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This week’s big energy announcements? Just another nail in the coffin of low-cost power

The Spectator, 17 September 2020

The government’s energy policy announced this week is another milestone in the demise of what was once the world’s lowest-cost energy market. The slow fuse priming the bomb was lit in 2001, when Prime Minister John Howard Mandatory Renewable Energy Target (MRET) requiring electricity retailers to include two per cent of exotic renewables (wind and solar) into their electricity supply.  This gave a 50 per cent subsidy – paid for by customers — to these renewables.    

At that time renewables were confidently forecast to be fully competitive within a few years.  Twenty years later wind and solar still require assistance to compete with fossil fuels and their further shortcomings of variable power supply have become more evident.  

But policy augmentations from John Howard’s modest interventions mean wind and solar are now are responsible for over a fifth of demand.  And the MRET subsidies remain in place, compounded by additional support in the form of assistance for transmission, grants and soft loans –- in all, the equivalent to $13 billion a year.  Aside from this cost, these measures bring about highly volatile prices –- especially in the current COVID-abnormal era.  

Moreover, by forcing coal generators to operate uneconomically with stop-start operations both increasing overhead expenses and adding to wear and tear, government interventions have raised costs for those generators, which remain the dominant sources of supply.  This is making them  ..... Read more     ....pdf

Can democracy survive an increasingly biased media?

The Spectator, 16 September 2020

     The ACCC is seeking to force Google and Facebook to pay for the media content they redistribute which has led to their capturing the advertising revenue that previously went to newspapers.  The issue is ostensibly one of bargaining imbalance but behind it is the notion that social media is undermining a vigorous free press.  

 

The struggle for freedom of expression was not one of “the people” but one of what we would today call the liberal elites seeking to promote their political preferences.  It developed in England and in 1640 the press became free, allowing the Puritans to campaign against the Crown.  Having executed the king, the Puritans quickly reimposed censorship in 1643.  This lapsed 50 years later and in what would become the United States, de facto press freedom was formally established in a 1734 trial fronted by Alexander Hamilton; it was enshrined in the First Amendment in 1791.  Many other nations have adopted this, mostly without practicing it.  

Most people, especially the press itself, see unbiased freedom of reporting as a buttress against tyranny.  Objectivity in newspapers, however, only emerged during the middle of the nineteenth century due to advertisers coming to dominate the media’s finances and generally seeking that  ..... Read more     ..... pdf

Governments have made this recession worse. They can’t now impede recovery

The Spectator, 2 September 2020

     A 7 per cent fall in GDP during the June quarter is pretty much to have been expected. Led by spending falls on transport (down over 80 per cent) and in cafes (down 56 per cent), household spending was down 12 per cent.   

But there is no shortage of demand – the household saving rate has shot up from 6 per cent to nearly 20 per cent. Though precautionary saving is doubtless a factor, people have limited opportunities to spend their money rather than being short of funds.

The consumption foregone in the recent quarter is lost – and further losses will be recorded during the current quarter. And there will be lasting changes in demand, including a permanent dip in demand for office facilities, which will require building modifications and adaptations.  Nonetheless, the crisis has not impacted the fundamental production base of the economy — its facilities and skills. Left to itself output will mend and do so quite rapidly – the high pent-up savings, low interest rates will help considerably in this respect. ..... Read more     ..... pdf

Biden’s handlers track away from lunacy in energy policy

Catallaxy Files, 1 September 2020

Joe Biden’s new claim to be in favour of law and order is not the only area where the Democrats are tracking away from the radical left.  Among the crazy policies that the Democrats have been promoting (with disastrous consequences in California) are a conversion of the US electricity system to wind/solar even faster than Australia’s.

I touched on Biden’s energy policy in the September edition of Climate News.

In May, Biden announced a Dream Team of climate advisers co-chaired by Alexandria Ocasio-Cortez, “the avatar of the Green New Deal”, and John Kerry, architect of the Paris climate accord.  One former adviser not included is Hillary Clinton’s presumptive Energy Secretary, Audrey Zibelman who, since Turnbull fingered her to head the Australian Energy Market Operator, has been mustering new regulatory accretions for electricity in the Australian National Market.

The Dream  Team, which also included Rep. Kathy Castor, the chair of Nancy Pelosi’s Select Committee on the Climate Crisis, seemed to presage  .....Read more

The Bill Comes Due for Renewable Energy

Quadrant Online, 24 August 2020

     Australia’s excessively high energy prices are undermining our competitiveness and cutting our standards of living. Since 2002 Australian governments have introduced climate policies to reduce carbon dioxide.  This has caused high cost and low reliability wind and solar to displace cheap coal and gas power. Our electricity prices, once the lowest in the world, have become one of the most expensive.

It is readily acknowledged that regulatory measures bring about costs to consumers by forcing energy retailers to incorporate growing shares of wind and solar energy into the electricity they provide. For the average household consumer, the commonly quoted additional cost to electricity bills is $90 per annum or about 6.5 per cent.

But this estimate, carefully assembled by the Australian Energy Market Commission (AEMC), only counts about one sixth of the total cost. It comprises only those costs directly attributable to Commonwealth and state regulatory requirements, mainly cross subsidies on grid-supplied wind and solar as well as on rooftop solar.Currently, these facilities, which are approaching 20 per cent of total supply, get a subsidy of $40 per MWh. That is roughly the same ,,,,,Read more

California dreamin’, our cheap and reliable electricity nightmare

The Spectator, 20 August 2020

     Matthew Warren in the AFR three days ago was highly critical of the electricity market manager’s proposed spending on new transmission lines.  The proposals involve a centrally planned network with over $17 billion of new transmission lines plus a further $10 billion for the Snowy pumped storage scheme.  This spending is designed to shore–up the inherently inefficient and high cost wind and solar generators that regulatory subsidies have made possible.   

There is an irony in Warren’s attack since, in a previous life as head lobbyist for the renewable energy industry, he was instrumental in having the Rudd/Gillard government accept the slogan “20 per cent renewables by 2020” with the fourfold expansion in subsidised renewables this entailed.  It is that policy which has undermined the low cost, reliable market-driven electricity supply industry we once had.  And it is that policy which has created the case for the vast expansion in transmission expenditure that the market manager is signalling. 

Warren’s conversion to a market-driven approach is clearly not shared by the market manager, Audrey Zibelman, who writes    ..... Read more      .....pdf version

We can still have a V-shaped corona recovery. Here’s how

The Spectator, 11 August 2020

     The shutdown in Victoria is devastating the state economy retarding the national recovery.

The data on which to assess the actual downturn and longer-term national costs is confusing.

Measured GDP has seen a reduction of only 2.75 per cent.  But this is largely a consumption-based measure and has been underpinned by JobKeeper/JobSeeker payments that represent borrowing from the future.  Such payments unsupported by production cannot continue for long in spite of the hopes of Modern Monetary Theory supporters and the illusions of leftists who think the economy produces irrespective of government measures.

A better measure of reduced output is the number of hours worked, which are down 9.4 per cent.  This is imperfect because, on the one hand, largely unproductive public sector employees have been unaffected and, on the other hand, so also have the most productive jobs in mining, agriculture, processing industries, telecommunications and finance.

In terms of costs that have been imposed, government supporting actions will have increased debt by some $330 billion.  The average Australian ..... Read more

How a Premier should shoulder the burden of office

The Spectator, 3 August 2020

We can but wish…

“It’s only fair”, Victorian Premier Dan Andrews said as he announced that he and his Cabinet would work for no payment over the course of the Phase 4 Shutdown he’d just introduced.

“Backbench MPs and their staff, who like a million other Victorians are unable to go to work, will surrender their salaries and accept the same JobSeeker payment as other workers no longer able to earn a living.  We are seeking to introduce the same conditions for all state public servants other than those in ‘front-line’ positions performing services that are even more critical in these troubling times.”

The Premier continued, “As a government, we believe in equally sharing the pain that we, as decision makers, have visited upon the state as a whole.  And the measures will assist in alleviating some of the costs to the economy stemming from these actions.”     ..... Read more     ..... pdf version

Confucian wisdom

The Spectator, 28 July 2020

     The International Energy Agency is just another international agency that Australia finances in order to receive advice that, if taken, would cripple the economy. At the latest Clean Energy summit, IEA’s agitator-in-chief Fatih Birol continued to push for a COVID 19 recovery with its central theme involving substituting high cost renewable energy for coal.

In its coverage of the summit, RenewEconomy, one of many Australian wind/solar energy propaganda publications, applauded Birol’s call for an expedited closure of all Australian coal plants.   

Birol does not stop at exhorting his flock to stop building new coal fired power stations but urges a decarbonisation program for the existing ones as well as for steel plant, cement factories and other emission-intensive facilities. Mentioning carbon capture and storage and hydrogen, he described finding the technologies to do this as “big homework”. Big homework it is! For coal, the massive Australian government spending on CCS – including bankrolling the highly secretive Carbon Capture and Storage Institute – would deliver electricity at three times the cost of existing High Efficiency  ..... Read more      .....pdf version       

Sorry Alan, but Modern Monetary Theory is a load of cobblers

The Spectator, 20 July 2020

     Alan Kohler considers the current crisis provides the ideal laboratory for applying the catchily titled Modern Monetary Theory — MMT.  He sees this as a paradigm change whereby the government just keeps spending money with little concern for debt in order to maintain employment.  He considers this to be a modern version of the stimulus to counteract a downturn, one that goes much further than policies favoured by Keynesian economics.   

Keynesian economics is a prescription for ironing out the peaks and troughs in an economic cycle.  It would never have achieved its current popularity had it been seen as the permanent stimulus that Kohler advocates.  Even in its pure form it had become discredited in bringing about “stagflation” in the 1970s rather than its intendedeconomic recovery.  And in the Global Financial Crisis in 2007, Australia recovered not from the wasteful Kevin Rudd/Ken Henry stimulus policy of “Go hard, go early, go households” but from a genuine increase in demand brought about by the booming Chinese economy. 

Keynesian policy prescriptions as advocated by Keynes himself, at least in his later years, contra Rudd/Ken Henry, involved investment spending to provide a platform of higher future incomes.  The problem with this is that government is likely to be wasteful its allocations and such ..... Read more     .....pdf version

The Business Council maintains its crusade for higher electricity prices

Catallaxy Files, 20 July 2020

     IThe Australian today, we have a puff piece by JENNIFER WESTACOTT (head of the Business Council) and  ALISON WATKINS (head of Coca Cola Amatil).  It is headlined “The window of change is open: now is the time for pro-business economic reform” and has the usual exhortatory bromides, demanding “that we expunge the idea that business as usual will cut it”. 

It tells us “our starting point was a period of stagnation in investment, productivity and wages growth. So, how do we achieve the monumental task of creating about two million new jobs”. It talks about unleashing business, building confidence and unleashing balance sheets.  Two general policy reforms it suggests are a 20 per cent investment allowance (rapid write-off of investment spending is always a good idea) and cutting red tape (a great idea but one that has eluded Australian Governments for 30 years). It also supports open markets, skilled migration and a more competitive tax system.

But the only specific policy it advocates is, “devising a road map to outline how we transition to a more carbon-efficient economy”.

This is code for even more of the energy taxes and regulations that have crippled the economy.  At present, regulations and subsidies to ..... Read more

On the Road to Ruin for no Good Reason

Quadrant Online, 12 July 2020

     This week’s announced closure of New Zealand’s only aluminium smelter presents the shape of things to come for Australia. Aluminium producers gravitated to these shores, attracted by some of the lowest electricity prices in the world. Those prices appeared to be sustainable, founded as they were on extensive low-cost and well-situated coal resources.

A wake-up call might have been the closure six years ago of the Port Henry smelter near Geelong. Although an old facility, no suggestion of it being replaced was entertained.  Already, with carbon taxes and governments determined to reject coal in favour of subsidising high-cost and unreliable wind, the bounty of new, world-class new aluminium smelters had become a history lesson.  

Things have only grown worse. 

Australia’s energy politics, in the form of subsidies and other favours to renewables — constantly punted as being on the cusp of being competitive with coal or gas — have left our own remaining smelters requiring government assistance to stave off bankruptcy. Hence, we have government subsidies in place to counteract the damage done by other subsidies!

Australia’s energy interventions come in three flavours:

1 Direct Commonwealth and state payments to renewables and vaunted new sources, with hydrogen ..... Read more

Do we want to follow St Jacinda and price our industry out of existence?

The Spectator, 10 July 2020

     Rio Tinto’s announced closure of its aluminium smelter in New Zealand due to uncompetitive power prices this week is a reminder of the vulnerability of Australia’s four remaining smelters, all of which face sharply higher prices courtesy of government energy policies.  With energy costs comprising about a third of their total costs, smelters are industry’s bellwethers of future energy competitivenessand all four of Australia’s are on national suicide watch.  

As a result of subsidies to wind and solar, these expensive and unreliable energy sources have caused high customer costs, both directly and indirectly, while also diverting the nation’s investment resources into avenues that actually damage the economy.   

Commonwealth and state subsidies to wind and solar energy are running at just under $7 billion a year.  $4 billion of these are as a result of requirements imposed on consumers by the Commonwealth’s Renewable Energy Target and its similar provisions for roof-top installations and measures taken by state governments.  Some $2 billion of assistance to renewables comes from direct subsidies.    

The effect of these subsidies is compounded by their forcing out of production lower-cost coal generators.  As a result, prices ar ..... Read more     .....pdf version

Power companies must decide: are they about virtue signalling or cheap, reliable energy?

The Spectator, 30 June 2020

     Yesterday, The Australian reported dissent within the Australian Energy Council (AEC), the industry association that represents electricity generators.  Of its 24 members two, Delta and Infigen,have strongly opposed a formal AEC position that advocates the industry operating with zero CO2 emissions by 2050.  This would entail the elimination of coal and gas, which presently comprise 80 per cent of electricity supply.   

That position is one adopted by other industry associations like the Business Council of Australia (BCA) and the Australian Industry Group which, like the Minerals Council and the National Farmers Federation, long ago abandoned reform agendas and shifted their lobbying focus to virtue signalling and special deals for their members.  The BCA even welcomed Anthony Albanese’s offer to have the government join it in accepting the ALP’s policy as “bipartisan”.

By plumping for fuel neutrality, the AEC secretariat has also faced reduced access to green dominated state government bodies, which provide energy subsidies costing almost $1 billion a year.  

All major industry associations now promote abandoning electricity generation from coal as the key to reducing greenhouse gas ..... Read more    .....pdf version

Albo’s Claytons climate policy switch

The Spectator, 24 June 2020

     In the media today, we see two contrasting ALP position papers, by Kevin Rudd in the AFR, and by Anthony Albanese in a Press Club address pre-released to some media outlets.  

Kevin Rudd, in ranting against “the faceless men of the factions” claims among the ALP successes that, “We ratified the Kyoto Protocol, (in 2007) legislated a Mandatory Renewable Energy Target now delivering 20 per cent clean energy, and legislated twice for a carbon price only to be defeated by the Liberal-Green coalition”. 

Rudd’s measures accelerated the trend to subsidised wind and solar, the upshot of which became clear in 2016. At that time, the increased market share of difficult-to-control intermittent generation finally forced the departure from the market of two very significant coal generators, the Northern in South Australia and Hazelwood in Victoria. The upshot was first, the collapse of the South Australian electricity supply system, demonstrated the vulnerability of a system that is dependent on renewables, and secondly the doubling of the wholesale costs of electricity.     ..... Read more     ..... pdf version

A Democracy if We Can Keep It

Quadrant Online, 18 June 2020

     In an AFR column, former Liberal leader Alexander Downer has reprised a conversation with the late Lord Carrington in which Britain’s one-time Home Secretary suggested democracy would struggle to survive. It was a view Downer rejected at the time but of which he is not now so sure.  I have visited this theme in the past – for example herehere and here — and in these times of madness, when popular movements demand the sacking of entire police forces and an incident in Minneapolis sees statues of Captain Cook vandalised in Australia, I return to the theme with a marked degree of pessimism.

