yet another inquiry possibly achieve?”

So CO2Land org asks is the result a forgone conclusion? Nothing more than a rubber stamp to say regulation will assure the new buyer will make money and the consumer continues to pay too much?

This is especially relevant when Ernst & Young also reported in the ABC on 13 October 2014, that “the Federal Parliament has announced a Senate inquiry to investigate whether the so-called gold plating of Australia’s electricity networks is artificially driving up the cost of electricity.

Up to 60 per cent of some household electricity bills can be attributed to network costs, which is the amount passed on to consumers for maintaining infrastructure such as poles and wires.”

We also feel it is important to know a little history – If you did not know Australia has in recent times had a non-regulated network in the east. How could this be possible? You see the regulatory rules were written for AC (alternating current) wires connections. DC (direct current) is not AC regulated. So what if we wanted to build DC lines? You could speculate it would introduce competition – assuming competition was welcome!

Another interesting matter is the preoccupation in the story ‘Strong appetite for energy sector privatisations’ with the bank on saying” “However, given the scale of the programs there will be pressure on banks to accept a larger exposure than they would typically take on” – And, “the unique opportunity to invest in these high quality infrastructure assets operating within a stable regulatory environment.”

Forgive us but what about the inquiry! A fair go? Or is it a means to the end!

 

 

Regulatory Response – Strengthened in NSW and Qld

Resource recovery is a hot issue – pun intended – the problem is most that say they do have methods rarely have solutions at a commercial scale. Often the excuse is the rules are at fault. There may be some truth in that claim even if in the main it is the systems that are at fault for offering concept grants as opposed to solution incentives in Australia that dominates the innovation space. If you think we are saying that at least one iconic institution might have a reason to delay innovation. That is not what is being said: It is being said regulatory response mechanisms are in need of a rethink. In particular we find evidence that regulatory response with policy on reuse, recycling, reprocessing and energy recovery, is not necessarily consistent with the most efficient use of the recovered resources opportunity.

As we seem to doing so regularly lately we can report NSW and Queensland are doing something about the rules around resource recovery that do not weaken the intention of the rules, and at the same time they encourage a more flexible approach to offset harm. It is done with new policy positions being taken that alter the regulatory response to issues. This change means the EPA of both states are responding to solutions that says show me it works and we will listen as opposed to it does not fit the guidelines sort of approach.

It is true some in our society just want to exploit with disregard to good environmental practice and some media might even exploit our emotions in the interest of their own agenda, and strong regulatory responses remain in need to counter same. For example we found a story of a notice that the NSW Environmental Protection Agency (EPA) has issued a clean-up notice to a fuel transport company in relation to environmental issues at its depot. The NSW EPA found “that fuel or a similar material had leaked or been pumped onto the ground” at the site. According to NSW EPA the clean-up notice requires Xpress “to immediately stop receiving or removing any waste and contain any contamination within bunds on site”. Source NSW EPA’s media release on 3rd September 2014. Clearly the regulatory response was appropriate for this matter.

Staying on NSW rules, on 10th September 2014, the Office of Environment and Heritage announced it was rethinking its approach to its major projects policy in NSW. The benefit said is it is a more flexible approach aimed to put an end to case-by-case negotiations by providing a standard method for assessing impacts and determining offset requirements. The new policy is likely to be followed by additional changes to biodiversity protection arrangements in NSW, which are currently undergoing a comprehensive review.

Also related to this policy approach is a Legally-backed accreditation scheme that is the offsets policy for major projects will be accompanied by a new accreditation scheme for consultants who administer the policy’s supporting framework for biodiversity assessment. The accreditation scheme will be developed over the next 18 months, while the new policy is being implemented. The policy will be given formal effect through legislation after the 18-month interim phase, and the accreditation scheme will also have legislative backing. During the interim phase, consultants using the assessment framework must be accredited under the NSW BioBanking Scheme, in accordance with s142B of the Threatened Species Act.

Importantly to above is that it has planning protections that do not allow empowered consent authorities to allow economically significant projects to proceed with watered-down offset obligations if normal requirements would have affected their viability. In other words discounting is not allowed. However, the policy will allow credits to be earned from ecological rehabilitation. The NSW Government’s response to public comments on the draft version says it is also open to allowing “other forms of post-development rehabilitation” to earn biodiversity credits.

NSW biodiversity offsets policy for major projects (NSW Government, September 2014)

Framework for biodiversity assessment

Report of submissions on the draft policy (NSW Government, September 2014)

Individual submissions on the draft policy

 

Now to Queensland where the media reports would have you believe there are no rules. We read that on 2nd September 2014 the Queensland companies are now subject to pay five times more for some infringement notice offences, and the Department of Environment and Heritage Protection can now issue notices for a wider range of infractions. The Queensland Government introduced the changes, which took effect from September 1, through a new State Penalties Enforcement Regulation. Several offences under the Environmental Protection Act will now incur an infringement notice penalty of $11,385, up from $2,277:

  • contravening an environmental protection order;
  • carrying out an activity without an environmental licence (known as an ‘environmental authority’ in Queensland);
  • failing to comply with an environmental authority condition; and
  • failing as the holder of an environmental authority to ensure compliance with its conditions.

