‘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.

A glimpse of our new utility model

Change the name Hawaii for Australia in this story. Then you might get a glimpse into our new utility model. Just like in Australia – east or west coast, Hawaii Electric, the US state’s biggest utility, has failed to create a long-term, customer-focused business model. The problem, according to the Hawaii PUC as reported as said last week is “An increasing penetration of utility-scale renewables and distributed generation has ‘broken’ the traditional utility-customer regulatory compact….An overhaul of the traditional cost-of-service utility regulation model is being touted as a possible solution.”

Now we hear you say but Tony and Joe are going to put an end to the renewable industry in Australia by 1 July 2014. Well, according to the Climate Speculator and Tristan Edis the Environment Minister, Greg Hunt says his Cabinet Colleagues are dreaming. http://www.businessspectator.com.au/climate .

We might get cheeky here and refer to CO2Land org’s last posting, 7 May 2014 – Fantasy and Budgets, in particular on after eating a mushroom Alice in Wonderland grew a mile high – we guess it was a magic one! However, no amount of distorted truths can hide the reality and its acceptance here, as in the US state utility regulators, there is a need to take steps to incentivize changes to the utility business model, and utilities should lead on these issues, instead of being dragged along. One furphy that can be dispelled by recent reports cannot attribute renewable to price increases, again quoting, 8 May, 2:22 PM, Explaining electricity markets to dummies by TRISTAN EDIS: “While economic modeling shows that the injection of lots of solar and wind power via the RET will lower wholesale electricity prices, 95% of politicians and 98% of journalists struggle to understand and accept it” (RET refers to Renewable Energy Target). We can only say, sad but true.

Now back to the utility change model, rather than waffle on like a ‘polly’ – aussie slang for politician. You might better get a grip on the case and idea by directly reading –

http://www.utilitydive.com/news/hawaiis-overhaul-of-the-utility-business-model/259923/

We should also add that in Australia, after eight years of study there is no evidence that Wind Energy in South Australia has been causal of wholesale energy price increases in that state or the eastern seaboard to which it is connected. To refer to that story refer to the Climate Speculator again.

Have got to go now – put my waste into the gasifier, produce syngas to start the generator for our power needs, it is cold overcast and foggy outside – need a backup for the solar on the roof. It is just like having a battery without acid. Sorry Alice!

Ironic RET – the sum is bigger than the whole.

The conversation was fluid, and as the Renewable Energy Forum wound down to its closing stages. What was obvious was we all shared a concern that what is policy is not what was understood as the intention of the policy. If we make example of the Renewable Energy Target (RET): After a review of the 2001 target set under the Mandatory Renewable Energy Target (MRET), the Australian Federal Government in August 2009 committed to the RET and it was designed to ensure that 20 per cent of Australia’s electricity supply will come from renewable sources by 2020.  Then in June 2010, the Federal Parliament passed legislation to separate the RET into two parts to commence on 1 January 2011 – the Large scale Renewable Energy Target (LRET) and the Small scale Renewable Energy Scheme (SRES). These changes are in order to provide greater certainty for households, large-scale renewable energy projects and installers of small-scale renewable energy systems.

What has happened since is the 20% Australian Federal policy changed to GWh available targets.

What is wrong with that you say? Well previously 20% meant 20% no matter how much the demand for electricity grew. In other words the renewable energy requirement will grow to ever-higher numbers as electricity demand grew at approximately 5% per year. This suggested traditional generators would lose market share to new renewable starters. To get accord on the issue, the setting was then addressed as a Gigawatt target that said 20% was desired but was ‘real’ in that it actually reduced the % of the renewable energy production each time total energy demand increased. What now worries the traditional generators that agreed to the accord is that demand is reducing at around 2% pa and that it is trend, ironically because of the policies of the new Australian Government towards manufacturing and innovation. So at the time of change to Gigawatt target until demand actually dropped we saw the actual % of the target drop to about 13% and now it will rise on predictions to have demand reduce we will find the target will again be closer to 20%. It even affects the Energy Retailer in that the risk of being caught ‘short’ or ‘long’ in the market is a much bigger risk.

Another issue is that states and territories always need to do more, and they have set their own targets. The Australian Capital Territory (ACT) recently amended its 25% target to reflect 90% by 2020.  ACT have even introduced a 20 cents per kWh feed in tariff (FIT) to encourage large scale renewable to supply business and industrial needs in the region. What they have effectively done is create a capacity market inside a Spot Market for electricity.

So – If you studied my phone records, what would you unearth about me and my intentions, seriously? The irony is metadata collection on individuals might give you the wrong conclusion. Why is that so? I am a collaborator and a competitor, the cluster I might frequent will change according to the clients needs. Imagine this I am at the Renewable Energy Forum, I tell all about the wonderful deal I have done based on coal fired generation, that it was a wonderful outcome – and all agree they needed to know that outcome. They now knew what tactics they needed to counter those arrangements. But as metadata it might read or profile, they are here, they are everywhere, what are they up to – must be no good!

Oh dear, getting paranoid about the RET review are we? No actually feeling very positive. Why? CO2Land org can remember at least 7 reviews of different sorts on the matter. Yes, something will change, and distortion in the market place will be adjusted. Maybe even new models for the industry will be mandated to accommodate change or the transition strategies for the inevitable continued growth will be clearer.

Why be so confident? The Abbott government largely is a carbon copy of the Howard era. Even when Howard introduced the Mandatory Renewable Energy Target (MRET) it was not his preferred vehicle to protect the environment, but it was a means, through pluralism to remain in power.   In this case to appease the Democrat Party faithful (sorry Green Party faithful but that is a fact). Abbott is a former Howard Minister, as is many of the Abbott cabinet, and the difference is, in Abbott’s case, is the need to appease right wing entity(s). The problem with the right wing groups is they tend to be Elitist and leaning toward returning to feudalistic ideals.  Howard tended to favour Roman times, and you must suspect Abbott does too.

So CO2Land org does not believe that Abbott, who previously endorsed Carbon, is doing anything other than adjust the rules to appease concerns and continue with what China is doing – encourage continued renewable uptake.

What if Turnbull takes over as Prime Minister, would it be better? By degrees we suspect rather than radical. We can be encouraged that Turnbull does continue to support the ideals of sustainable business.  In our opinion he had one fault, too honest in his previous stint of party leader. Maybe he did learn that lesson – don’t be too visible in setting your agenda.

Don’t give up on renewables surviving the RET review  is our advice. If you note the style of the current executive it is similar to neurolinguistic programming, that in effect means we just give up trying to comprehend meaning. More proof listen to the language being used; ever changing degrees of view point and you might even notice yourself saying: Did he not say something else yesterday – I give up!

Don’t give up because the Pollyanna moment is to come, suddenly, Abbott will say I always supported the environment, I was waiting for the right moment and mechanism. It is about how a relevant government can govern to maintain a community obligation. NOTE: All weasel words have been carefully chosen so no disclaimer is required!