The reverence for democracy arose only over the last a century or so. Prior to then, rule by consent – especially with regard to taxation – had been common, as affirmed in 1215 by Magna Carta. But that did not mean rule by the people.  The great Greek philosophers were acutely aware of the deficiencies of mob rule in Athens, and American revolutionaries of the eighteenth century were similarly concerned that the gentle tyranny of King George could be replaced with something much, much worse.  Their belief was in life, liberty and property.  John Adams wrote:

Property is surely a right of mankind as really as liberty … The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.

Like it or not, Australia needs Donald Trump

The Spectator, 18 June 2020

     It is difficult to imagine a more critical juncture in Australian history: 

  • We confront a world downturn, accompanied by a new kind of cold war between the United States and China,  

  • Our international protector, the US is going through a crisis of confidence, if not a populist revolution, that is engulfing the rule of law while within the Democratic Party, younger progressives and socialists are displacing moderates.  

  • Australia’s helicopter money, response to COVID-19 has further damaged an economy weakened by decades of punitive energy and environmental regulatory measures undermining its comparative advantage in manufacturing, agriculture and mining. At the same time, these productive sectors have been carrying an increasing burden of social services. All this is compounded by the military folly of selecting politically correct soldiers and hardware.  
     

President Trump right now is trailing by 13 points in the polls.  The constellation of forces creating this are the virulently hostile Democrat establishment, pushed further by the rising influence of its younger green left, supported by anti-capitalist organisations like Sunrise and Antifa.  They also include the Never Trumpers who preferred the corrupt Clintons and now acquiesce in a Democrat candidate under radical  ..... Read more     ..... pdf version

Coronavirus: We can’t spend our way to wealth

The Australian, 11 June 2020

     In addressing the effects of the pandemic lockdown, the Morris­on government has injected $84bn under the JobKeeper and JobSeeker programs and another $688m for home renovations. The Reserve Bank of Australia has, in addition, engineered cheap loans of at least $90bn, and possibly much more.

Though sometimes referring to these measures as a stimulus, the government would deny it is going down the same path as Kevin Rudd, who spent $200bn attempting, ineffectually, to combat­ the global financial crisis.

A justification for this generous support is that shutdown polic­ies causing workers to be evicted from their jobs were taken in the national interest. But now we face an economic slump.

While the federal bureaucracy, and Treasury in particular, is full of credentialed economists, they are, for the most part, Keynesian — and therefore to counter a fall in output they prescribe demand stimuli through government spending, or tax cuts unmatched by spending cuts.

 

A minority would have been schooled in Friedman’s monetar­ism and would favour creating phantom savings, which depress ..... Read more          ..... pdf version

An Endlessly Renewable Source of Green Agitprop

Quadrant Online, 9 June 2020

     Stoking the fires of renewable energy’s purported advantages is the International Renewable Energy Agency (IRENA), an intergovernmental outfit whose chief purpose is to serve as a spigot for endless propaganda. Its official message is that fossil fuel is an archaic source of electricity now being battered by upstart competitors wind and solar. Bear in mind that world electricity supply pans out at 38 per cent for coal, 23 per cent gas and 26 per cent hydro/nuclear. Wind/solar supply 10 per cent.

IRENA tirelessly advocates for renewables, saying they “could form a key component of economic stimulus packages in the wake of the COVID-19 pandemic.” And in the purple prose so common with these green-spruiking agencies it claims, “Scaling up renewables can boost struggling economies. It can save money for consumers, pique the appetites of investors and create numerous high-quality new jobs.” Investment in renewables is amplified by other benefits, the story goes, as it is alleged to bring “health, sustainability and inclusive prosperity.” When it comes to renewables, no snake-oil salesman of old could hold a carbon-neutral candle to the likes of their modern green-lipped urgers.

IRENA would have us see renewable power installations as a key component of economic stimulus packages in the wake of the COVID-19 ..... Read more

Is a COVID based slump causing an energy policy re-think?

Catallaxy Files, 2 June 2020

     I have a piece in the Spectator this morning that builds upon the challenging commentaries by Senator Canavan and Craig Kelly calling for termination of subsidies to renewables and leaving the Paris Agreement under which Australia agreed to reduce its greenhouse gas emissions.  These measures, and those earlier under the Kyoto Accord, drive up energy costs and are destroying manufacturing which would be flourishing under the low energy costs we could have.

Some in the ALP, especially Joel Fitzgibbon representing a coal mining seat, also agree.

Australian electricity supply has, in the course of 20 years, moved from just about the cheapest in the world to one of the most expensive.  The present relative position is indicated by this graph. ..... Read more

If we want to rebuild manufacturing post coronavirus, we need to cut the cost of energy

The Spectator, 2 June 2020

     In one of the most challenging commentaries by a senior politician, former resources minister Matt Canavan, advocates leaving the Paris Agreement under which Australia has agreed to take actions that will reduce its greenhouse gas emissions.  He argues that Australia cannot afford to meet the treaty obligations which require replacing electricity generated from coal by expensive wind and solar. The subsidies this requires drive up the cost of energy and, with our high wage economy, prevents us having a vibrant manufacturing sector.  

Steep electricity price increases have undermined the nation's ..... Read more 

 ..... pdf version

Energy policy disaster continues; more intervention, less market

Catallaxy Files, 21 May 2020

     The Commonwealth keeps pressing policy issues that, on the one hand, dilute the spending egregiously allocated to renewables but then divert it to the failed carbon capture and storage (CSS) adventure and to the highly speculative unleashing of cheap energy from hydrogen.  It released a report of an activist-stacked and serviced committee chaired by Grant King that promoted this, as well as inching the nation closer to a cap-and-trade emission reduction program.  I wrote this piece for The Spectator yesterday.

In a new initiative, the government has again appointed another committee of people who are wedded to the green energy revolution to advise on new gee-wizz tech issues.  It will get the answers it expects to get and embark on another spending spree.

The government has also provided yet another “road map” compiled by the environment department for a grateful minister. This favours gas (which it says is cheaper than coal – an absurd statement regarding Australia) and the colossally expensive pumped storage option.  Like all previous reports it predicts the dawn of an era when renewables will be the cheapest form of energy but does say they need to be “firmed” by attendant supplies of controllable energy (hence gas and pumped storage).      ..... Read more

Why is the Morrison Government leaving the back door open to a carbon tax?

The Spectator, 20 May 2020

     As part of the ABC’s climate conspiracy agenda, Four Corners this week highlighted the “anger” at the government from the senior mandarins from its failure to deliver their goal of a carbon tax.  Their preferred approach was notwithstanding the tax rate would today have to be $US100 per tonne, a staggering $80 billion a year impost.

Also unmentioned was government action on the chimaera of climate change that presently costs over $4 billion a year in regulatory and direct funding. Included in this are regulatory requirements to support wind and large-scale solar (at a cost this year of $1.1 billion) and rooftop solar which this year is costing $1.7 billion.   

There are two components of the Commonwealth’s Climate Solutions Package of direct spending budget on emission reductions.  The first is a “$2 billion Climate Solutions Fund to support Australian farmers, businesses and communities to adopt new technologies that reduce ..... Read more          ..... pdf version

Renewable energy’s destruction of the electricity supply system. Has the penny dropped?

Catallaxy Files, 16 May 2020​

     Remarkably,  the Energy Minister joins the market manager in recognising the perverse effect roof-top renewable energy installations have on the electricity supply system.  Those installations impose costs far greater than the value they tap in “free” sunlight.  This is an outcome common with all wind/solar facilities.

The unmentioned fact is that there would be negligible take-up of these facilities without subsidies, which annually cost consumers and taxpayers over $4 billion and have caused a doubling of the electricity price. Though economy-saboteurs comprising greens, the ALP and the Turnbull Liberals have been the most complicit in requiring these, the policy approach has also been shared by people who claim to be conservative rationalists within the Coalition.  Astonishingly, the current government remains in favour of the on-going policy of subsidising roof-top solar installations and only one MP, Craig Kelly, is outspoken about the damage being done by the subsidies to renewables! ..... Read more

Gassed-Up and Light-Headed for Hydrogen

Quadrant Online, 11 May 2020

     There can be no doubting the reversion of businesses’ political advice to self-interested advocacy, in contrast to the glory days of 40 years ago.  At that time there was a strong push for deregulation, but industry leaders have since backslid into promoting their particular interests, seeking subsidies (especially for energy) and, not unrelatedly, virtue-selling to deflect NGO criticism and its associated damage to share prices. I have a piece in The Spectator that addresses this.

The advice from businesses and their representatives is now best politely ignored.  Firms willvirtue-signal but in acting on the advice they proffer – usually focussing on calls for some form of carbon tax – they face the test of the marketplace.  As I note, business success is dominated by iron laws of profit. Those leaders who implement measures that veer too close to the quicksands of virtue-signalling will be swallowed by it.

In today’s AFR, the superb Joe Aston illustrates this by focussing on Rio Tinto which, having sold its coal interests, has recently assumed the pole position among the climate alarmists. Rio is, with Shell and BHP, dominant among the international Energy Transitions Commission (ETC) which this month has     ..... Read more

Whatever happened to economic leadership from business?

The Spectator, 11 May 2020

     Having reached the pinnacles of their profession, business leaders have earned the right to speak with authority and have become accustomed to having that authority recognised. Their success stems from mastering the intricacies of their own firm: what to buy and sell, how to make savings, what product innovations to adopt and so on. But these skills rarely metamorphose into political leadership – indeed Donald Trump might be unique in this respect among world statesmen.     

A key reason for this is that business leaders have one overriding goal, maximising the wealth of their shareholders, whereas political success measures are diffuse.  

Not having time to master wider political issues, business leaders tend to relate national interests to those of their firm, immortalised as “What’s good for General Motors is good for America”, in the (misquoted) words of a former GM president.  Beyond this, business leaders    ..... Read more          ..... pdf version

The COVID lockdown and spendathon – was it worth it and what is to be done?

Catallaxy Files, 7 May 2020

     I have a piece in Quadrant where I estimate the person-years lives saved in Australia at 80,000. Each person-year is worth, on the government’s data, $219,000, hence saving is quantified at $17 billion.

The cost in outlays and lost production I estimate at $235 billion, fourteen fold the benefits in lives saved.

If however the initial health experts estimates of likely deaths without a lockdown had proved accurate the value of the lives saved would have been $526 billion, ostensibly far in excess of the costs incurred.

But we have to be wary of applying these high values per life saved in the context of very large numbers since costs per person become increasingly unaffordable as the numbers to be saved increase. More importantly, we have to have a better fix on health projections than one that, in this cas ..... Read more

The Lockdown Strategy Called to Account

Quadrant Online, 7 May 2020

     Writing in The Australian, Janet Albrechtsen has pointed out that the statistical value of life used in regulatory assessment is $4.9 million for someone expected to live another 40 years — $213,000 per year  Such measures are income-dependent; in the US the value was put at $9 million and a 2012 study for Turkey put it at five and a half years per capita income or $59,000. Such measurements offend self-righteous claims that “every life is priceless” but such notions, if followed, would impose costs that would bring about other and additional loss of lives.​

While Albrechtsen’s column is written in the context of coronavirus expenditure, she does not extend it to examining the worthiness of..... Read more

Revealed: the true cost of our stimulus spending

The Spectator, 7 May 2020

     Relative to GDP Australian government spending to address COVID-19 has been among the highest in the world.

The Morrison government seems pleased to have been a world leader in mortgaging the future to combat the crisis.  Its package, totalling $320 billion, comprises five elements: 

  • The PM’s initially announced health spending $2.4 billion 

  • JobKeeper and JobSeeker business support $168.78 billion 

  • Credit support$125 billion 

  • Access to superannuation$0.876 billion 

  • Income support$23.839 billion 

..... Read more                    ..... pdf version

The coronavirus can’t stop the windpower blowhards, let alone economic reality
The Spectator, 30 April 2020

     For Australian energy, 2020 started precariously.  The bushfires showed the vulnerability of the nation to its subsidy-induced reliance on renewable energy.    

Average prices in January reached near-record levels.  In addition, the market manager was forced to intervene spending over four times as much as normal — $310 million — buying services and compensating suppliers in order to stabilise the system.   

In February, low demand, an influx of renewable energy, and high supplies of hydro brought about a halving of the previous month’s prices.  These conditions continued in March when they were reinforced by a forced cessation of demand and ample gas supplies caused by the COVID-19 crisis.  

And in April prices fell to $35 per MWh.  Such levels   ..... Read more          ..... pdf file

A COVID-19 economic recovery program

Catallaxy Files, 23 April 2020

     While the green left will use the crisis to march us to lower living standards and greater losses of liberty, the Commonwealth Government is making the right noises about reducing the tax and regulatory measures that have held us back.  But do they know where to start?

The tax reforms are easy: pare back company taxes and other imposts on production.

I offered some advice in regulatory refom in an article published in the Spectator.  These regulatory sins comprise areas where real economic dividends can be made, collectively greater than the losses by the Commonwealth’s generosity with our savings and future incomes.  These are

  • Strip Back the Fair Work Commission’s functions to become similar to those in other jurisdictions: oversighting issues of unfair dismissal and human rights abuses etc.

  • Align land regulations for new housing development with those in Germany and US States like Texas, the Carolinas and Ohio, thereby reducing the cost of a new home by $200,000.

  • Curtail the creation of new national parks and address other land use measures that prevent farming, mining and logging in vast tracts of  ...... Read more

Scott, Josh and Mathias: here’s how you get us out of this mess

The Spectator, 22 April 2020

     The Morrison government has flagged tax cuts and aggressive deregulation as part of a pro-business road to economic recovery. A focus on stimulating rapid growth on the other side of the coronavirus pandemic is expected to guide October’s federal budget. — AAP report, April 20.

Future government action must focus strongly upon savings as a result of the 15 per cent of GDP ($340 billion) that has been spent on combating coronavirus.   

Fifty years ago, the Commonwealth budget accounted for 18.3% of GDP. In the years since then, even before the current spending spree, the share had grown to 24.6%. Right now, with an extra $340 billion budgeted, the share of GDP will have become 35 %.   

The nation’s phenomenal intrinsic wealth allowed Australia to prosper in spite of the growing claim on income by a largely     .....Read more     .....pdf file

Green Snouts Sniff a COVID Windfall

Quandrant Online, 16 April 2020

     The Pope, deprived of the counsel of Cardinal Pell, the Church’s most astute voice, foolishly called coronavirus “nature’s response” for failures to act on climate change. It was, therefore, hardly surprising that coronavirus would be recruited to push for additional renewable energy subsidies to reinforce those that have already created today’s high cost, low quality electricity.

Coal Wire, an anti-fossil fuel publication, was quick to swoop on a Harvard study that said the pollutant PM2.5 exacerbated coronavirus and that coal power stations were an important source of the pollutant.  Actually less than 5 per cent of PM2.5 particulate emissions come from energy production.

Also fast out of the blocks was the anti-fossil fuel head of the Paris based International Energy  .....Read more

Does the Morrison government have the skills to lead us out of the recession it has created?