That later is most interesting as it makes it much more difficult to outsource your responsibilities.

The report goes on to say: Infringement notice penalties for most other offences have more than doubled, with many rising from $2,277 to $5,692. New Environmental Protection Act infringement notice offences include:

  • failing to provide a financial assurance before undertaking an activity that requires an environmental authority or before engaging in small-scale mining (penalty of $11,385);
  • not complying with conditions of a licence ($11,385);
  • ailing to comply with a notice ($8,538); and
  • unlawfully causing material environmental harm ($8,358).

Failing to comply with a condition of approval in breach of the Waste Reduction and Recycling Act will now incur a penalty of $11,385 (up from $2,277). Penalties have also risen for infringement notices issued under the Water Act and several other acts. In 2012-13, the most recent year for which statistics are available, the Department of Environment and Heritage Protection issued 280 penalty infringement notices for environmental and nature conservation breaches, a big rise on the 76 notices issued in the previous year.

You see, it will not just disappear – the regulatory response continues.

Links to customer value – Future Energy Supply Strategies

Regulatory tests and security of supply –Sounds so elegant so simple when it is a strategic position statement or statements. Queensland gives some very good examples in recent times.

The first being the effort Ergon Energy put into the work to secure power supply upgrades to the ‘Granite Belt’ and that process started in 2011. It was abandoned 17 September 2014. What changed?

Then there is biofuel potential in Queensland. Why the focus on non-fossil sourced fuel now?

Then there are the Coal industry woes – China does not want the Galilee Basin coal type – it is too dirty for its cities!

Back to Ergon: After the Warwick Daily News headlined its story, 15 September 2014, “ERGON pulls the plug” – The story was quoting the Qld Energy Minister – Mark McArdle, as announcing the end of duplication of the Warwick to Stanthorpe power line and the controversy over the routes being selected. Ergon Energy then in a letter 17 September 2014 wrote to the landholders that were to be affected by the proposed duplication of the power line and formally advised they will no longer be effected. Clearly indicated for making the decision were the outcomes of the regulatory test(s). How could the regulator test find as it did to stop the project, even sway the politics of the project? Well, the key findings were:

  • The reliability standards changed on 1 July 2014. There is a heightened need to weigh the costs against the value to customers.
  • Existing demand is slowing and the evidence future demand will continue that trend if not further reduce. Certainly not inside the regulatory forecast periods.
  • Rising costs can no longer be blamed on rising demand predictions, that waste and excess must now be addressed for efficiency dividends.
  • There was very little to be concerned about with the reliability of the network as it stands now.
  • There is an edit the focus should be on affordability. That capital expenditure must be justified as needed.

Another way of putting all this is – Ergon Energy or any other supplier cannot get away with gold plating and excessive redundant equipment and infrastructure just because it gives them comfort – it must give value. How can you get value? You can improve the technology offering better monitoring, performance and be ‘smart’. The later is as simple as balancing the demand supply equation with incentives and/or implementing demand management strategies.

And, yes there is more: alternative energy supply is opening being touted as ‘planned initiatives’ What alternative energy? Call it what you like – clean, green or whatever. But what will stick is not only ‘proven technology’ as the descriptors now includes ‘likely technology’ of distributed type and ‘battery’ storage.

As an aside did you know as ‘battery’ can be a physical volume exchange as well as an electron store!

Does this mean technology will save coal? It is possible – but at the end of the day it will get down to the economics and it is not looking all that bright for coal as sustaining its position even for baseload demand.  Even our world partners are turning their backs on coal – it is now seen as too expensive in terms of the outlook, and the economics, the environment and the cost of the process to make it ‘clean’. Recent Chinese regulatory changes are testimony to that issue. Then there is the story -AngloAmerican boss sees coal mines closing at a rate of one a fortnight http://www.goulburnpost.com.au/story/2569015/angloamerican-boss-sees-coal-mines-closing-at-a-rate-of-one-a-fortnight/ … – no a good look is it!

Yesterday, 22 September 2014, in Canberra the Minister for Industry Ian MacFarlane addressed a biofuel forum on the strategy for Queensland to take the lead on bio fuel production. This follows a paper released through the Queensland University of Technology prepared by Corelli and Deloitte Access Economics. The paper called “Economic impact of a future tropical bioenergy industry in Queensland”. It talks of the ‘potential’ of new manufacturing facilities, and how biofuels can be used as an area of increased focus in agricultural strategy.

What all this means is that traditional energy is heeding a need for a strategic change of heart. Despite what is being said about business as usual, that is not the behaviour behind the scenes and increasingly it is coming to the fore that change is inevitable. The EUAA calls it a paradigm for the industry. The question is what part of the pack are we to become. Australia has always been world renown for finding solutions. What we have not been good at is getting things done, besides talk about it that is.

