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Power plays: time to think about buying back the grid

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Malcolm Turnbull has continued to espouse his rhetoric about how he proposes to tackle electricity prices. Unfortunately, in the end, it will all be just smoke and mirrors.

You need to go back to the turn of the century to discover the start of this crisis. Back then, the states did what states did best, run central utilities and these were not ever figured to be election issues, they were a basic function of any incumbent government

malcom and shorten

New South Wales had dabbled in public/private energy generation but it was never attractive enough to meet both public expectations and those of the private investors. Utilities , it was though, are not-for-profit as a rule because you can’t pick and choose your customers, i.e. the wealthy ones.

While Howard spent billions on middle class welfare on the back of the greatest level of federal income ever seen, he chose to rob the predominately Labor states of revenue, only to offer the cool-aid of the “ever growing” GST, he was setting all of us up for what we have now.

Once the GST came into play, and on the back of the ”best Olympics ever”, the states started buying votes using borrowings based on the forecast GST income. This Kool-aid drugged the governments into the belief that if they maxed out the credit card, growing GST would reset the limit, therefore solvency was assured.

How wrong they were!

We now see state governments barely able to meet interest payments from revenue, let alone find the cash to do what they were put there for in the first place, provide services to the populous at least cost.

Successive state governments have had to source vote buying revenue from either selling off assets or turning them into corporate cash cows.

In both cases, profit takes precedence over planning which has been laid bare by the phenomenon of cheap renewable energy. We are stuck between a rock and a hard place, nearly every essential services from transport, health and education are in disarray, but electricity is probably the most singular example of a problem that should never, ever become a crisis.

The ineptitude of our current governments will never be changed by the polls: no opposition has ever moved far from the status quo, they only move in different shaped circles.

The opportunity is right now for the Turnbull government to change the course of Australia’s political history, it may have sovereign risk all written all over it, but you might be surprised.

The correct thing that should happen right now is the nationalisation of every single power asset in the country. There won’t be too many losers, believe me, because most of the private owners who bought before renewables are either bleeding to death or trying to drive government policy to provide enough oxygen to survive.

The states who still own the assets will just have to learn again what their purpose is.

By doing this, we can get the right minds in the right space who, without any other agenda, determine what is the best way to utilize our existing coal gas and renewable assets to provide the cheapest electricity going forward and, with the ability to plan with impunity from the next election, enable a smooth transition to a higher level of renewables in Australia.

This may include a couple of new coal power stations, it may not, but without taking the politics and revenue sourcing out of essential services out of essential services, we are surely doomed. If state, or indeed federal governments need extra cash to buy votes, go on the game or something, don’t screw with our services.

Rob Campbell is Managing Director of Vulcan Energy.  

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  • The Grid and power stations should never been sold in the first place for governments quick ways of balancing their budgets.

  • Jo

    “This may include a couple of new coal power stations, …” This is sheer nonsense.
    We are in this mess because the States are tied up with power stations and coal mines as they either (partially) own them or they try or tried to sell them at a good price.
    Buying back the fossil fuel power stations would mean that the States are even more interested to secure their income by keeping the fossil fuel fired power stations alive for as long as possible. I suppose your heard about Tony’s suggestion to buy the Hazelwood power station back and start it up again.

    “Utilities , …, are not-for-profit ….” What?

    “…most of the private owners who bought before renewables are either bleeding to death or trying to drive government policy …” What do you mean? I have bought a PV system in the past and I am doing very well.

  • Andrea

    Yep, the market is dysfunctional. I disagree with new coal power stations – better to have massive government investment in storage (especially pumped hydro) and interconnectors. Here is our article that deals with some of the issues raised in Finkel: https://climateactionmoreland.org/2017/06/14/the-finkel-review-not-just-a-cet-its-actually-about-keeping-the-lights-on/
    Finkel wants more planning – which is a start. But bringing back state ownership and control is IMHO what we need

  • Farmer Dave

    Here in Tasmania we have the great advantage that the State owned electricity business was never sold off, although there have been attempts to do so. So now we have three separate entities, all owned by the Tasmanian government on behalf of all Tasmanians: a generator (Hydro Tasmania), a poles and wires company (TasNetworks), and a retailer (Aurora Energy). All are Government Business Entities, with their own Boards and management teams. I think it would make great sense to put all three back together and to save a lot on overheads, but I do not know if the NEM rules or any COAG agreements would be an obstacle. Does anyone know?

    If it is possible for Tasmania to put these three entities back together, the government could ensure that the savings were passed on to Tasmanians, and could walk away from the guaranteed returns on investment pricing that drives distribution costs in Australia. To me it would make sense for the combined organisation to be charged with the responsibility of providing secure, safe, 100% renewable electricity to Tasmanians, and to be free to exact as much profit as possible from power sales to the mainland – provided the other objectives were not compromised.

  • MaxG

    Nice article Rob — fully agree.

  • solarguy

    We couldn’t buy back the poles and wires, there just isn’t the money to do it now. Way too late.

    But the state govs can invest in solar and wind generation though.