The Spectator, 16 April 2020

     The $320 billion in costs the Australian government has incurred to sustain and stimulate the economy in light of the COVID-19 crisis is money spent for consumption without it attracting any corresponding production. It is a permanent loss that can only be retrieved by increased production. Two areas where reform could compensate for this loss of revenue are the cessation of wasteful spending and regulations in water and energy, where total savings of $50 billion are available.

But in addition to these direct savings, removal of these regulatory and taxpayer costs would unleash even larger productivity benefits in the two sectors.

For water, in Australia’s most important irrigation area, the Murray Darling Basin, the government’s actions in buying up 20 per cent of irrigators’ water for spurious environmental purposes has brought a tenfold increase in the water price, and hence its cost to farmers. At least $7 billion could be saved by the government reselling the water it holds to irrigators and recalling the funds yet to be spent.

In addition, the economy would make other gains. Water is an essential input to agriculture and the increased output restoring ..... read more      .....pdf version

ScoMo’s gone as crazy as Kev, but we can still save the economy

The Spectator, 2 April 2020

     When the Prime Minister and Treasurer appointed Stephen Kennedy as the Treasury Secretary, they opted for a bureaucrat who had been the architect of Turnbull’s potentially disastrous carbon tax. They would also have known him to have been a senior adviser on Kevin Rudd’s exorbitant spendathon following the 2008 global financial crisis.

 

Unsurprisingly, the Secretary of the Treasury recommended that the government implement a “Full Rudd” coronavirus program, suggesting the British approach was insufficiently stimulatory.  Ministers need little encouragement to embark on spending sprees but in times past Treasury used to be a brake on their ambitions. 

 

Australia’s spending now totals $320 billion. At 14 per cent of GDP this is a magnitude similar to that of the UK program, though larger than that of the US at least fivefold that of Japan, Canada, Korea, Norway or New Zealand. Commonwealth spending programs go well beyond maintaining the nation’s businesses and sustaining those who are unemployed and extends into Keynesian economic stimulus territory. The stimulus effect will be ..... Read more     ..... pdf version

Emergency Measures in Need of an Exit Strategy

Quadrant, 25 March 2020

     It started with Mirko Bagaric in The Australian — Release super to boost economy— who, while justifiably railing against the superannuation funds’ fees, argued that allowing people to access 10 per cent of their super could inject up to $300 million into the economy.  Mirko has separately suggested that the actual amount might be $150 billion.

Treasurer Josh Frydenberg has accepted a watered-down version of this, which he thinks might inject $27 billion into the economy by allowing people to access $20,000 of their superannuation savings, interestingly, over two years, an indication that the malaise won’t be over soon. This is part of the fiscal package which is now at $189 billion. That’s 9.7 per cent of today’s GDP but considerably more down the road, with GDP contracting by maybe 20 per cent.

Much of the expenditure, that which seeks to cushion the costs to those worst affected, is sensible. But, even so, there has to be be an exit strategy.  We have doubled the dole, for example, but when do we return it to previous levels?

Some of the money is conjured up by the Reserve Bank, which is buying shares and bonds to depress interest rates.  This “quantitative easing” ..... Read more

Revealed: the Deep Green State

The Spectator, 24 March 2020

     A story in the Guardian demonstrates the impotence of government against the Deep State machinery that it nominally controls.

 

This involved an attempt, in line with government policy, to divert money from the Emissions Reduction Fund to less harmful activities than efficiency-undermining promotion of green energy that it normally funds. The case under review was an attempt by Delta Energy to get some $14 million support for refurbishing its Vales Point plant, an outcome that would extend the plant’s life (and incidentally reduce its greenhouse gas emissions). The Guardian notes that “energy baron” Trevor St Baker is a part owner of the plant.

 

The Emissions Reduction Fund was set up by the Abbott Government following its election in 2013. Its Environment Minister, Greg Hunt, was an avid promoter of “direct action” which involves buying out firms’ greenhouse gas emissions rather than reducing emissions by taxing coal. In fact, buying out emissions simply funds canny firms who can offer a good story, while providing negligible effects on total emissions, since the cashiered production ..... Read more     pdf version

Danandrewstan: two steps forwards, one step back as energy security matters more than ever

The Spectator, 18 March 2020

     The latest energy policy from the Victorian government is to place a constitutional ban on fracking and coal seam gas exploration but once again permit the search for conventional gas in the state.   

The proposed policy was developed in consultation with an industry/activist Independent Stakeholder Advisory Panel. The panel was chaired by the Lead Scientist, Amanda Caples, a pharmacologist, who was previously responsible for developing the state’s “strategic industry growth plans”. In announcing the policy, the Premier said it was “a science-based approach”. Presumably, he had in mind political science. 

The exploration bans were first implemented in 2012 by the Coalition government under the then minister for energy — and now opposition leader — Michael O’Brien. For the Coalition back in 2012 seeking to blunt opposition from green radicals, a ban on new gas supplies seemed like good cynical policy. 

 

There were ample supplies of Bass Strait gas and some farmers opposed gas exploration, with others wanting more  ..... Read more          pdf version

How to Make Things a Whole Lot Worse

Quadrant Online, 17 March 2020

     Deaths from coronavirus were up yesterday (March 16) on the previous day. Although death rates lower than one per cent are being quoted, the macro data (deaths/deaths-plus-recoveries) is 8 per cent, and 15 per cent in Australia (see the chart below).  Hopefully that will improve. Otherwise, if Angela Merkel is correct in estimating that 60 per cent of humankind will eventually contract the disease, we can expect over 300 million deaths.  Tomas Pueyo’s brilliant analysis suggests a death rate levelling off at 3-5 per cent for countries or areas that are unprepared, but one-tenth of this for those quickly identifying and isolating those affected, and intensely treating the 20 per cent who develop the most serious symptoms.  Among the latter are South Korea and China outside of Wuhan, the coronavirus’ origin and epicentre.

Despite an inevitably horrendous death toll the world will recover, leaving the virus as just another background killer, like its garden-variety cousin influenza.

For the present, the world is now in a very deep economic depression.  There is no shortage of consumer demand but the basis of that demand, income from the supply of goods and services, has been or soon will be sharply curtailed. ..... Read more

Coronavirus: Pump-priming is economic folly

The Australian, 17 March 2020

     In normal times we have a healthy disdain for the insights and capabilities of our political leaders. In Australia, the commentariat has just emerged from agendas that blamed them for not acting fast enough to combat the bushfire crisis — even having contributed to it — and from looting taxpayer funds to curry favour with voters in the sports rorts saga. In the US, half the population thinks their President is so corrupt that he should be placed on trial.

Yet suddenly, with the coronavirus crisis, politicians and their advisers are thought to have powers and the wisdom to turn back tides and lead us out of the wilderness.

The US is focused on stopping the spread of the disease, finding a cure and easing the discomfort of those afflicted. Britain, like Australia, has added measures to assist business with investment support. .....Read more             pdf version

The Coronavirus stimulus package: not just another trip down the Swanee?

The Spectator, 12 March 2020

​     We have mixed messages on coronavirus: Angela Merkel has said 60-70 per cent of Germans will contract the disease, while the latest data from China and South Korea shows new cases having peaked and, in the case of China, recoveries closing in on new cases.

 

Aside from spending on health precautions and seeking to staunch the spread, what do governments do? 

 

The Trump Administration is talking about ensuring those thrown out of work are looked after financially – the equivalent of community action in medieval plagues when stricken villages were isolated but fed by those nearby.  In a rare flash of economic lucidity, Senate Democratic leader Chuck Schumer said the government should focus on guaranteeing paid sick leave for infected workers and extending unemployment insurance for people put out of work.  But Trump is also urging the Federal Reserve to embark on a financial stimulus. 

 

Australian politicians look likely to avoid panicky measures involving economic stimulus. Hopefully this means they have learned from past ..... Read more

The last thing we need now is more costly climate virtue signalling

The Spectator 10 March 2020

     Desperate to attend the September 2020 Glasgow climate change summit with a positive program, the Coalition government continues to promote, at the expense of national living standards, elitist-appealing measures that force lower greenhouse gas emissions. 

 

The new elixir is to boost investment in CO2-free hydrogen technologies which, if not mystical, hardly require funding from Australian taxpayers.  New support measures add to the $1.5 billion annual funding of a bewildering acronymic gaggle of institutions (including CEFC, ARENA, CER and CSIRO) and at least $2 billion in subsidies to wind and solar.   

The Glasgow meeting is the third phase of climate change programs.   

 

The first phase was established by the Kyoto Agreement in 1997, in which rich nations pledged to stabilise their emissions.  Although only ..... Read more

Toilet paper shortages – why is Australia not a net exporter?

Catallaxy Files, 7 March 2020

     It was a relief to learn that Australia is 80 per cent self-sufficient in toilet paper and there is, therefore, no need for panic buying.

But hang on a minute.  First, that 80 per cent is for a market that has suddenly grown – perhaps doubled.  So, there may indeed be a shortage.

What should be more worrisome is that Australia is only 80 per cent self-sufficient in an industry sector which we should be a massive net exporter.  We actually import 50 per cent more wood and paper products than we export.

In days of yore, governments were always looking for value-added industries that could leverage off our natural advantages.  Because we had cheap energy and bauxite, we were world leaders in aluminium production and this led to fantasies that we’d become a key part of the global supply chains for industries like automobiles (engines) and – I kid you not – for windmills (blades).  Governments sank considerable funding into these ventures.

They were doomed by the labour market arrangements that, with the connivance of governments and the legal system, have priced Australia .....Read more

Revealed: the sickly state of the National Electricity Market

The Spectator, 26 February 2020

    This year’s annual report from the regulatory collective that is the Energy Security Board awards itself gongs for overseeing a (temporary) spot price decline and assembling an armoury if new tools to prevent catastrophe from a system poisoned by renewable energy subsidies. Unfortunately, it declines to illuminate the additional costs this has entailed, preferring instead to give cover to the politics behind the demise of the industry’s efficiency.   

The report is a consensus by the peak energy body itself and its three sister regulators, the Australian Energy Market Commission, which has custody over the market rules; the Australian Energy Regulator responsible for setting network prices; and the Australian Energy Market Operator (AEMO), responsible for scheduling supplies and ensuring supply/demand balance. It addresses the “challenge” to:  

  • supply electricity when solar and wind are not available; 

  • create new markets for services like frequency, voltage control, inertia, and system strength; and .... Read more            pdf version

George Calombaris gets done like a dinner

The Australian, 14 February 2020

     George Calombaris is a victim of the Australian regulatory state. The failure of his restaurant businesses has been greeted by a mixture of schadenfreude that a tall poppy has been exposed for having cheated his employees, and tut-tutting for not being sufficiently alive to the regimen under which his industry’s labour hire regulations operate.

In between, there have been pointed remarks about how other miscreants — for example, the ABC — have not been subject to the indignation that a commercial operator has faced for not having paid his staff in accordance with the labyrinthine government-specified rates.

There are three points that better describe what has taken place.

First, other than in the context of the highly regulated labour arrangements that cover the Australian hospitality industry, there was no fraud involved. The employees agreed on a package of wages, hours and other responsibilities; they were for the most part seasoned workers ..... Read more     .....pdf version

One Word: ‘Klobuchar’

Quadrant, 14 February 2020

     When the US Presidential polls had the triumvirate of Biden, Saunders and Warren (above) vying for the November 2020 date with destiny, President Trump was sitting pretty. As the poll leader, Biden was a known quantity.  He was showing his age in mangling words, he had a legacy as an Obama failure, was an insider in an era when this is poison, and had a son who had benefitted immensely from his patronage and protection in getting paid handsomely for a job in Ukraine for which, aside from his father’s political clout, he was utterly unqualified. He would have been crushed by Trump’s relentless pressure as the campaign progressed.

Elizabeth Warren adoption of far-left socialist ideas combined with a fraudulent invention of indigeneity would have likewise been a victim of Trump’s acidic bluntness.  Trawling the depths of wokeness (“reparations for gay couples”) she would have ended the campaign humiliated.

Bernie Sanders has never pretended to be anything other than a Communist sympathiser.  He encapsulates the anti-Americanism that is ..... Read more

How the rise of environmental politics is threatening traditional allegiances – and world trade

The Spectator, 10 February 2020

     Some 172 years ago Karl Marx opened the modern era of politics in proclaiming that a spectre was haunting Europe. The spectre he referred to was in the title of his “Communist Manifesto”. 

Marx was talking in the context of the series of political disturbances in major European capital cities in 1848.  He interpreted these as bookending the ancien regime, the evolution from which had been brutally signalled in 1789 with the French Revolution and perhaps even back in 1649 when Charles I paid the price for his “high crimes and misdemeanours”. Marx saw the events of 1848 as presaging revolution and a new era of peace and prosperity where private property would be abolished and income would be earned “by each according to his abilities” and apportioned “to each according to his needs”.     

The shift to the modern state had been and continued to be evolutionary and founded on individual private proper..... Read more          pdf version

Democracy becoming dominated by the politics of envy?

Catallaxy Files, 24 January 2020

     Among the attendees of the recent Mont Pelerin Society were Steve K, Sinclair and me.  A great many issues were discussed in the debate on liberty, efficiency, their friends and enemies.

I have a piece in today’s The Australian, which summarised my view of the more important take-aways.   They include

No attendees doubted market capitalism’s higher efficiency and ability to deliver growth, including for the benefit of poorer members of society. But recent developments have undermined confidence that the model will continue to prevail.

These include the resumption of growth in the size of government and a weakening of property rights by, for example, the seizure of land usages rights. In Australia, government actions to reduce greenhouse gas emissions through planning laws and measures that restrain commercial activity include the increase in regulatory intrusions and permissions, like those that resulted in the Adani coalmine taking nine years to be ..... Read more

Wealth will weaken if we ever yield to populism

The Australian, 24 January 2020

     This week’s Davos meeting of virtue-signallers and plutocrats was preceded last week by a meeting at Stanford University of the Mont Pelerin Society. Long dominated by Milton Friedman, among the society’s luminaries today are two former US secretaries of state, George Shultz and Condoleezza Rice.

Founded in the aftermath of World War II, the Mont Pelerin Society set out arguments that free markets based on property rights and the rule of law were the keys to delivering prosperity and freedom. Its meetings provided an intellectual bulwark to the then prevailing attractions of communism or at least to socialism.

As the 20th century progressed, the sclerotic state of the socialist world was increasingly evident. By contrast, adopting the Mont Pelerin principles saw a revived Germany and Japan, followed in the 1970s by the creation of prosperity in Hong Kong, Taiwan, Singapore and Korea.  .....Read more

Renewables rent-seekers aren’t interested in bushfire prevention – or cheap efficient energy

Spectator Australia, 20 January 2020

     No amount of mouth-frothing by Piers Morgan or artful deception bythe legions of renewable energy warriors published by the Australian Financial Review and the Guardian will change the facts about this summer.  The severe fire season is due to dry weather (not itself conceivably a result of climate change – rainfall trends have been flat for the past century) and the accumulation of combustible material on the forests’ floors. The build-up of combustible material is a result of the criminal neglect of the authorities to undertake or, in the case of private land, to prevent cool burn-offs.  Less than one-third of the recommended hectares have been burned-off.     

Subsidy seekers in the renewable sector and among its media clients are hinting, sometimes even claiming, that the fires are caused by Australian delinquency in inadequately forcing the replacement of coal by wind and solar.  Such policies could never have any effect on the climate.  Moreover, Australia has harmed itself far more than any other nation in substituting renewables for low cost, reliable coal.   This is demonstrated by these two ...... Read more        ......pdf file

Time to Bight the bullet over gas scare campaign

The Australian, 8 January 2020

     The NSW government is considering approving the establishment of a liquefied natural gas import facility moored off Port Kembla. This same government has erected formidable barriers to domestic gas production.