And, there is more: some government facilitations would assist in industry establishment. Not our quote, it is taken straight from the above papers key findings.

‘good faith’ – a legislative event or an earned value!

” Australia now has some of the highest electricity costs in the developed world” – the claim was part of a upcoming conference promotion. Why is this so? We can easily say the reason is a range of federal and state government policies. With some bemusement we could even say the amateurs must have been in charge when all this happened, and they could not help themselves but to make changes without understanding the consequences. Another way of saying it is they thought ‘good faith’ was a legislative event and not an earned value!

If you carry over the ‘good faith’ argument as a legislative event, you can easily see how the intention could be manipulated according to the stronger lobbying power of the day. There does not need to be a business case for the policy, it just needs to be a positioning matter for what is ideal. In terms of positioning you might see how the carbon price became known as the carbon tax in the repeal legislation (the definition of ‘price’ was changed to reflect emotive wording ‘tax’), that the renewable energy target became a plaything for posturing the adverse effects and without evidence is said to have contributed to cause energy prices to rise.

It still happens, again and again. The driver – we need change to show we are positive about business. Business according to amateurs is ‘doing something’, and that so important! Think of these examples: Gas market reform needed, it will increase gas production and ease the pricing situation. Maybe it would – if you had a direct one on one relationship between the supply and demand. It is not that simple and business professional understand this, but a graduate and an evaluation team for a policy might not. With interest we note that the EUAA has an upcoming program based on New Energy Paradigm – Better Energy, Better Business. The word ‘better’ we assume means the amateurs will be kept away and only the business astute will be debating the program! The logic being a new paradigm forms the basis of something. But what if the carbon tax or RET can no longer be blamed for some of the highest electricity costs in the developed world. What do you blame then? What then would be the outstandingly clear or typical example or archetype of the cause? Again it would not be hard to consider the amateur was being too ready to expose a popular view without sufficient knowledge of the facts.

Pondering this issue along came a story about the Sydney Second airport and a mad bit of posturing by the small business Minister to an audience on how they will fix who ever gets in their way. The story:

Airport chief slams minister’s delay statement, 06 Sep 2014, Sydney Morning Herald, Sydney: Badgerys Creek Talk of ‘another partner’ –

“A key federal government minister has warned Sydney Airport that if it delays the process of building an airport at Badgerys Creek, the government will find another partner to help build the project.

But that warning immediately produced a backlash from the chairman of Sydney Airport Corporation, Max Moore-Wilton, who stressed that Sydney Airport retained the first right to build another airport in Sydney. He also questioned the seniority of the minister delivering the warning.

“This is not a game for talented amateurs,” Mr Moore-Wilton said. “This is business.””

The illustration here is a very important one. It is business that works to contain costs and it is opportunists that are the costs.

Possibly the more damming is when “Asked about Mr Briggs’ comments, Mr Moore-Wilton said: “We are following in good faith the provision of the legislation governing the process for considering a second Sydney Airport.

I imagine since it’s a legal obligation, Mr Briggs ought to consider his statements very carefully … we paid for the right to negotiate.”

It is all about the ‘right’ is it not?

For those that did not know Max Moore-Wilton, in the days before being Chair of Sydney Airport was secretary of the Department of Prime Minister and Cabinet. We guess he can see an amateur from a long way off and knows business very well.

Govtape – emissions, consequences affecting rational thinking

Wintelboff recently had a dilemma to resolve in a brokerage agreement – the best energy price was from a renewable sources retailer. The problem was the transition from the carbon price repeal might actually mean the supply would be from a brown coal generator. How could this happen? It happens when the market is artificially manipulated. When those that advocate and love liberal attitudes to the market it is very disappointing that intervention is done purely on the basis of lobbying and not on evidence.

Back to the outcome: The client decided a black coal generator was the better option, and that Gentailer made it very attractive in terms of an offset for their emissions. They carried no penalty for a solar array on the premises, as its purpose was to address the peak demand issues of the daytime energy use. On balance it was a good deal. Not perfect, however, much better than the attempts of interventionists.

We have found a story that backs up the recant above and tells a frightening story of how intervention brought on by ideology can have consequence – even after a very short time:

http://www.canberratimes.com.au/environment/climate-change/emissions-from-energy-generation-jump-most-in-eight-years-after-carbon-price-axed-20140903-10by8d.html

Emissions from energy generation jump most in eight years after carbon price axed

‘Carbon emissions from the country’s main electricity grid have risen since the end of the carbon tax by the largest amount in nearly eight years.

Data from the National Electricity Market, which covers about 80 per cent of Australia’s population, shows that emissions from the sector rose by about 1 million tonnes, or 0.8 per cent, at an annualised rate last month compared with June.

That is the biggest two-month increase since the end of 2006, and came as a result of an increase in overall demand and a rise in the share of coal-fired power in the market, according to Pitt & Sherry’s monthly Cedex emissions index.

“It is highly likely that the trend directions of electricity demand, generation and emissions seen in the last two months will become set in place,” the consultancy said, adding that the emissions intensity of the power industry was rising after six years of falls.

Environment Minister Greg Hunt did not comment on the rise in emissions when contacted on Wednesday.

Australia’s bipartisan goal is to cut greenhouse gas emissions by 5 per cent below 2000 levels by the year 2020. The government scrapped the two-year-old carbon price in July……..

The share of black and brown coal in the national market rose to 73.3 per cent from a historic low of 72.9 per cent in July, and will probably rise further as gas and hydro start to shrink.

The addition of new wind and solar energy capacity is also about to grind to a halt with the industry anticipating the Abbott government will take an axe to the Renewable Energy Target.

The latest emissions figures come as the 20-megawatt Royalla solar plant, the country’s largest solar farm to be added to the grid, was officially opened in the ACT on Wednesday.

About 370 megawatts of wind in NSW and Victoria and 170 megawatts of large-scale solar are under construction, but “after that, there’s very little in the pipeline”, Pitt & Sherry principal consultant Hugh Saddler said.

Emissions from the power sector account for the largest emissions share of any industry, making up about one-third of Australia’s total. The industry is expected to see a rise of millions of tonnes of emissions in coming months as gas in Queensland starts to be diverted to exports rather than domestic use and the main hydro plants scale back output.

If Hydro Tasmania’s production drops back to levels just after the last drought, output will be about 9 terawatt-hours a year – down from about 12TWh levels before the end of the carbon price.

“If that switches to brown coal, it will be nearly 4 million tonnes” of extra emissions annually, Dr Saddler said.

The share of gas in the market was little changed last month from July at 13 per cent, while hydro’s share dropped to 9.1 per cent from 9.3 per cent, Dr Saddler said.

Wind energy’s share last month eased to 4.6 per cent from 4.9 per cent a month earlier. A windy July saw record wind energy production in the country.”’

 

At the start of this post, we said: a dilemma existed, the client wanted to be progressive, was presented with regressive and it was difficulty to get through the govtape! That’s it – it is govtape not redtape or greentape in the way!

shallow and deeper sustainability – thinking in time frames

Something is sustainable, and you talk about it. You do not a thing about it, what is your problem? We believe the issue is the sustainable risk reward structure is viewed as competition against short-term profits and makes it a target of disquiet with investors not concerned with long-term benefits. This in turn can be used to promote discomfort with our personal circumstances and immediate security. We are saying ‘the bad for the economy tool’ is used to confuse and give the impression it is not worth the effort.

If we start with the definition – CO2Land org is a great believer in defining adequately before you say your piece. If you don’t you are a target for ‘weasel’ word artists that can then exercise ‘plausible denial’ when you rely on their support. By this we say they will rely on the term plausible deniability as a legal concept. They may even say there are a lack of evidence proving they did not say exactly the level of support they would provide and it is not true and a allegation of support. Standards might even be quoted and reference will be made of the need of proof and how that may vary in civil and criminal cases – for example. www.urbandictionary.com/define.php?term=plausible .

What is sustainable? It is actually dependent on the eye of the beholder. It can be many different things to many different people. To some it is measurable as a financial cost – an economic cost. To others it is the environmental cost and a moral issue of securing the future. How often have you heard it may be immoral, but it is not illegal as a justification for a short-term gain? It is even more complicated if you introduce policy to the argument. At a macro level it is about security, at a micro level the economics of being in business. Nevertheless it is all about efficiency, and that is the problem – the measure of performance!

So what will be done about it, and what will make social and environmental matters more important than just references to being significant to actually doing something about it? Co2LAND Org found the Economist recently published a story that would explain what is needed:

http://www.economist.com/news/business/21614152-few-pioneering-businesses-are-developing-sustainability-policies-worthy-name-new?utm_content=bufferbb375&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer

A new green wave – BILL MCKIBBEN, an American environmentalist, once dismissed sustainability as “a buzzless buzzword”. That seems about right. A survey of 2,000 companies by the MIT Sloan Management Review and the Boston Consulting Group found that two-thirds of businesspeople thought social and environmental matters were “significant” or “very significant” but that only 10% thought they themselves were doing enough about it.

That sense of disappointment should be no surprise. Sustainability can refer to anything from building wind farms to combating social inequality. The idea crops up everywhere from Starbucks to the deliberations of the United Nations (whose governments are in the middle of working out a set of so-called Sustainable Development Goals for 2015-30). An ill-defined, controversial notion is no basis for coherent policy.