Gas imports to Australia were last considered 20 years ago. The source was to be Papua New Guinean gas, to be sent here via sub-sea pipeline, then distributed — again by pipeline — to Queensland and NSW. The then federal government liked the idea as a way of providing aid to PNG.

At the time, Santos and Origin Energy were in the early stages of developing coal-seam gasfields in southern Queensland but were struggling to secure domestic markets for their gas.

Gas prices were less than $3 a gigajoule, a similar price to that which prevailed then and now in the US but less than half today’s Australian price.

However, gas drilling methods were about to be revolutionised. In a world first, the small, privately owned company CH4 Gas drilled three ..... Read more

Soleimani’s assassination and its aftermath

Catallaxy Files, 8 January 2020

     A mass murderer calling himself a general is killed on Donald Trump’s orders either and/or because he escalated terror by killing yet another American or to take him out before he escalated even further.

George W. Bush did not target him during the height of the Iraq War, when Iranian-supplied roadside bombs and Iran-backed militias were killing hundreds of American troops. By 2011, that toll had reached more than 600 and Barack Obama was the president; he too declined to hit the general. Indeed in his $150 billion Danegeld to Iran he financed that nation’s Middle East reign of terror. But Trump, who came into office vowing to pull the United States out from Middle Eastern wars, decided to cross a line two war-president predecessors feared breaching.

The reaction;

  • Joe Biden, said Trump had “tossed a stick of dynamite into a tinderbox”.

  • Massachusetts Sen. Elizabeth Warren said the move “‘increased the likelihood of more deaths and new Middle East conflict.”..... Read more

Madrid: the climate catastrophe juggernaut trundles on

Spectator Australia, 20 December 2019

     As well as nation-states, an astonishing well-funded 2,330 NGOs, many with multiple delegates, fronted up to this month’s Madrid climate conference.  The macabre festival was re-located from Santiago because the Chilean populace had risen in revolt about the higher prices foisted upon them by its government following the green gods just as faithfully as the virtue signalling textbook says they must.   

The objective of the successive biennial UN climate change Conference of Parties is to replace the messy cacophony of market capitalism by one that operates under the guidance of the intellectual aristocracy. The all-pervasive carbon dioxide and other gases that have been increased with the march of higher global living standards offer the catalyst for this power transfer.  For, even though the evidence continues to elude us that higher emissions of these harmless gases is bringing significant, let alone catastrophic, global temperature increases/climate change, those favouring the transfer of power include alarmists, lobbyist and bien pensants guilt-ridden at the success of the West.  They have marched through the institutions and assembled signatures of people, real and imagined, in support of zero emissions.  They have persuaded mainstream media and politics that ..... Read more         ..... pdf 

Electricity supply continues is dismal march

Catallaxy Files, 11 December 2019

     I have a piece in the Spectator today that draws together some recent developments in energy policy being developed in the half dozen or so agencies that control what is ostensibly, and was in earlier days, a market with supply largely from private enterprise.  I also did a session on the issue with Chris Kenny.

The destruction of the once highly efficient electricity supply industry by government and bureaucratic oversight is, of course, well known.  This, the most vital Australian industry, continues to hurtle towards Armageddon, courtesy of government subsidies to the intrinsically uncompetitive renewables.   And the besieged Energy and Environment Minister, Angus Taylor, is in Paris defending the semi EU-type policy Australia has adopted while trying to avoid going the full Greta.

This week we had three publications from agencies that are piloting us towards the economic oblivion politicians have determined upon.

The Australian Energy Market Commission (AEMC) has released its price forecast for the next few years.  Halleluiah!  Prices to households are falling 10 per cent the year after next after ramping up 30 per cent (250 per cent for wholesale prices) since the 2017 forced closure of Hazelwood.  The ..... Read more

Cheaper power coming? Blink and you’ll miss it if our Paris goals remain

The Spectator Australia, 11 December 2019

     There is a panoply of agencies regulating energy at the Commonwealth level and not all of these seem to be rowing in the same direction.  The main agencies are  

  • The Energy and Environment Department with 490 staff in energy and greenhouse — plus another 454 in its dependent agencies: Clean Energy Finance Corporation, the Clean Energy Regulator and the Climate Change Authority;

  • The Australian Energy Regulator (AER) with 283 staff;

  • The Australian Energy Market Commission (AEMC) with 95 staff;

  • The Energy Security Board (ESB) with perhaps 10 staff; and

  • The Australian Energy Market Operator (AEMO) with 670 staff. 
     

Although AEMO is mainly concerned with operational issues, its CEO and a good many of its resources are heavily involved in ..... Read more     .....pdf version

Good Sense Sold Up the River

Quadrant Online, 6 December 2019

     Earlier this week some 3,000 irrigators and their supporters rallied in Canberra against government policy on Murray-Darling irrigation and management.  With the  cacophony of dozens of semi-trailers’ blaring horns, it was certainly noisy. Ominously for the National Party, their representatives were treated with considerable hostility, particular anger being directed at water Minister David Littleproud. Enduring the jeers, the Nationals would have been especially dismayed at the warm welcome for Pauline Hanson and Malcolm Roberts.

The current drought has exacerbated a contrived water shortage that government policy has engineered in the Murray. Having set a cap on water extractions in 1999 — roughly a third of the average flow — the productive uses of this “working river” have been gradually reduced.  As a supplier of a vital agricultural input to a formerly barren area that grew to supply 40 per cent of the nation’s farm produce, the river has been de-rated.  At a cost of $13 billion, some 20 per cent of the flow has been diverted to “environmental” use. This has caused a five- to ten-fold increase in the price and forced thousands of far ..... Read more

Sacrificed on Victoria’s Green Altar

Quadrant Online, 27th November 2019

Victoria is the vanguard of states in major struggles over the control and use of public lands.  These comprise around 35 per cent of the state, the majority of which is in parks and reserves that aim to minimise human impact. Such areas have long been seen as under-managed and infested with exotic flora and fauna. They are increasingly recognised as perilous host to ferocious and destructive fires.

The rest of the public land is state forest, traditionally available for forestry, grazing, mining and a whole range of leisure activities such car rallies, hunting, horse riding, camping and dog walking, none of which are generally permitted in National Parks.

Two developments are changing the nature of Victoria’s public lands. The first is increasing restrictions on the activities allowed in the state forests. Over the past 30 years governments have progressively constrained the use of the forests for timber harvesting and grazing.  Grazing has been all but eliminated and only 6 per cent of Victoria’s public forests are available for timber production, the annual harvesting area having been reduced from 25,000 hectares 40 years ago to just 3,000 hectares today.  Last week, the Andrews government announced a 2030 phase-out of all timber-getting in the state forests.

The second change is the conversion of state forest to national park and other conservation reserve categories.  This not only imposes restrictions on use but is also an essential step to converting the land to Aboriginal title, which unlike Native title, grants beneficial-use and veto rights over the activities and intentions of others.  Even within the remaining state forest, the government is moving to enhance designated Aboriginal groups’ influence by granting them controls over exploration licences .....Read more

The flagging economy, its causes and remedies

Catallaxy Files, 22 November 2019

Keynesian policy lever pullers at the RBA and Treasury, as well as the Opposition, have been urging the government to inflate the economy. Some are calling for deficit spending, others are urging the authoities to force interest rates even lower than the current barely positive levels.  Even if ignorant of the impossibility of pump priming economies, it’s almost as if they have never seen the evidence of failures of such moves that are observable from current economic outcomes in Europe and Japan.

Australia’s economy is now stagnating – in per capita terms there is no growth.  The key to this is flagging levels of private investment, the key to increased real income levels. Private investment has fallen from 18 per cent of GDP to 11 per cent over the past 7 years.  In addition, its potency has been weakened.   Policies that have directed funds into counter-productive or low return investment, notably in electricity and the NBN, and other measures that have undermined long standing productive capital in irrigated farming by redirecting water to environmental goals.

At his address last night to the Business Council (sans a couple of otherwise occupied  bankers) the Prime Minister partly moved towards the stimulators’ position by announcing a bringing forward of $4 billion of infrastructure spending. With private non-housing investment running at $220 billion a year, even in current recession-like levels such a spending increase is unlikely to be material even if it were to be a positive stimulous.

The PM also said he was taking steps to reduce the paperburden entailed in elongated approval processes created by the relentless rise of regulation. 

..... Read more

The Regulatory Enemies of Promise

Quandrant Online, 22 November 2019

One disturbing factor regarding the Australian economy is its sluggish growth.  Per capita growth was negative in 2018/9 and has not had a sustained run above 2 per cent since the pre-2007 Howard/Costello years.

The key drivers of growth are capital investment (with its associated technological gains) and freedom from regulatory provisions that distort the direction of capital spending away from the most promising venues.  The slowdown in (non-dwelling, private) capital investment in Australia over recent years is clear and as a share of GDP is illustrated below.

The share of GDP comprising investment reached a recent peak of almost 18 per cent during 2012 and has steadily fallen to under 11 per cent in the June 2019 quarter.  This is the sort of level we saw post 1975, when recession and inflation brought economic recession and, in the early 1990s, presaging Paul Keating’s “recession we had to have” ..... Read more

The return of Ross Garnaut and climate nirvana?

The Spectator, 7 November 2019

This week, the Financial Review has featured a return of Ross Garnaut to the climate policy advisory role. Soothingly, he said that with the upcoming technological changes, Australia in a post-carbon world could become the locus of energy-intensive processing of minerals”. This, he said, was because of our superior “renewable energy endowment”. The renewables he refers to are wind and solar. They remain two to three times the cost of coal, gas or nuclear in electricity generation and will never be cheaper than them nor as reliable. Australia is not even particularly well-endowed in wind and solar, except in the more inhospitable and remote parts of the continent.

Exploring the perimeter of credulity, Garnaut also saw renewable energy as bringing a burgeoning hydrogen export industry for Japan and Korea. And he saw Australia as an exporter of its wind and solar as electricity via high voltage direct current transmission.

It was Garnaut’s eponymous 2008 report that armed the Rudd government’s agenda for overturning the conventional energy market.

The Garnaut report welcomed “Australia’s return to the international fold following the election of the Rudd Labor Government.” It paved the way for a massive expansion of the renewables subsidies and the Gillard carbon tax. It was largely written by the present Commonwealth Treasury Secretary, Stephen Kennedy, something that’s especially worrisome given the prominent role Treasurer Josh Frydenberg played in marketing Turnbull’s version of a carbon tax.

..... Read more

A Billion Reasons to Despair

Quadrant Online, 30 October 2019

The support that certain people offer for a policy is Quite often  a clear indication that it is hopelessly wrong.  So it is when Malcolm Turnbull registered support for the government’s intention to fling an extra billion dollars at the Clean Energy Finance Corporation to “future proof the electricity grid”.

Turnbull’s favoured green energy policies involve subsidies to renewables, both directly and by hidden taxes on consumers and in the form of the Renewable Energy Target.  The policies were initiated by Howard, in a pale form, and accelerated by Rudd/Gillard. Abbott tried with only modest success to roll them back.  Then Turnbull as prime minister, with then-energy minister Josh Frydenberg, attempted to intensify the policies by introducing a carbon tax, deceptively called the National Energy Guarantee. Turnbull’s attachment to this duplicity cost him his prime ministership, just as it cost him his party’s leadership back in 2009.

Australia’s green energy subsidies have transformed the nation from having the cheapest electricity among major global entities to one of the dearest.  For households, the average Australian price at 25 (US) cents per kwh, is three times that in India and China, which do not have our cheap coal, and almost twice that of the US (the average of which is boosted by green fruitloop West Coast policies).  We do, however, remain better placed than Germany, where the “Energiewende transition” has brought prices to 36 cents per kwh.

Australia’s deindustrialisation is certain under the policies being adopted by both the Coalition and the ALP; the next major manufacturing plant departures will be at least two of the three east coast aluminium smelters.  ..... Read more

Australia’s Wealth of Complacency

Quadrant Online, 18 October 2019

NickCater in The Australian rightly lampoons a Harvard study that, by polacing its focus on manufacturing, manages to rank Australia ninety-third in the world economic complexity league table. By contrast, another study, Credit Suisse’s Global Wealth Report, puts Australians second in the world in terms of average wealth and the wealthiest for median wealth. These assessments inevitably involve some exercising of problematical judgements by their authors, but that aside, wealth is not as easy to measure as it might appear.

The Credit Suisse study would be heavily coloured by the fact that most of Australians’ household wealth is locked up in the homes they own.  And the value of those houses is inflated threefold more than that of comparable houses in the US or France, where planning regulations are more liberal. Take away the illusory wealth represented by regulatory-driven land scarcity (in the nation with the world’s highest per-capita land availability!) and Australian’s household wealth falls to average OECD levels .....Read more

Governments created this Murray-Darling crisis

The Australian, 8 October 2019

The Murray-Darling is the only major region where irrigation plays a prominent role. Water availability there has the urgent attention of politicians because locals, unhappy at measures that have deprived farmers of water, have helped displace Nationals representatives in favour of those from the Shooters, Fishers and Farmers Party.


Drought Minister David Littleproud is to meet farming representatives on Tuesday to discuss a fivefold increase in prices of Murray-Darling water. The minister attributes this to speculator hoarding together with another villain, climate change, which he says “is leading to hotter days, meaning droughts”.


Neither of these factors are the cause of the farmers’ discontent.


Although the Murray-Darling, like much of Australia, is in serious drought, this is not unusual. Other areas are seeing record rainfall; for Australia as a whole, rainfall has increased during the past century.


As for the minister’s attack on speculators, he targets an ever-convenient and populist scapegoat.
Independent ownership of water was facilitated when the rivers’ water was formally made tradeable in 2014 (before which trades were informal and ostensibly water could be owned only by the landowner). ..... Read more

We should be afraid of rising fuel costs, not climate claims

The Spectator, 27 September 2019

With the children’s week-long climate crusade now approaching its end, the United Nations meeting on climate change, accompanied by the normal release of alarmist “findings”, is well underway in New York. The New York meeting has been weaponised by the millions of children incited to take time off from school. President Trump sat through the “we’ll be watching you” rant from the unhappy teenager Greta Thunberg. The UN Secretary-General is requiring countries like Australia, judged to be too heavily fossil fuel focussed, to listen rather than talk.

Bill Gates is struck by the volume and intensity of interest among the public, which he says is “quite a contrast versus five years ago, where it was hardly discussed at all.” Starting as a scientific backwater, climate change has come to dominate the scientific community and politics in general. Within the former “think tank”, the Tasman Institute, in the early 1990s my colleagues and I wrote a string of books and papers that examined the economics of the issue recognising then the crippling costs that would result from forcing a reduction of emissions. We were joined by scientists, including Arizona State’s Professor of Climatology, Robert Balling and later by Brian Tucker who, having retired as Chief of CSIRO’s Division of Atmospheric Physics, committed the ultimate apostasy of decrying the climate alarmism in which he had participated in the pursuit of grants. ..... Read more

Standby for next week’s UN doomfest for climate crazies

Spectator, 18 September 2019

The push is on ahead of the upcoming UN Climate Summit to be held next week in New York. Although the most senior world leaders, Donald Trump and Xi Jinping, will not attend, the UN claims that 100 heads of state will.