Many corporate “sustainability plans” are therefore modest. They focus on saving energy, cutting waste and streamlining logistics. Nothing wrong with that: these things reduce operating costs while benefiting the environment. They help explain why sustainability efforts tend to increase profits, not reduce them. A study by Robert Eccles and George Serafeim of the Harvard Business School (HBS) found that, between 1992 and 2010, companies which adopted what they call high-sustainability policies were more profitable and improved their stockmarket valuation more than those which did not (though this may just have been because high-sustainability firms happened to be better managed).

However, there are drawbacks to such plans. For one thing, they are misnamed: these are efficiency policies, not sustainability ones. Companies ought to want to save energy or cut waste anyway, regardless of the impact on the environment. And it turns out that many of the schemes do not in fact do that much for the environment or social equity. The majority of greenhouse-gas emissions associated with consumer goods, for example, are produced either in the supply chain or by shoppers. So there is only limited scope for such products’ makers to lessen their environmental footprints through green measures of their own.

As a result, most corporate sustainability plans rarely amount to more than cost-saving measures and compliance with government regulations, plus a few projects with a public-relations punch (say, reforesting parts of a cleared jungle). They fall well short of putting sustainability at the heart of what firms do.

For some companies, though, that is changing. Take SABMiller, the world’s second-largest brewer. The firm has been a pioneer in the field. But until recently its sustainability efforts consisted of a laundry list of targets (there used to be ten) aimed at reducing carbon emissions or water usage in its brewing operations. This summer it unveiled new, broader targets—only five this time—which apply to suppliers, sellers and customers, as well as to SABMiller itself. It is promising to teach basic business skills to 500,000 small enterprises, mostly shops which sell its beer. It is helping farmers use water more efficiently: in Rajasthan, in northern India, it is working with wheat farmers who have been depleting their aquifer to reduce water use by a quarter, to ensure it still has water to brew beer. And it is sponsoring anti-drunkenness and road-safety campaigns aimed at its own customers.

Jane Nelson, director of the Corporate Social Responsibility Initiative at the Harvard Kennedy School, says SABMiller’s efforts are characteristic of a new wave of sustainability plans. These set targets not only for the company but for the people it works with and sells to. The targets are not only about the environment but society at large. (In a spectacular example, Unilever, an Anglo-Dutch consumer-goods giant, says it aims to “help a billion people take steps to improve their health and well-being”.) They are supervised by the board, not left to specialists. Domtar, an American fibre company, created a sustainability committee but the vice-president for sustainability does not chair it; the chair rotates among other managers so as to involve the firm as a whole. In short, she argues, for some companies sustainability has become a core part of their strategy, not just a green way to cut costs.

Little green men

But why should firms make sustainability central to what they do? Environmentalists might reply that virtue is its own reward. But companies need more concrete returns—higher profits, say, or increased sales, or higher stockmarket valuations.

The first wave of sustainability policies provided those. The new wave may not: sustainability targets could raise costs, not cut them, making environmentally friendly consumer goods more expensive than the eco-hostile variety. Efforts to combat social inequality could boost wages. Training can be costly.

Paul Polman, the boss of Unilever, argues that good sustainability policies still improve the fundamentals of businesses in the long run. They change customers’ behaviour in beneficial ways—by, say, increasing demand for green products that the firm makes. They also please investors concerned about environmental threats. The trouble is that consumer behaviour is often slow to change and that, if green products are too expensive, the firm risks losing market share. Environmental investors are still a minority among shareholders, most of whom continue to be more concerned about quarterly earnings.

The first wave of sustainability rewarded itself. The new wave will not do that. It is more akin to investing now to have a licence to operate in future, when consumers, lobbyists and regulators will be ever more demanding about the way firms behave. That does not mean the new wave will not reward its adopters. But it will boost their long-term competitive position, rather than their short-term profits. Unlike the rewards of the superficial first wave, those of deeper sustainability could take years to sink in.

Economist.com/blogs/schumpeter

Co2Land org thinks the later point above is another way to think of sustainability – shallow and deeper sustainability when defining what it is to you. And, we say some ore thicker than others and it takes longer to sink in!

Pride and Passion – too much for the business.

My father used to say – think your mother was a glassmaker? Meaning I cannot see through you. My pride would be hurt. Not because of what was said, but that I did not notice I was in the way and awkward at it too! That said it has parallels for business. Recently we were asked a question – I have done all the necessary steps to get my idea to market, don’t they know how important it is – it could change everything! I even spend $300,000 on IP Lawyers to protect our precious idea from copiers. Still going nowhere, why? Our reply, no worries ‘you’ are the problem. The problem is pride and being too proud and too much unbridled passion in your beliefs. Then our friend said; that is what the other guy said! Adding, they said you are not ready for success and it is very common when ideas get to the point of needing objective assessments and not just hard work. It is at that point where what could go wrong really goes wrong with the next step and it is ‘you’.

If we start with the hard work equation, Co2Land org Posted on July 23, 2014, Waltz with your innovation – 1,2,3 step. From this you will get a good visual on the issues. Then there are the mistakes: Chances are you challenged conventional wisdom – first mistake. Someone else has something to lose. Chances are you have improved a widget – next mistake. It was someone else’s cash cow. Chances are you did not realise you have set a new standard, or at least the potential to change is recognised. This means you are causal to change. Have any of you ever thought that what you cause to change might not like to change?

Then there is the problem of objective assessments and the blockers for it: What you might need to change is your pride! It is that point where your pride will not let you give up; you might want to walk away. But you cannot. It is that point that is too much for good business.

But can you still be proud that at least you give it a go? It is normal behaviour for you to hate to miss the next step for ‘your baby’ to succeed. What you would not like to hear is ‘you’ might better help the company by stepping back for three to four years and it would be good for your company. Why? It is in your mind – you are the best thing for the new company. It is your right in being there for the transition from inventor to innovator to leader. The reality can be different – too much passion to project and not being willing to share the problem.

For further explanation of why, maybe you should step back the following from: Jason Thibeault Sr. Director Marketing Strategy at Limelight Networks; Co-Author of “Recommend This!” on August 13, 2014, wrote: “About a year ago, I had an amazing opportunity to go work for a startup (PokitDok). This startup had everything I could possibly want in an opportunity: a great team, a lead investor who was a personal friend, an amazing mission/vision (which is what really drew me to them). And it was a gut wrenching decision to leave my position at Limelight Networks where, for all intents and purposes, I had an extended family and had just helped pivot the company to new messaging and direction. But I pulled the trigger anyway.

No risk, no reward, right?

Well, four weeks later, I was back at Limelight and wrote this personal reflection because I hope that people can learn from my experience.

The truth about startups

Everyone sees the startup opportunity as a potential lottery win. Sure, there’s the possibility of a windfall financially but for every one that hits it big, there are hundreds, even thousands, that don’t.

There are three things that people don’t quite understand about startups (and that I had forgotten unfortunately after doing a few). First, they are very tight-knit. Even post series-A, PokitDok had 13 people who had all worked together at some point (everyone in the company had a relationship to the two founders). They were already like a family. So there is a lot of intimacy in a startup which, for classic introverts like myself, is very hard to deal with. Second, they move fast. Everyone is doing a lit bit of everything at some point. When work needs to be done and there’s no one who is “responsible” for it, someone picks it up and runs with it (or they acknowledge they will get to it later if it’s not part of the focus). That can be a major cultural shock for someone coming from a public-company environment where roles and responsibilities are fairly well defined. Third, it’s all about focus. There are limited resources (time and money) and in order to be successful enough to garner more investment (or, heaven forbid, revenue) the company has to remain focused on the tasks that lend themselves directly to proving the company’s business model. That can have significant challenges for introverts who are big thinkers and visionaries.

I got broadsided by all three of these issues. As an introvert with an HFA diagnosis (high-functioning autism), I quickly withdrew. It was massive overstimulation. Every meeting, every “huddle up”, every problem I saw, every “lacking” element from the marketing function generated more mental output than I knew what to do with. I couldn’t process it quickly enough. It was overwhelming. Which, of course, led to another problem: I began to get manic. In my introverted mind, I wanted to get the minutiae tackled. I wanted to get all the processes and day-to-day stuff out of the way so that I could concentrate on what I was good at: thinking, pontificating, dreaming, exploring, examining. So I was producing a lot of stuff but not very deeply. I wasn’t very focused. Which is all great for brand and strategic marketing, not so good for day-to-day.

When the shoe drops…

So at the end of 4 weeks the CEO and I agreed that “it wasn’t a fit.”

It’s important to understand the implications of coming to this conclusion. It wasn’t a reflection on my skills or my ability to accomplish my work. It was all about my role (as a senior executive) and the current state/size of the company. In 3 or 4 years? Maybe a different story. They needed to get tactical and operational. I was operating a few levels above that.

Some people might find this a massive blow to their ego. They might not hear the part about “it’s not a reflection of your skill, we still need you to help us.” Only I understand startups and so I applauded the CEO for her ability to make a quick decision. There’s really no way to hide a problem, like someone not fitting or a lack of focus, in a startup. That intimacy exposes everything. And because of that second thing about startups, things moving really fast, someone not fitting can turn into a huge problem that snowballs completely out of control in a matter of weeks (where it might take months or years in a more established company).

Still, I did what anyone would do: I freaked out a little. I just lost my job (despite the consulting opportunity). I had no health benefits. Ruh, roh…

There really is a silver lining

Thankfully, I had left Limelight under great circumstances. I didn’t go to a competitor. I didn’t blast the company over their issues. I didn’t leave angry. In fact, I left sad (and I was actually still consulting with them because I still believe strongly in what they are trying to accomplish; heck, I helped get them there). So I reached out to my former boss (Kirby Wadsworth, with whom I was co-authoring a book for Wiley anyway) and told him what had happened. Long story short, I went back at Limelight for the long-term.