The official Climate Summit is proceeded by the Youth Summit to be attended by autistic rock star Greta Thunberg, yachted in from Europe at great expense to avoid burning fossil fuels in aeroplanes. Unlike the leader of the Medieval Children’s Crusade, who was not taken seriously by world leaders, then the Pope and king of France, Thunberg has met the pontiff and is feted by government and social media leaders.

The New York Youth Summit takes place alongside a weeklong global climate strike, ostensibly led by children, planned for the week Friday.

The on-going push for climate change action is centred on reductions in carbon dioxide emissions from fossil fuels, though there are other featured issues. One of these involves chastising right-wing Brazil, often with phoney photos, for converting Amazon forests to farmland (left-wing Peru, which makes the right climate concern noises, gets a free pass). In addition, there are the kooky issues involving conversions to vegetarianism.

The agenda for dramatic and urgent action on climate change – the so-called “climate emergency” – is totally divorced from the evidence.  .....Read more

..... pdf format

Irrigation water restraints about to become more harmful

Catallaxy Files, 10 September 2019

There is a considerable interest in water in the Murray Darling, an issue that I have written about over the two decades during which concerted attacks on irrigation took place.

Most of my articles and reports, including my latest piece in The Spectator, drew attention to the effect of taking water for environmental and other reasons from irrigators. Recent activity by farmers has given the matter some considerable profile and Alan Jones addressed it as did Peta Credlin.

The truth of the Murray Darling is that the highly irregular river flow became a working river during the twentieth century and the previously low productivity region was transformed into producing 40 per cent of the nation’s agricultural produce.

Then came claims by a group of environmental activists, the Wentworth Group including David Karoly, Tim Flannery, Anna Skarbek, who said that salt infusion caused by irrigation was crippling the region.  Naturally the ABC uncritically adopted and magnified this absurdity, which nobody now takes seriously.  An outcome was John Howard establishing federal intervention, taking some 450 gigalitres off irrigators, designed to placate the activists’ demands for 1,500 gigalitres. Irrigators’ water comprised 11,500 of the average flow of 34,000 gigalitres.

The bureaucratic infrastructure was in place to expand this. Then came the global warming scare, with the 2008 Garnuat report claiming that the area was certain to run out of rain and water generally so we’d better get used to it and stop all irrigation.  The Garnaut report was in fact written by a Treasury officer, David Kennedy, who Josh Frydenberg has recently appointed as Treasury Secretary.  ..... Read more

Regulatory attacks bringing a sad demise of the Australian economy

Catallaxy Files, 4 September 2019

The Australian economy has been flagging for many years now.  Over the past year we actually saw a decline in GDP per capita and per hour worked.

There are many reasons for this but all come back to government intervention – excess spending on unproductive welfare measures, over-taxation of business income and the general regulatory morass that has come to characterise economic management.

An outcome of this intervention and major cause of the economy’s malaise can be traced back to private investment, the prime driver of higher income levels.  In real terms investment has declined by 20 per cent over the past half dozen years.  As a share of Gross National Expenditure, it has fallen from over 16 per cent five years ago to under 12 per cent now.

..... Read more

Subsidies, bureaucrats, blackouts and bills: inside our electricity disaster

Spectator Australia, 26 August 2019

The Australian Energy Market Operator is one of the half dozen different government institutions responsible for planning and managing the electricity industry. Like its sister agencies, AEMO accepts no responsibility for the transformation of an industry that over the past five years has gone from supplying the world’s cheapest, most reliable power to one of the dearest and least reliable.

There is daily evidence of the damage from climate change inspired, renewable energy-induced high electricity prices. The latest confirmation comes from Bluescope, which is opting for a $1 billion investment in the US, rather than Australia. The cause of this disaster has been the regulations subsidising high cost intermittent renewable energy.

In planning for the future AEMO claims to have abandoned a “price-based mechanism to achieve decarbonsation”. But this is pure dissimulation. AEMO is now promoting a volume-based carbon budget – instead of setting the tax and allowing this to bring about its carbon target, AEMO is setting the target directly, which will see a de facto tax emerge.

Another regulatory agency, the Energy Security Board in its 2025 plan, has the same approach, which it calls the Renewable Integration Study.

Yet another government agency, Infrastructure Australia, earlier this month published its own catechism for the future. This was also founded on policies to combat and adapt to climate change. IA costs taxpayers $12 million a year to provide a voluminous, gushing fantasy report every few years that tells us we need to decarbonise. And when it states “Policy uncertainty and poor coordination has affected investment in the energy sector” this is not an apology for regulatory ..... Read more        pdf file

Another rope-seller to the hangman

Catallaxy Files, 13 August 2019

An article in the Fairfax papers today asks how we proceed to make sure that regions don’t suffer too much as a result of the inevitable triumph of renewables and the consequent demise of coal.  The article represents the views of the Global Compact Network Australia (GCNA), which is funded a hundred or so firms including the usual virtue signallers: BHP, Rio, Qantas, AGL, IKEA, Shell and so on as well as charity agitators like World Vision and Care.

For Australia the article sees closures in the coal areas as inevitable as a result of technology and low carbon policies’ “disruption” (see how the social engineers hijack the contemporary version of Schumpeterian language to describe a process that has nothing to do with entrepreneurial developments).

GCNA’s answer is to follow the German blueprint and not the American one. The latter in the Appalachians, we are told, subsidised coal but its inevitable closure left an economic wilderness as its legacy.  Germany in the Ruhr

ramped up its community and social infrastructure efforts. It built modern infrastructure, tertiary institutes, cultural and leisure industries. It played to the region’s logistical strengths, building up packaging and transport industries’ and, of course, ‘developed environmental jobs and eco-tourism’.

The article claims the $266 million package given for the Hazelwood closure is not nearly enough and wants to see coordination and far more spending.

Anyone following trade policy over the past 30 years will be aware, unlike the article’s author, of the colossal subsidies that Germany gave to shore up its increasingly uncompetitive coal mines. And the history of government promotion of particular areas is decidedly mixed – especially in Australia where the millions of dollars pumped into the Multifunctionpolis all got buried in a swamp near Adelaide. ..... Read more

The hazards of synthetic valuations of environmental services

Catallaxy Files, 7 August 2019

I have a Spectator article ($) addressing new bans on rural, mining and recreational activities proposed in 77,000 hectares of the Victorian Goldfields region north of Melbourne.  The agenda involves converting the targeted area, which has no remarkable features, from State Forest to National Park.

This would prevent activities include grazing, logging, horse riding, hunting, 4-wheel driving, prospecting and mining. The more intrusive activities – logging and grazing – have already been progressively reduced as forest management has been refocussed onto environmental conservation rather than production.

The review is being undertaken by the Victorian Environmental Assessment Council (VEAC), an agency stacked with environmental activists. VEAC has courted the local aboriginal representatives, who are understandably solidly behind a change that grants them advisory rights and may vest them with paid duties lead to some form of native title.

VEAC also has to prove the change is worthwhile in benefits to the community as a whole.

Some 18 per cent of Victoria is National Park (plus about 13 per cent State Forest).  As environmental services are public goods, that cannot easily be charged for, policy changes need to be informed about what the public would pay for redefining land from State Forest and increasing National Park land – in this case by two per cent.

To do this VEAC hire some reliable economists, well versed in the black art of “contingent valuation” that asks people what they would be prepared to pay for some environmental goods; the consultants are also practiced in the magic of estimating what recreational and productive value might be lost from the reclassification. ..... Read more

Nobbling the new gold rush

The Spectator, 7 August 2019

The rising price of gold is stimulating a boom in new activity. However, Victoria is one state government standing firm against this and other productive developments.

 

Victoria has a little over four million hectares, 18 per cent of the state, in areas classified as National Parks. Already, only about a quarter of this is adequately managed for feral plant and animal invasions. Public ownership also includes about 3 million hectares as state forest. A great deal of this is in the aptly named Goldfields, in the state’s Central West.

 

In state forest, unlike National Park, permitted activities include grazing, logging, horse riding, hunting, 4-wheel driving, prospecting and mining. The more intrusive activities – logging and grazing – have been progressively reduced as their management has been refocussed on environmental conservation rather than production.

 

The Victorian government has outsourced reviews of public land use to the Victorian Environmental Assessment Council (VEAC) to which it has appointed people with strong conservation convictions. VEAC is progressively conducting examinations with a view to reducing the extent of permitted activities that they consider intrude upon conservation. The latest targeted area is the 400,000 hectares comprising the Central West.

VEAC’s modus operendi is to have the government set it terms of reference for a report to address all the values of the area: natural, cultural, social and economic, and call for submissions from interested parties on how usages should be modified. An important step in this is to identify some “traditional owners”, vest them with authority to offer advice and duchess them around the area, inviting them to rediscover their historic attachment to the land.

..... Read more

Carbon reduction policies just shovelling money into a black hole

The Australian, 23 July 2019

Australian taxpayers are funding pointless and costly efforts to change the climate

The global warming scare has fathered many government policies that have penalised taxpayers and consumers. The energy and climate space is dominated by regulatory-oriented entrepreneurs seeking government funding or measures to distort markets in their favour. The Copenhagen Consensus Centre’s Bjorn Lomborg puts the global cost at $230 billion a year.

 

For Australia, Energy and Emissions Reduction Minister Angus Taylor is trying to bring an erosion of these costs through “masterful inactivity” — letting the programs expire. But it will take at least a decade to eliminate the $5bn a year impost paid by Australians through the subsidies and regulatory-induced costs that are undermining low-cost energy supply.

 

Meanwhile, extra spending is being proposed, the latest being an additional subsidy for poles and wires to allow the already subsidised rooftop solar panels to work more effectively. New fads keep emerging — the latest extracting hydrogen from fossil fuels which, in a familiar refrain, will be a future bonanza if only governments come to the party with funding.

 

One longstanding solution that refuses to die is carbon capture and storage. It involves stripping out the carbon dioxide from coal (and gas) generation and burying it where, it is hoped, it will stay.

 

In Australia, finance for this was a part of the suite of measures introduced by Kevin Rudd as prime minister. That was in 2009 when he was planning to take the world by storm as the lead player in the extravaganza of that year’s Copenhagen climate change conference. He created six quangos to foster CCS with the Global Carbon Capture and Storage Institute, funded by an initial grant of .....Read more

When Even Bob Brown Gets It …

Quadrant Online, 19 July 2019

Some people think wind turbines are structures of beauty. Bob Brown is no longer among them and we’ve all had fun pointing out his apostasy. The half-million birds which turbines are estimated to kill every year in the US and the 200,000 German bats minced annually by the same machines might also take heart at his belated conversion, although the louder and less intelligent members of another species lately gluing themselves to Brisbane’s roads and elsewhere will probably take longer to absorb the truth about these taxpayer-supported environmental destroyers.

The sad truth is that many still see wind and solar power as the future, displacing those old-fashioned coal and nuclear plants. But even though wind and solar are said to be competitive, their supporters continue to demand increased subsidies, often dressed up as National Energy Guarantees or soft loans from the taxpayers’ greenbank, the Clean Energy Finance Corporation. Those subsidies have caused commercial coal generators to collapse, doubling the cost electricity and savaging its reliability.

In other words, and even allowing for Brown’s Damascene conversion, idiocy continues to prevail. .....Read more

Farming, fibs and Four Corners

The Spectator, 11 July 2019

From little things, big things grow. And so, for the 60 odd years until the nineteen-nineties, we saw the land in the Murray Darling basin being developed from what was mainly arid low-yield farmland into a province producing over 40 per cent of the nation’s agricultural output.

Dams transformed the highly irregular flows of the system (the annual variation being between 7,000 and 118,000 gigalitres) into a placid river. This not only allowed some 12,000 gigalitres of water out of the average 34,000 gigalitres to be allocated to irrigation use, but also gave us a river far more suitable for recreation as well as for fish and birdlife. The Murray Darling became a working river like the Nile, the Mississippi, the Indus, and the Po.

Climatic factors mean the irrigated area of Australia is low by world standards, less than one per cent compared to 20 per cent in many well-watered poorer countries as well as in Italy, Japan and Korea. The Murray Darling is nation’s the only extensive irrigation system.

Having created a valuable agricultural resource, Australia’s predilection for (normally destructive) policy meddling has, since the nineteen hundreds, worked on tearing it down.

Activists formed the Wentworth Group (named after the five star Sydney hotel where they met) to wind back and eventually eliminate irrigated agriculture in the river system. The Group’s members, mainly taxpayer funded, have included David Karoly, Tim Flannery, Anna Skarbek, and Quenton Grafton. Lusty and utterly unfounded claims were made about the river drying up as a result of global warming, irrigation causing salt infestations, driving animal species to extinction and causing forests to die. The media, especially the ABC, took up the cause publicised these jeremiads and magnified the activists’ support.

Politicians, most of whom are constantly attuned to a cause into which they can wade and exercise political control, started   ..... Read more      .....pdf file

Is the AFR rejoining economic rationality?

Catallaxy Files, 4 July 2019

The AFR has spent a decade of extolling the merits of renewable energy.  It has waxed lyrical on the beneficial effects of taxes on fossil fuels (aka renewable subsidies, the NEG).  But, following a passage rightly pointing out the cost imposed on the nation by a gas reserve policy, comes this from the editorial in today’s AFR

The loss of baseload power from sudden shutdown of Victoria’s Hazelwood coal-fired power plant in early 2017  .… was precipitated by the force-feeding of unreliable renewable energy into the power grid. Rather than penalise the source of Australia’s prosperity, governments need to fix the policy failures that have caused the problem.

In promoting the opposite position, for years the AFR has given regular columns to the green left writers at the Grattan Institute, the Australia Institute and elsewhere.  It has hosted a coterie of in-house journalists ceaselessly opining on the merits of “modern” sources of electricity – the sun and wind – marching daily to replace all their antediluvian fossil and nuclear rivals.  It  has approvingly cited the renewable energy scam’s boosters, including green interventionists like Garnaut and Yates as well as self-serving business leaders like EnergyAustralia’s Tanna, the appalling ex-AGL chief Andy Vesey, the cashed-up wind and solar farming subsidy-seekers, and political appointees heading regulatory agencies.

Here is just a small sample of headlines

July 25 2018:   The NEG won’t stop the unstoppable march of renewable energy

August 20 2018:   Thank God for renewable energy targets, state and federal

August 9 2018:   NEG agreement will be our first step to energy sanity     ..... Read more

The Clover Moore catastrophe

The Spectator, 28 June 2019

Clover Moore’s Sydney, with its Climate Emergency clarion call, is far from the first city to adopt the zero-emissions-by-2050 mantra.  In fact, the Carbon Disclosure Project with a blue-ribbon board of trustees claiming to represent $100 trillion of funds has 43 such cities on its A-List.  These include Melbourne, which demolishes Sydney’s virtue signalling credentials by having pledged zero net emissions by 2030 as far back as 2017. Previously Melbourne had even greater ambition with Lord Mayor Doyle planning in 2014 to be carbon neutral by 2020; the date of the city’s first zero emission target, set in 2003, has already passed.

In part, such actions constitute attention-seeking by local government politicians keen to extend their influence beyond bus shelters and garbage disposal. But they are also responsive. Human-induced climate change fears have come to dominate the political agenda over the past 30 years.  All Australian state governments have goals to be carbon neutral by 2050 and deliver cost punishments to their citizens in order to progress to this goal. This is despite the satellite data available since 1979 having failed to substantiate claims of dangerous global warming.

In recent years, governments around the world have been drawing back from tangible actions, at least those posing threats to extinguish the cheap energy that is the touchstone of the modern economy.

Perhaps the most significant of these come from the Trump Administration taking the US out of the Paris climate agreement and winding back the emission restraints enacted by President Obama.  In addition, we have:

  • The May 2019 Australian Coalition victory, in what was depicted as a climate change election, 

  • appearing to have halted further expansions in renewable subsidies and carbon emission suppressing measures that attack farming.

  • Canadians looking set to follow the Trump example after  ..... Read more   ..... Pdf file

Green subsidies have sapped nation’s energy for too long

The Australian, 20 June 2019

This month Energy and Emissions Reduction Minister Angus Taylor fleshed out the federal government’s energy policy in ways that brought howls of outrage from the subsidy-seeking renewable energy lobby. Stripping aside the rhetoric, his address had three main themes.

 

First, the government has subsidies in place for low-emission energy and does not intend to expand these with additional renewable energy subsidies. There will be no expansion of the existing commitments to subsidising large-scale solar and wind facilities — commitments likely to be fully acquitted by 2021 (though the existing subsidies will continue for another decade).

 

This has followed relentless pressure to expand the subsidies, but it is only a start. Unfortunately, no commitment was made to terminate the subsidies for small-scale rooftop facilities, even though the Australian Competition & Consumer Commission had recommended this course.

 

Nor was there any commitment to wind back the cripplingly expensive direct subsidies from the budget, including those through the Clean Energy Finance Corporation “green bank”.

 

Indeed, this week Victorian Energy, Environment and Climate Change Minister Lily D’Ambrosio triumphantly opened Australia’s “largest integrated battery and solar generator” at Kerang, a facility financed by direct government subsidies and soft loans from the CEFC.

The second strand was to reaffirm the government’s recognition that subsidies to high-cost, low-reliability wind and solar energy had undermined Australia’s energy affordability and the economy at large. .....Read more     .....Pdf file

A cancerous fantasy: Australian Outlook 2019

Catallaxy Files, 18 June 2019

Two years in the making and with a release planned for shortly after a triumphant Shorten Government occupied the Treasury Benches, we now have the Australian Outlook 2019.

A team led by Dr Ken Henry, the man who developed Australia’s disastrous response to the 2007 world economic crisis, has produced a glossy with some smashing pics and charts with wonderful curly lines.  The report tells us we have to confront challenges: the Rise of Asia, Technological change, Climate change and environment, Demographics, Trust, Social cohesion.

The Guardian and the AFR waxed lyrical about the blueprint, which is to shape the economy for the Brave New World. We were breathlessly told the nation is once again ‘at the crossroads’, that the report is a “call to arms” and we would, “Drift towards a future of slow decline economically and socially” unless we act now to ‘create a future of greater prosperity for all, globally competitive industries and a sustainable environment’.  Ah, the sustainable rub!

The AFR approvingly quoted the report as saying, ‘The world is changing, and Australia will need to adapt much more rapidly than in the past if it is to keep up.’ The report pointed to a need to focus on:

  • Technology, (without which the CSIRO as prime financier would not have a guernsey), and better education, quality jobs, and better cities

  • Following these bromides, there is the real agenda: ‘reliable, affordable low emissions’ (near zero within 40 years). This is amplified by a call for a land shift for sustainable food fibre and fuel production with, of course, carbon sequestration ..... Read more

The Rx for Vigorous Economic Growth

Quadrant Online, 7 June 2019

he Productivity Commission’s latest bulletin shows labour productivity annual growth has fallen over recent years, from an average of around 2.5 per cent since 1975/6 down to a negligible increase in 2017/8. Capital growth was also lower and the contribution to output from capital deepening was actually negative. 

This has ignited a debate on the health of the economy, especially as Greg Jericho in the Guardian points out, “Government spending accounted of 79 per cent of GDP growth in the past year – a level only marginally below what happened during the massive stimulus years of the GFC.”

But the debate about what needs to be done seems to be between the Keynesians, who want to see government stimulation through lowering taxes and increasing spending, and those who want an alternative means of government stimulation through increasing the supply of money via lower interest rates. Central planners and most of the media never seem to learn that government intervention will only exacerbate any underlying imbalance. We can only increase productivity and growth through deregulating supply and no longer discouraging savings and investment.

At least Treasurer Josh Frydenberg proclaims himself open to other options. He says, “I’ll be having discussions with my international counterparts about productivity-enhancing reforms in their own economies.”  It is, however, unlikely he’ll find too many good ideas beyond those of the Trump administration at the forthcoming meeting in Japan of the G20 finance ministers. Other leaders will be promoting the stimulatory lines favoured by the RBA and Commonwealth Treasury. ..... Read more

Angus Taylor: fighting for coal and cheap power, but is it too late?

The Spectator, 29 May 2019

In contrast to his predecessor, the eminently likeable Josh Frydenberg, Angus Taylor can be abrasive and has managed to antagonise many within the industry:

  • State ministers for launching the proposal for government supported new firm capacity and avoiding them monkey wrenching it by not first consulting them;

  • The rationalists by not abandoning renewable subsidies, including those to small scale rooftop facilities, which even the ACCC said were a costly waste;

  • The Greens, the ALP and “Modern Liberals” for not adopting green energy policies and including in the seemingly sacrosanct 2015 Paris targets “carryover” credits from exceeding the 1997 Kyoto agreement targets. That exceeding was due to Australia preventing land clearance – without compensating the farmers who paid for this;

  • Subsidy seekers and much of the regulatory establishment for not embracing the “National Energy Guarantee” version of a new, increased carbon tax;

  • The supply industry for threats to force divestments and establish price controls;

  • Smaller consumers for the Minister failing to live-up to the billing given him by Scott Morrison as the Minister for lowering electricity prices;

  • Larger customers epitomised by Brickworks chief executive Lindsay Partridge saying, “When manufacturers start closing and companies like me start saying I can bring bricks from Pennsylvania 16,000 kilometres away and land them in Sydney cheaper than I can make them, they’ve got big problems”. ..... Read more           Pdf version

Australia’s election result: a reprieve not a recovery

Catallaxy Files, 23 May 2019

Reprieve was possible but feared the worst.  Steve Kates offers a comprehensive 10-point summary of why the ALP lost.  I have a more succinct version in Canada’s Financial Post which highlights the key reasons being cost-pregnant green policies and the tax hikes on superannuation.

Everybody concerned about Australia’s future prosperity would be relieved at Saturday’s result.  The Coalition would be entitled to believe it guarantees them six more years of government, especially as the ALP is signalling a maintenance of  its current spending and climate policies.

The ALP went to the election with the most radical manifesto that we have ever seen – more so than that of Whitlam in its call upon national income.  Even in their detail its policies made no sense, for example with selective increases in spending on wages, health and education that defied the institutional arrangements in place to ensure rational decisions on these matters.

And yet 48 per cent of the electorate voted for Labor or its allies.  Indeed, perhaps the one reason their manifesto failed is, as Alan Kohler had said, because it attempted some integrity with tax proposals designed to cover the spending baubles that were offered.  While Chris Bowen’s tax hikes were totally inadequate, even the fig leaf they provided was sufficient to shift votes, amounting to a decisive two or three percentage points, to the coalition.  One would expect even less integrity in future Labor campaigns with a pretence that proposed ..... Read more

Australians voted against more climate-regulation mania, but their job's not done yet

Financial Post, 22 May 2019

 The Labour/Green alliance lost promising a raft of more spending and regulations

 

The conservative Liberal National Coalition (LNC) went into the Australian election on May 18th as a minority government. All opinion polls predicted the Labor Party would come out of the election with a majority with a margin of 8-20 seats in the 151-seat lower house. In the event, the LNC was returned with a firm majority under Prime Minister Scott Morrison, who had been leader for less than nine months, following a bitter leadership battle in his party. With some results still unconfirmed, Morrison’s party is shaping up to control 78 seats to Labor’s 67, with six going to others.

The Labor Party had run in a de facto alliance with the Green Party (they previously had a formal alliance agreement, that lapsed, but they remain allied). Their Labour/Green alliance had lost on a platform promising a raft of more spending and more regulations including:

— New privileges to trade unions (which cover fewer than 12 per cent of workers) and pay increases for certain low-wage workers;

— Tax cuts focused on the less well off;

— Aggressive climate policies including (but not limited to) restraining coal  ..... Read more

Our hard-won prosperity – and how to keep it

The Spectator Australia, 14 May 2019

The different rates of change in world income levels have provided Australia with a magnificent base on which to build our own prosperity. But, though our standard of living is testament to some success, political measures have blunted the potential level of achievement. A less regulated business regime and lower taxes especially on savings are vital to enhancing our income levels. Yet the ALP and to a lesser degree the Coalition are putting taxes on savings and have no stomach for deregulation.

Accelerating rates of change in world prosperity levels

This animated twitter graphic presents a fascinating review of the rise and fall of nations in the GDP stakes. Over the past half century, the constancy of the US, rise of Japan and Germany and the more recent rise of China and India are the dominant features. As late as 1969, Australia even crept into the top 10.

Reviewing a lengthier period, by the seventeenth century, Europe had pulled markedly ahead of the rest of the world in terms of GDP per capita. ..... Read more

Election promises: eating the seed corn that generates sustained economic growth

Catallaxy Files, 14 May 2019

I have a piece in the Spectator that addresses the importance of savings to provide the capital that underpins wealth creation.  Savings themselves will be severely constrained where the state or other looters can exproproate them or where the state imposes regulatory requirements that devalue the savings and the benefits from their investment.

The (IMF) data (shown right) are indicative of the benefits from small government and high savings. This pattern of high savings and small government is present in the earliest European economic take-offs and in those of Japan, the “Asian Tigers” and with Chindia.

Australian government spending tends to be ratchetted up by Labor administrations with the measures not being fully reversed by conservative administrations. The more recent of these have been new policy spending initiatives in education and for people with disabilities.

There is also a mounting hostility to growth by The Greens and to some degree the ALP in political decision-making and this has resulted in growth-inhibiting regulatory policies including: ..... Read more

Dog Dirt is No Substitute for Debate

Quadrant Online, 8th May 2019

There is now a narrow path to victory for the Coalition.  It relies upon them winning a couple of seats in Queensland and Tasmania, regaining Indi and making a net loss of only two elsewhere (in addition to the likely loss of Farrer to the Shooters, Farmers and Fishers).  But more than one loss is likely in Victoria, and there are vulnerable Liberal seats in Western Australia.

The possible near-term saviours for the Coalition are, first, the sandbagging of seats that contain large numbers of retirees set to be adversely affected by Labor’s intended raid on their savings –a grab even more grasping than that already introduced by the Coalition.  But, secondly, there is the possible gain of seats where green policies have had tangible negative effects. We recently saw the Coalition fall victim to a backlash in the NSW state election as a consequence of green water policies, hence the  possible loss of the Murray-Darling seat of Farrer.  The Coalition is, however, seeing possible gains as a result of green anti-mining policies, most particularly in Queensland.  ..... Read more

Forget the “watergate” conspiracies: here is the truth about the Murray

The Spectator Australia, 28 April 2019

The Murray Darling River is facing a plethora of publicity: fish deaths due to mismanagement of flows by the responsible body, farmer agitation as a result of loss of irrigation water, claims that the water buybacks behind the farmer concerns have been at excessive prices and possibly corruptly made, and a report by the “Wentworth Group of Concerned Scientists” with the usual claims of environmental distress.

The Basin has been a political football for the past two decades. The original initiative to insert heightened government control commenced with the ACF.   Infiltrating themselves into farmer groups, always on the lookout for a hand out and ultrasensitive to criticism about their land stewardship, they formed a partnership with the NFF. A joint report in 2000 (the National Investment in Rural Landscapes) sought to extract $6.5 billion to combat environmental distress, which they said was costing $2 billion a year.

..... Read more

The Huge Cost of Climate Hysteria

Quadrant Online, 24 April 2019

Mark Lawson comes from a journalistic tradition which attempted to assess factual information without interpreting it within an ideological framework. His book, Climate Hysteria, draws on publicly available information, details that information, and analyses its interpretation and projections as offered by climate “experts”. It is highly readable, pulling together the both history of the climate debate and the present situation by comparing the careerists’ doom-laden forecasts against reality.

His book, as its title suggests, analyses the development of what he calls “climate hysteria” which,  coupled with conferences of nations represented by their environmental agencies, has led to international agreements limiting emissions of carbon dioxide and other the greenhouse gases, the latest being the Paris Agreement of 2016. Trouble is, the climate is failing to behave the way scientific analysis, as reported at planetary conferences, indicates it should. Not only have the various milestones indicating apocalyptic tipping points on the road to irretrievable disaster failed to occur, but even the minor prophecies haven’t materialised.

Consider:

# there has been no increase in wildfires, whereas more of these were claimed to be imminent in the IPCC papers

# there has been no change in global precipitation ..... Read more

Weaponising the ACCC to address cartels: more market controls planned

Catallaxy Files, 16 April 2019

Having seen the ACCC staffing levels increase 10 per cent since 2014 with a further increase of 14 per cent budgeted for next year, Chairman Rod Sims is out campaigning for additional resources to combat cartels. Sims’s views are in line with those of a predecessor, Graeme Samuel, who said ‘cartel behaviour is, in reality, a form of theft and little different from classes of corporate crime that already attract criminal sentences.’

Another predecessor of Sims at the ACCC, Allen Fels, like Sims was a long term ALP client/assister of the ALP and was rewarded with the ACCC job. Fels would mask his proclivity to intervene in markets (i.e. to “correct” them) by citing Adam Smith’s aphorism, ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’

Neither Fels nor Sims would have agreed with Smith’s succeeding sentence, ‘It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice’.  Still less would they recognise that the words were in the context of a chapter in The Wealth of Nations that addressed the perverse effects of government regulation in creating monopolies; indeed, government facilitation is only means by which such monopolies can persist.

Ten years ago Julie (now Makayla) Novak and I examined cartel behaviour and its supposed combating by authorities in the US and Australia.  .....Read more

More on the electric vehicles farce

Catallaxy Files, 8 April 2019

We can all have great sport on the back of Bill Shorten’s inability to differentiate between 8 minutes and 8 hours when it comes to the charge rate for electric batteries. But we should not delude ourselves that the Coalition is markedly different.  The ALP policy has two strands – first the 50 per cent of new cars to be electric buy 2030 and secondly requiring vehicle emissions to be 105 grams of CO2 per kilometre by 2025.

The former recommendation also involved a roll-out of charging facilities across the nation.  Angus Taylor for the government has, rightly, excoriated this proposal.  But not so long ago he too was extolling a roll out by ARENA costed at $15 million for, “The ultra-rapid charge will provide a range of up to 400 kilometres in just fifteen minutes, compared to a current charging time of several hours”.

The 105 grams of CO2 per km recommendation was made by the government’s own hand-picked Climate Change Authority and was a policy approach Malcolm Turnbull almost got through the Liberal Party Room. Requiring all car sellers to average a level of emissions, which none of the March 2019 top 20 selling vehicles achieve, would require sharp price premiums on all other vehicles – and all vehicles outside of the electric models that start in price at $50k – in order to make the average.  It is unlikely that this could be possible without upping prices of low cost models by 50 per cent and doubling the price of petrol.  Norway, is the poster child of the electric car strategy ..... Read more

Electricity subsidies beget further interventions bringing additional inefficiences

Catallaxy Files, 31 March 2018

Unusually, Energy Minister Angus Taylor has some pre-politician expertise in the sector and is fully aware of the deficiencies of renewables (the exotic wind/ solar ones, not hydro) and the damage done to Australian prices and reliability by subsidised wind/solar.