I know that a lot of people are excited by startup opportunities but going into one with eyes wide-open is critical to being successful which is why I impart this one piece of advice: The startup culture (fast, intimate, focused) has to fit with your personality. It’s probably not the best place for a classic introvert unless you are an engineer where it’s expected that you are heads-down in code.

Every experience, no matter how small, changes us

But I also learned a lot about myself. In fact, it gave me a new perspective on my role in helping a business be successful. That new perspective actually empowered me to come up with a role at Limelight (working for Kirby) that is perhaps the most exciting role I could have ever imagined. So what did I learn?

That I’m not a “leader”. That’s not me. Worrying about leading takes away from my ability to do what I do best. When I played hockey, I was a go-to guy because I worked hard. But I was never the captain.

That it’s okay not to be the best at everything. I’ve embraced what I’m really good at: strategy/vision, writing/storytelling, and speaking. Those are my three core strengths. Everything else…no thanks.

That being happy with myself means recognizing #1 and #2.

Would I have liked the startup to work out? Sure. They really have a powerful mission and vision. Yet I also don’t think that I would have had a “life changing” event if it had worked out. I might have continued to believe that I was good at everything, that I was a leader (and deserved the title to go with it), and that I was happy. So in a sense, everything worked out for the best. I got to go back “home” to my extended family (and an exciting new role) while making new relationships with the people at Pokitdok (who are all really awesome people, by the way).

My ultimate advice to everyone? Be truthful to yourself. Accept your weaknesses and embrace your strengths. Don’t try to make strengths out of weaknesses if it’s going to make you miserable trying especially at a startup. Understand that you cannot place anything above your own personal happiness. Because if you aren’t happy, you can’t contribute to other people’s happiness and when it comes down to it, happy environments make for productive employees.”

Well there you go! As long as you experience – you live! You also have reason to be proud, no need to be sorry. Just be cool!

 

 

What hurts more – dealing with energy contracts.

Measures or impacts – what hurts you more when you are dealing with energy contracts as a small, but described as large in National Electricity law, business? What factors affect your decision to enter into the contract? How do you stand up for your rights?

The first rule is do not expect consumer legislation to protect you! You may be surprised that energy regulations even circumvent your rights. For instance: The deemed provisions, and price during the contract period. Then consider the extraordinary fact the Australian Energy Market Commission (AEMC) is on record as saying the equivalent of ‘caveat emptor’ – buyer beware is sufficient protection.

In the case of Energy Service Agreement, Retail Energy Agreement or simply Contract for Sale of Electricity (the description referred to by your retailer) you should realise you are without ‘warranty’. You see without a warranty the buyer takes the risk. The supplier or energy retailer takes no risk. In most cases this is true if you are a small (large business).

A series of recent brokering agreements by WIntelboff has highlighted to the client that this risk is critical. Even intervention strategies can be protracted and lack a feeling of satisfaction for the client. Most might even be frustrated because it is costly to fight, and if they qualified for the Ombudsman to investigate there is the risk they will be told ‘no, too difficult’, or the equivalent!

One client has penned her concerns in trying to get a fair contract, and we feel compelled to air them for her:

“On receipt of XXXXXX offer of renewal of electricity supply to the XXXXXXX XXX, the Manager, passed it on to me to “check out” as I had (and am still) involved with researching the power industry and finding ways and means of reducing our power bills.

The initial offer for three years from a numbers point of view looked like a vast improvement on what we are paying for Power from XXXXXX at present.

However on wading through the thirty odd pages of contractual agreement I realised that it was one of the most complex legal documents I had ever had to consider.

I recommended to XXXXX we ask the advice of the ‘crew’ who had been guiding us through installing Solar Power for the Business for two reasons….

They had a greater understanding of the Industry and what affected the retail electricity market…and I was concerned about the solar panel installation and other power reduction strategies affecting the tariff adversely with the 160Mwh factor

My concern that the fine print was mostly one way…to XXXXXX with no real guarantees built in to protect us from penalties..

Bottom line is…

In my personal opinion, XXXXXX’s business methods with this are appalling and amount to business bullying. Expecting a XXXXXXXX (requiring managerial and/or Board Approval) to make a decision with 2 weeks of receiving their renewal…AND…stating that the time could be extended…but didn’t when I requested it …. is tantamount to fraudulent behaviour.”

CO2Land org feels that a truly competitive industry would have adequate consumer protection, and you would expect where it was possible to lose customers you would be concerned about adverse behaviour. You would even expect a civil response to your queries – more than just the family phone message of ‘why we are great people’. Actually, when asking one retailer if it was possible to change a threshold provision – The actual response might surprise you – the 300 MWh pa + customer was told “you are too small a customer to influence us to adjust or amend our contract”!

It gets really scary at this point. They don’t care? Why you might ask. Some speculation could be: They might be selling short in the market. As such they can make more money from ‘double dipping’ than dealing with you. For the long sell retailer they might just offer fantastic prices to fill the books and just raise the prices later. The really scary thing is it is not just the raw energy prices at play here. It can also be environmental charges and some government fee liabilities.  