Back in August of last year, as a newly minted minister, he basked in the PM’s invested title of Minister for electricity prices down.  Conceptionally, the task this entails is not very difficult in the context of Australia having an abundance of cheap well-situated coal that has in the past allowed us to have the cheapest electricity in the world and could again do so.  However, timing is of the essence and the program had to be achieved in the nine months gestation period ending in this year’s May election.  This was a tall order, seeing as the collapse of the low prices occurred in 2016/17 (when Hazelwood closed) some 15 years after the renewable subsidy venom started to be introduced.

By November of last year Angus Taylor was trying to jaw-bone electricity retailers to reduce their prices.  The pressure was intensified and by January this was converted into a rather more prescriptive form of price regulation followed by censorious comments about electricity company profits; these have grown tumescently not because of retail margins but as a result of the high wholesale prices caused by renewables (plus state government actions) knocking out Hazelwood and the SA Northern Power Station. ..... Read more

NSW Election: the Triumph of the Irrigators

Catallaxy Files, 24 March 2019

The Nationals are paraded as having had a poor election.  This is not obvious – the Nationals got 9.7 per cent of the vote in the Legislative Assembly, a swing against them of 0.9 per cent, in the context of considerable opposition on their traditional turf with the Shooters, Fishers and Farmers (SFF) increasing their share by 3.2 per cent and One Nation up by 1.1 per cent.  (One Nation will get over 6 per cent in the Upper House).  However, this performance resulted in a loss of two seats (Murray and Barwon) to the SFF together with the confirmation of the gain of Orange that the SFF had previously made.  And Dubbo and Wagga also saw major swings against the Nationals to right wing candidates.

The Nationals did well in other seats, notably that of the Deputy Leader John Barilaro.  Barilaro, unlike the National’s leadership in Canberra where David Littleproud replaced Barnaby Joyce as Agriculture Minister, but in common with the ascendant SFF had called for action to restore water to irrigation.

This issue and mismanagement of the Murray Darling oin general has been crucial to the electoral losses of the Nationals and the Water Minister has stepped down.

As well as the loss of three Lower House seats, the erosion of support to pro-irrigation parties will also force those Nationals previously complacent about the issue to step up in support of their traditional constituents.  In addition, SFF, One Nation and perhaps David Leyonhjelm will likely have 4 Upper House seats and the balance of power.  Hence, even if Gladys Berejiklian wins an outright majority in the Lower House a review of Murray Darling irrigation policy in the Murray Darling is inevitable. ..... Read more

The scare is settled? Have the climate catastrophists won?

The Spectator Australia, 19 March 2019

Evidence does not seem to matter in the debate on human-induced climate change. Hardly anyone is listening to reason. Minds have been made up.

A substantial majority of people considers human-induced climate change is underway. They do so even though temperatures and ocean levels have not risen beyond their long-term trends, there is no increase in extreme events, no increase in flooding, droughts, or forest fires. And iconic features like the Great Barrier Reef are under no stress.

Countering every solid piece of evidence showing climate stability are unscientific claims that a particular occurrence of flooding, drought, hurricanes, and hot weather is proof of the opposite. Even Barnaby Joyce is on board when he says, “No one is seriously arguing the climate is not changing; I’m driving along the road now and the trees designed for our climate, eucalyptus, are dying. The creeks are dry and have been for years now; droughts are the rule and not the exception and their duration is brutal.”

A majority is equally unconvinced by the palpable evidence of higher electricity prices and a less reliable network due to a replacement of controllable fossil fuel generation by intermittently available renewables that require both expensive back-up and high-cost transmission. The simplistic cry that renewable energy is free and must be cheaper than those ancient coal generators is accepted by professionals outside the industry, and some within it. It is becoming a dominant perspective of bankers, doctors, lawyers as well as teachers..... Read more        .....pdf file

Energy policy: the $72 billion fair dinkum disaster

The Spectator, 26 February 2018

Energy and climate change policy in Australia and other western democracies is now, along with immigration and its associated fear of imported third world violence, the cutting edge of the political divide.

But in Australia, the Liberal Party’s policy over the past 20 years has converged with that of the Labor Party and latterly the Greens to favour increased subsidies to electricity generated from wind and solar.  This has knocked out lower cost, more reliable coal generators and doubled wholesale prices, with costs further enhanced by a consequent need for more spending to offset wind’s unreliability and on poles and wires.

The Liberals (supported by Labor) have responded to these regulatory induced cost increases by requiring retailers to reduce prices, a measure that is certain further to deter efficient investment, bringing still higher costs. ..... Read more      .....pdf file

The myths of the Murray

The Spectator, 17 February 2019

Over the past century, the Murray Darling river’s naturally highly irregular flows have been transformed to convert it into the tranquil, ever-flowing waterway that has allowed the Basin it serves to become the source of 41 per cent of the nation’s agricultural output.

Green activists have, however, demonised irrigated farming by promoting myths about the river being under environmental stress. Such claims have been further amplified by fictitious and disproven claims that the precipitation into the catchment area will be much reduced due to supposed global warming.

As a result, one quarter of the water previously used for agricultural activities dependent on irrigation has been reallocated to environmental targets, including transforming the mouth of the Murray from its natural salt-infused state into freshwater lakes. Mismanagement of these environmental flows was critical in causing an unprecedented fish kill in 2019.

The cost of the Basin Plan in derating the region’s agricultural potential has been tragic, for the region. In aggregate terms this is likely to be in excess of $3 billion per annum at a time when agricultural export opportunities are promising. The measures adopted in the Basin plan were reactions to ill-founded and refuted concerns about human damage to the environment. The Commonwealth should cease incurring costs in preventing water use for irrigation and should re-sell the water it has banked to those willing to pay for it.      ..... Read more        ... pdf file

The Green Robe of Climate Justice

Quadrant online, 11 February 2019

Being open-minded and impartial, as his tenure as a judge requires, we can take for granted that Mr Justice Preston read more broadly than the warmist epistles of alarmists and climate careerists cited in his judgment against the Rocky Hill coal mine. Alas, the views of less excitable climate scientists failed to get a mention.

Last week, the senior judge in the NSW Land and Environment Court, Mr Justice Brian Preston (left), rejected the Rocky Hill coal mine’s application to operate for a number of reasons, one of them being “to meet generally agreed climate targets” for a “rapid and deep ­decrease” in emissions. The case against the mine was run by the activist Environmental Defenders Office NSW, which is funded in part by the state government and at which Preston once served as the founding principal solicitor.

Mr Preston was appointed to the leading legal role in the Land and Environment Court by Labor attorney-general Bob Debus in 2005.  Debus said he was impressed by his record as an environmental activist when appointing him to the job.  ..... Read more

Days of power and fury: January 2019 electricity prices and outages

Catallaxy Files, 3 February 2019

Compared with a National Market that had a turnover of less than $7.5 billion a year  four years ago, the turnover in just two days in January was over $1 billion.

It is impossible without all data on contracts to determine who the electricity industry’s winners and losers were from the January 2019 high priced events.

With the electricity there are multiple markets but it is best to think of them comprising just two markets. The first is the spot market which we see every five minutes; the price peaked in late January in some states at $14,500 dollars per megawatt hour (MWh).  The price, prior to outcome from governmental destabilisation of the market, was $30-40 per MWh.

The second is the contract market whereby sellers and buyers agree beforehand on the prices at which they will supply and demand electricity for all the various periods of time. This contract market really comprises probably 95% of the aggregate market and the prices are fixed in advance. ..... Read more

The Liberals’ Downhill Racers

Quadrant Online, 27 January 2019

Last week, NSW’s Photios-aligned Arts Minister Don Harwin appointed Tim Flannery to the board of the Australian Museum. Days later, Olympics skier Zali Steggall announced the climate careerist would be aiding her independent bid to oust Tony Abbott from Warringah, a campaign that has already seen ex-Turnbull staffer Alice Thompson join the race. With friends like this, just what sort of a party have the Liberals become?

Could this be a coincidence? Zali Steggall, former Olympic skier and admirer of Malcolm Turnbull, is to contest Tony Abbott’s seat of Warringah.  At her launch on January 27 she said her decision to declare as an independent was motivated by a desire to promote the “sensible centre”.

That term is code for climate change, the issue which is supported by agitprop from the massive funding that scurrilous and self-interested entities have at their fingertips, courtesy of funding for renewables, Great Barrier Reef and the associated green-ish endeavours governments of all stripes have provided.  She made this clear.

“I have been consulting with Australia’s leading climate change and economics experts. I’m very lucky to have Professor Tim Flannery here today, and he and other experts have agreed to advise me on climate strategy and how we can best achieve the results we need to achieve for Warringah and Australia.”

..... Read more

Tim Flannery quote from 2007

Reality check from 2011:

Tim Flannery quote from 2007

Warragamba Dam hits a 10 year high

Reaping the fruits of political sabotage of the electricity industry

Catallaxy Files, 25 January 2019

The third world nature of Australia’s electricity industry was revealed this week with wholesale prices in Victoria and South Australia at the maximum $14,500 for lengthy periods in spite of thousands of customers being cut-off, major users agreeing to shut down demand in return for compensation paid by consumers, and even some oil plants being called in.

The causes are clear.  For twenty years, Australia has embarked upon a subsidy program for intermittent, unreliable and costly wind and solar.  This is accompanied in Victoria and South Australia (and perhaps now in Queensland) by outright hostility to coal, the form of power that had given the nation the lowest cost and most reliable electricity in the world.

As I said in a previous post, there has been no shortage of spending on electricity generation

Over the past decade, we have spent $70 billion on wind and solar. That $70 billion is enough for 12 new coal generators that would give us electricity with a wholesale cost of one third that of the current level. Instead we have been closing down the more economical coal fired power stations because renewables, two thirds of the costs of which are covered by subsidies, are making them uneconomical.

Not one cent of the $70 billion spent on wind and solar would have occurred had it not been for the subsidies. Those subsidies – renewable energy schemes, the Green Energy Bank, direct support from the Commonwealth and state support measures – are running at $5 billion a year. ..... Read more

Banks pretend to be virtue signalling while plundering electricity consumers

Catallaxy Files, 21 January 2019

In the salad days prior to 2015, before governments’ destructive interventions undermined Australia’s stable low-cost electricity supply, electricity as a topic of general interest hardly figured. Any concerns about power blackouts just did not reach the front pages or the late-night news bulletins.

At that time the National Market had about 50,000 megawatts (MW) of capacity, about 80 per cent of which was coal with gas and hydro providing the balance; with the exception of wind/solar, which had already grown to around 1,000 MW, all the capacity was under human control or “despatchable”. The National Market now has about 45,000 MW of dispatchable capacity plus nearly 7,000 MW of wind and solar, with a further 45,000 MW wind and solar planned. No wind or solar facility would have been commercial without the subsidies they receive.

From the outset of the National Market, 20 years ago, there has always been a bit of a stand-off between generators and retailers over summer supplies and their prices.  The most marginal generators (usually gas) sought better rewards for remaining on-line as a contingency supply source.  The market manager, now called the Australian Energy Market Operator (AEMO), being more risk averse than the retailers, would usually step in acting as a reserve trader, to guarantee extra supplies. This Reliability and Emergency Reserve Trader (RERT) now contracts for about 1000 megawatts, on top of which are “demand response” contracts with major users.  In addition, the market manager has powers, which it increasingly uses, to direct generators to stay on line or to make themselves available when such actions would be unprofitable. In the last quarter this included forcing South Australian gas plants to be available 40 per cent of the time (with consumers providing special payments) to compensate for wind supply inadequacies ..... Read more

The Australian Energy Regulator’s wholesale electricity market performance report

Catallaxy Files, 9 January 2019

The more desperate the situation of an industry, the more reports and regulatory overseers’ governments require, blind to any recognition of an industry’s malaise being created by their own actions.  And so, with electricity we have an alphabet soup of regulatory agencies analysing, advising and fiddling.  At the Commonwealth level we have the ESB, AEMO, AEMC, AER and ACCC all seeking a place in the sun.  On top of this are state regulatory agencies and conventional line departments.  Then we have government research agencies like CSIRO and the Cooperative Research Centres.

The Australian Energy Regulator has one necessary function, which it discharges effectively, namely setting the price the monopoly poles and wires businesses may charge for their services.  It has other functions of less obvious worth. Among these is a requirement to report every two years on “the performance of the wholesale electricity market, including analysing and identifying whether there is effective competition in the market and whether there are market features that may be detrimental to effective competition or the efficient functioning of the market”.

Its first such report was issued shortly before Christmas.  The report’s main themes are:

  • Prices have risen, largely due to the closure of Hazelwood and other coal power stations, but that increased coal prices may have contributed to this as might also, to a limited and declining extent, monopolistic behaviour on the part of Queensland government owned generators.

  • In spite of a diminished controllable supply, in the shorter term there is sufficient capacity to avoid blackouts. ..... Read more

Australia, the Plodding Underperformer

Quadrant Online, 8 January 2019

Australia sits on the world’s most valuable natural resources, yet those immense blessings aren’t matched by income levels — a failure which must be seen as an indictment of successive governments’ stewardship. More worrying, the pressures and follies that have inflicted below-par economic development are growing more pronounced

The different rates of change in world income levels have provided Australia with a magnificent base on which to build our own prosperity.  Alas, though our standard of living testifies to some success, political measures have blunted the potential level of achievement.  A less regulated, lower taxing political regime is important to enhancing our income levels. And as the 21st century progresses such a policy redirection will assume increased importance in ensuring our national security.

This graphic presents a fascinating review of the rise and fall of nations in the GDP stakes.  Over the past half century, the constancy of the US, rise of Japan and Germany, and the more recent rise of China and India are the dominant features.  As late as 1969, Australia even crept into the top 10. ..... Read more

Liberal luvvies for higher power prices

The Spectator, 20 December 2018

Politicians as targets of the French gilets jaunes are omnipresent in Australia and have, with their climate change-driven energy policies, created even greater economic damage than in France. Notwithstanding the disastrous effects from subsidising renewable energy, politicians’ hubris within the Coalition, ALP and Greens leaves most MPs convinced that renewable energy is the future. Debate is mainly centred on whether or not to double down on the harmful regulatory interventions that have undermined the coal generators that gave the nation its competitiveness and much of its prosperity.

The Gilets Jaune movement in France, rapidly spreading to other countries, stems from public revolts against the arrogance of the leaders that have been elected. The issue that has galvanised the French is government action to combat climate change, particularly its corollary of politically driven price increases for energy.

Many of these leaders who are the target of the demonstrations share similar career patterns. Starting with political activism at University they seamlessly move into working for a politician, thence into becoming themselves an elected politician, often parachuted into a safe seat, and from then on to ministerial office. All this is achieved without ever having had a real, productive job.

This describes NSW Energy Minister Don Harwin whose political agenda has been dominated by gay rights activism and who, as President of the NSW Upper House, supported a motion that described Mr Trump as ‘a revolting slug’ unfit for public office.   ..... Read more

The mirage of lower renewable energy driven electricity prices

Catallaxy Files, 10 December 2018

Josh Frydenberg claimed the last week in Parliament was a poor one for the opposition and the triumph for the government. He made mention of the Opposition’s inability to get Peter Dutton and its failure to deliver its preferred outcomes regarding Manus Island detainees.

He also mentioned as a success the government’s energy policy proposals.  One such proposal, the “Prohibiting Market Misconduct Bill 2018”, was clearly not a success for the government. The proposal was referred to the Senate for investigation and cannot emerge from that process until the least April of next year.