If you do not believe us – just read your contract very carefully. Some terms and conditions might be expressly stated, and some overtly say you are screwed.

CO2Land org is aware of only one retailer, at this time, that includes an undertaking to not rise prices for the contract with the exception of those mandated by government. Even then, you might be a little nervous when you realise the retailer is government owned! What if they mandate a change? What if they sell to a private company and the condition of sale says you can charge what you like – eh, you are deregulated? But better the bird in the hand as they say. At least if done wrong by Government you can vote them out eventually. Unfortunately, retailers in the mean time might just laugh and say how can you hurt me!

It is disappointing that tactics and marketing are used to make you believe they are doing it for you, when the deal is something else it is their insurance – not yours, and you are the one paying.

Stop Press – small *described as small, should ask for up to 17 % Discount on their bill. But what penalties take it all back again + more – that is for another post. In the mean time just remember to look at what you give up for the illusion of more!

 

No place for flat earth society – Climate change priority one.

The nightmare popped up during sleep time: They dropped the A off UStralia – what happened Anthony? Don’t you know there am no ‘I’ in team! What brought this about? Having just read Peter Costello’s comment before bedtime and having an uneasy feeling from it – in his words:

“Mr Costello believes the Prime Minister has missed the point.

“I don’t know about this Team Australia stuff…..I have heard it used in tourist and trade promotions. But as far as I am concerned, when it comes to stopping terrorism, it is not a matter of getting on the team.”

The rest of the story is found in – Peter Costello criticises PM Tony Abbott’s call to join ‘Team Australia’ By political reporter Karen Barlow, staff – “Former Liberal treasurer Peter Costello has hit out again at the Coalition Government’s agenda, following up on a swipe over unpopular budget measures with criticism over the Prime Minister’s call to join “Team Australia”.

The story actually sprung from Peter Costello taking a swipe over another agenda through, “his regular News Corp column to attack Tony Abbott’s decision last week to drop changes to section 18C of the Racial Discrimination Act.

Citing the need to engage Australia’s Muslim community on new anti-terror laws, Mr Abbott declared everyone needed to join “Team Australia” and support the Government’s proposed new counterterrorism laws….I want the communities of the country to be our friend, not our critic,” he said. 

Fair enough we say –the fact, we need friends.

But there is a twist – We need a meeting of minds for that to happen. So why would we think two faced or two minds and the characteristics of flux plus spring to mind. Why is he trying to solder the joints and soldier on with falsehoods? Ironically it is climate change that may be the catalyst to foster relationships after all. Yes, Climate Change! Yes, despite Ab bott saying in 2009 that Climate Change is ‘crap’. It seems that to be part of the universal club he now needs to embrace Climate Change.

Actually, CO2Land org predicted this a few months back in a previous blog.

Why do we know it now? From the story: US administration and Tony Abbott have ‘meeting of minds’ on climate change By Peter Hartcher and John Garnaut Aug. 14, 2014:

“The Abbott government has discussed with the Obama administration the subject that was supposed to be unmentionable between them – climate change”.

A senior US official said ”there was a meeting of the minds on the significance of the challenge” when the two countries held their annual Ausmin consultations in Sydney this week.

The subject was not mentioned at the Ausmin news conference on Tuesday.

But Daniel Russel, the senior official for the Asia-Pacific region in the US State Department, was involved in the talks and said the two governments had ”a good discussion of non-traditional security threats, among which is climate change”.

”The conversation was predicated on the reality of global warming,” he said, dismissing any hint that the Abbott government might be in denial on the subject.

”It was not a theological debate. It was an information exchange.”

He described it as ”a very practical, forward-looking conversation” on the matter………. The Barack Obama administration has made climate change a priority.”

“Mr Kerry is especially fervent. In February he said that it was ”the world’s most fearsome” weapon of mass destruction.

He has described sceptics of the science of man-made climate change as members of the ”Flat Earth Society” and said he and Mr Obama had no time for them.”

“Mr Abbott said in 2009 that the science of climate change was ”absolute crap”…… They exchanged views on the upcoming global conferences regarding climate change and they also touched on the relevance to the force posture agreement in the sense that the Asia-Pacific region is home to lot of wonderful things but, unfortunately, it’s also home to the lion’s share of natural disasters, and a significant component of the rationale and the mission for the rotational [US Marine] presence in Darwin … is to increase the region’s ability to respond to natural disasters.”

The head of Australia’s Climate Institute, John Connor, said: ”This government may be waking up to the fact that the heavy hitters in the US and China see climate change as a security issue and an economic issue, not just an environment issue.

The chief of US Pacific Command, Admiral Sam Locklear, has said that climate change could lead to the displacement of millions of people, ”and then security will start to crumble pretty quickly”.

Our turn, we told you so, and if you really want to be on TEAM UStralia you better remember there is no ‘I’ in team. Despite how hubris one may be!