Wrapped in the normal cautious verbiage about “last resort” measures, the Bill is a desperate attempt to see electricity prices reduced before the next election. To do so it forces retailers to reduce their prices and generators to ensure they operate their businesses “fairly”.  With thirty odd retailers around the nation and dozens of differently owned generators, the electricity market is just about the least susceptible to the monopoly activities against which these measures were targeted. The provisions would allow the government to have the ACCC examine suspect behaviour which could result in fines of $10 million or divestiture.  Divestiture is clearly aimed at AGL’s Liddell Power Station.

Among the media outlets criticising the bill was the AFR. Ben Potter assailed it as ‘socialist’. The AFR had previously not opposed the carbon tax, renewable subsidies or the NEG all of which involved the expropriation of fossil fuel generator investments.  It could be that such epithets are reserved for actions against industries that do not meet the PC test!   ..... Read more

Ford’s Ontario has Nothing to Learn from Australia’s Climate Plan

The gilets jaunes (yellow vests) demonstrations across the Atlantic against climate change driven fuel taxes offer Premier Doug Ford yet another reason to congratulate himself on repealing Ontario’s carbon tax.

 

Less reassuring however is the speculation that he is to introduce a measure similar to the Australian ‘Emissions Reduction Fund’ (ERF).  A sop to the leftists within the Australian coalition conservative parties, this provides funding for a reverse auction where, instead of taxing all emissions, (with the revenues theoretically being used to compensate those paying the taxes), the government invites bids from firms for the abatement measures they will undertake. 

 

Australia’s ERF is part of a suite of measures in place, including

 

  • renewable energy subsidies that cost about $A3 billion a year,

  • direct federal investment through the budget of perhaps $500 million a year plus a similar amount for various state and territory programs,

  • regulations on light bulbs, buildings, white-goods etc. designed to reduce energy,

  • and a government $A10 billion Clean Energy Finance Corporation.   ..... Read more

The ALP’s emission reduction dreams will strangle the economy

Catallaxy Files, 23 November 2018

Over the past decade, we have spent $70 billion on wind and solar.  Here are some statistics from BNEF, not uncoincidentally, the venue where Bill Shorten and Mark Butler yesterday launched an outline of the ALP energy and climate policy.  

That $70 billion is enough for 12 new coal generators that would give us electricity with a wholesale cost of one third that of the current level.

Instead we have been closing down the more economical coal fired power stations because renewables, two thirds of the costs of which are covered by subsidies, are making them uneconomical.

Not one cent of the $70 billion spent on wind and solar would have occurred had it not been for the subsidies. Those subsidies – renewable energy schemes, the Green Energy Bank, direct support from the Commonwealth and state support measures – are running at $5 billion a year.

The outcome of this experiment has been electricity costs which have skyrocketed to become among the highest in the world. A corollary, in addition to the obvious costs to households, is the loss of some of our most productive industries energy intensive including aluminium smelting.

Now, the ALP wants to double the share of subsidised renewables which, even at 20 per cent of supply, have poisoned our electricity sector.

To do this, they want to spend an additional $10 billion in funding the green energy bank.  And they want to spend $5 billion on new interconnectors to allow unreliable and high cost wind to be transferred from state to state and to build new connections to windmills located in remote areas ..... Read more

Labor’s energy deal: Shorten facts, but you’ll pay more

The Spectator Australia, 21 November 2018

Sucked in by spurious claims of the loss of 99 per cent of all coral reefs, mounting natural disasters, a permanent drought in the Murray Darling, and illusions that fossil fuels are archaic, Labor is preparing to announce its energy policy.

Earlier this week, in a dummy run, Energy spokesman Mark Butler claimed, in the context of apparent public support for renewables, that we can up the government’s 23 per cent renewable energy share, which includes about eight per cent of (currently unsubsidised) hydro, to 50 per cent and also see electricity prices fall.

Bill Shorten is to formally launch the ALP “have our cake and eat it” policy on Thursday. This comes at a time when wholesale electricity prices for 2019 are around $95 per MWh, more than double prices just three years ago.

 

In claiming that its more intensive subsidy policies will lower overall electricity prices, the ALP platform is supported by the same confident predictions that have favoured existing renewable energy subsidies. Such predictions rest on modelling exercises by the main energy modellers, Jacobs, Deloittes, Frontier, Repu Tex, and ACiL. These presume that wind and solar generators, with a subsidy presently standing at $80 per MWh

..... Read more

The Diabolic Policy Dilemmas Created by Previous Energy Policies

Catallaxy Files, 14 November 2018

Regulatory measures – subsidies for wind/solar – have wrecked the Australian market, driving up prices and increasing supply costs.  And the policies have created wind and solar capacities that have on-going effects, which cannot be unwound by simply allowing the subsidies to run their course, since this will exact an increasing toll on energy costs.  Countervailing subsidies to coal generation cannot solve the problem since, with existing policies in place, a subsidy to one or more coal generators would impact on the economics of other coal generators rather than the subsidised wind/solar which create the problem.  

The main energy subsidies are the RET for wind and large scale solar with a subsidy this year at around $80 per MWh and the SRES for roof top facilities where the subsidy is paid up-front for the presumed life of the facility at a rate of $40 per MWh.  The RET this year costs electricity consumers $2.2 billion and the SRES over $1 billion.

Some people, especially those harvesting the subsidies, maintain the fiction that renewables are now cheaper than coal.  Most politicians bow to the voter impact of the ideology of human induced climate catastrophe and the myth of cheap renewable power that the subsidy seekers have spun .....Read more

The red and blue of the US mid-terms

Catallaxy Files, 12 November 2018

The US mid-terms: a victory for Trump?

Many on the right felt relief at the outcome of the US mid-terms, where the message was that the incumbent President predictably loses support.  The House loss was said to be modest and the Democrats actually lost ground in the Senate.

The inevitability of lost congressional mid-term support is overstated – one need go back only to 2002 to find the Republicans under President Bush gaining ground.  Here are the mid-term results since 1950 ..... Read more

Renewable subsidies: destroyers of low cost electricity supplies

Paper presented to the September 2018 conference: The Basic Science of a Changing Climate held in Porto

Renewable energy and its replacement of conventional electricity supplies

In meeting targets agreed at the 2002 Kyoto Convention, the precursor to the Paris Agreement, Australia, by preventing land clearance, reduced emissions by 100 million tonnes a year of CO2 equivalent.  Comprising almost 20 per cent of total emissions, this reduction allowed Australia to claim that there had been a negligible increase over the period 1990-2012, and Australian politicians were able to bask in diplomatic plaudits at farmers’ expense.

Australia also took measures to suppress greenhouse gas emissions from energy which, in its various forms, accounts for about 70 per cent of greenhouse gas emissions but as electricity brings only around 25 per cent. 

Electricity however is the focus of attention on emission reductions.

..... Read complete paper

Real people put living standards above virtue signalling on climate change

Catallaxy Files, 26 October 2018

Leftist Economist Joseph Stiglitz, coming to Australia to collect the human rights activist “Sydney Peace Prize”, is not the only dreamer urging a carbon tax for Australia and proclaiming that climate change was not a liberal conspiracy.

As Chris Kenny notes the Australian Institute of Company Directors (AICD) are also virtue signalling their support for such economy-crushing measures.  Oblivious to the fact that the carbon suppression agenda is really only confined to the sclerotic EU, 50 per cent of them put it as the major issue confronting the economy.  It’s as though they are cocooned in a world that has never heard of Donald Trump’s rejection of the Paris Agreement or the fact that China and India will at best look to join it a dozen years hence!

While many of the AICD respondents may have expertise in how to make businesses operate profitably, they clearly are bereft of political and general economic skills.

It may well be that the company directors’ stumping up for a carbon tax and other measures designed to subsidise renewables is based on their corporate interests, since so many firms have punted, willingly or unwillingly, for renewable “investments” along with the subsidies without which none of the investments would be profitable.  

Any movement to withdraw these subsidies will likely be a precursor for the rescinding of the rorts already granted and this will not look good on balance sheets.

Although the electorate is often also over-obsessed with climate change and its corollary of poverty inducement and high household electricity costs, most people are better grounded on what affects their interests.  The ACID virtue-signalling may well be self-interested but Essential has found that only 7 per cent of respondents among the general pubic put climate change and support for renewable subsidies as the key issue facing them ..... Read more

Socialism will impoverish you, but it won’t solve climate change

The Spectator, 25 October 2018

Writing in the Guardian, Geoff Sparrow is not the first person to call for a socialist “dictatorship of the proletariat” as the only means of markedly reducing emissions of carbon dioxide and other greenhouse gases. In a curious conflation of this with surveys that appear to show an attraction to socialism in the part of young people, he argues modern capitalism means ruination of the planet as well as Marxian impoverishment of the worker and “the steady destruction of social welfare, a preposterously unaffordable housing sector, an increasingly sinister security state and a political culture dominated by race-baiting charlatans”.

 

Big call!

 

It is true that many people in each new generation need to be freshly disillusioned by the observed deficiencies of socialism wherever it is practiced. Seventy years after Marx and Engels published their Communist Manifesto we saw its principles being put into place in the Soviet Union followed, 30 years later, in Eastern Europe and China. The collapse of the Soviet bloc and the self-destruction of socialism by the Chinese Communist Party testified to its failure as an economic system on top of its abysmal record regarding civil liberties. Once the Communist countries returned to capitalism with private ownership their economies started to prosper – spectacularly so in the case of China.

The collapse of the Soviet bloc and the self-destruction of socialism by the Chinese Communist Party testified to its failure as an economic system on top of its abysmal record regarding civil liberties. Once the Communist countries returned to capitalism with private ownership their economies started to prosper – spectacularly so in the case of China. .... Read more

The ‘Broad Church’ and its Termites

Quadrant Online, 22 October 2018

No sooner did Wentworth fall than the green-left of the Liberal congregation demanded yet further sacrifices of other people's money and hardship be laid before the altar of global warming. If the party of Menzies has been white-anted to this extent, might it not be time to burn the whole thing down?

The Liberals are proving themselves unable to differentiate their product from that of the ALP and even veering close to the Greens.  The rot started with John Howard and his “broad church” approach which welcomed soft socialism into the Liberal Party in an attempt to maroon the ALP with the hard left policies.

Howard was fortunate in this approach in having a strong-willed Treasurer who could make use of Treasury without being engulfed by the men and women led and nurtured by Ken Henry, the Keynesian global warmist. But other ministers and Howard’s own policy choices started processes that caused economic harm, moving the party closer to the ALP.

Most notorious among these was Howard’s 2001 decision on renewable energy subsidies, initially to bring these inherently high cost, low reliability wind/solar sources to comprise “two per cent additional energy”.  As such interventions inevitably do, this started permanent pressure for additional renewable subsidies (which Howard, to his credit, resisted while in office).  Subsidies to renewables will bring their share in electricity supply in 2020 to 24% (with commercial hydro another 8%).  These policies have converted the nation with world’s cheapest electricity into one with the most expensive. ..... Read more

The Warmists Are Starting to Sweat

Quadrant Online, 7 October 2018

Here's a prediction you can take to the bank: the ABC and Fairfax will be running even more inane climate-scare stories than usual. Why might that be? Because the US has taken its money and departed Paris, threatening climate careerists with the unsettling prospect of finding honest work.

Over the next week the report being finalised at a United Nations Intergovernmental Panel on Climate Change (IPCC), meeting in Korea, will see an outpouring of alarmist material.  Doom-laden factoids and forecasts will be released, all designed to head off an impending collapse in the “consensus” that reached its apogee in the Obama era.  Culminating in the 2015 Paris Agreement, an EU-US axis led policy development on regulatory measures to suppress emissions of carbon dioxide and other greenhouse gases. Most fundamentally the strategy involved bearing down on the use of coal and other fossil fuels to the electricity supply industry and replacing these sources with wind and solar.

Developed countries agreed to reduce emissions by around 26%;  successful developing countries, such as China and India, said they would fall into line 15 years hence. On the strength of this dubious promise no disciplines were placed on them, while they welcomed the self-mutilating actions of the developed world which enhanced their own competitiveness.  The emission-supressing coalition was rounded out by a slew of failing developing nations brought into the tent by the promise of a $100 billion annual fund to fill their begging bowls and finance the lifestyles of their elites.  Fat chance of that ever eventuating. ..... Read more

Carbon taxes: many losers, some winners

Catallaxy Files, 10 October 2018

In a Wall Street Journal opinion piece, Bjorn Lomborg drew attention to the inconsistency of the global warming costs and benefit estimates made by newly minted Nobel Prize recipient William Nordhaus, and the alarmist IPCC climate review issued out of Inchon.  Lomborg, is a believer in the global warming myth but tends to think the money spent alleviating it is better spent elsewhere (his socialist background does not allow him to include an option of leaving the money with its owners!)

New York Times article put the level of a carbon tax necessary to curtail emissions in line with an estimate of their social costs at somewhere between $135 and $5000 per tonne; the former would mean a twofold increase in Australian wholesale prices and the latter a thirteen fold increase.

Actually, though Nordhaus was a pioneer in marrying an emission reduction regime to economics, he uncritically accepted all the costs said to emanate from global warming – crop reductions, hurricanes, desertification of eastern Australia, increases in disease, lost infrastructure.  Having done so, he set about estimating the level of global tax which would redirect spending and investment to take into account of these “externalities”. ..... Read more

Wasteful investment in wind/solar has a negative value

Catallaxy Files, 2 October 2018

A breathless piece by the Guardian’s Calla Wahlquist announced that Victoria’s renewable energy boom set to create six thousand new jobs.   And yet the head of the renewable energy lobby group, Tristan Edis, was downbeat because the subsidies are being phased down.  This is the group that claims subsidies are not really needed (or is it will soon not be needed?) because the wind and solar technology as made such colossal leaps that they are now (or will soon be) on parity with that archaic fossil fuel technology.

New “clean energy” investment in Australia was estimated in 2017 by the renewable punting Bloomberg New Energy Finance at over $10 billion. ..... Read more

Australia's faunal extinction crisis:

Submission to Senate Environment and Communications References Committee Inquiry into Faunal Extinction

Recommendations

1. Recognise that there is no species eradication crisis in Australia;

2. Protect existing property rights to the maximum extent possible and fully compensate landholders for regulatory imposts to promote biodiversity conservation;

3. Provide for equivalent biodiversity conservation offsets when regulating the clearing of land for economic development;

4. Remove any legal impediments to innovation in biodiversity conservation on privately owned land;

5. Minimise the use of 'command and control' regulation;

6. Cease incurring needless expenditure and limitations on private land-holders to address this matter. Where any limitations of land use are sought, owners should be fully compensated from the public purse;

7. Remove the impediments to markets for biodiversity conservation, including by paying landholders for specified conservation outcomes and allowing biodiversity conservation obligations to be traded;

8. Recognise that the cost effective means of addressing the residual species eradications that are deemed likely is to do so directly by devising measures to eradicate feral predators; 

9. Consider measures that will encourage the development of “exclosures” that eliminate feral species and prevent their reinfestation;

10. Review blanket bans on exports of certain species and instead consider mechanisms including ownership vesting to allow their harvesting. Remove the legal impediments to the commercial exploitation of Australian wildlife, including its ownership, use, domestic exchange, and exportation   Read here

Victorian Government contracts for renewable energy supplies

Catallaxy Files, 13 September 2018

Victoria has announced fifteen-year contract for wind and solar capacity amounting to 650 megawatts (the giant Loy Yang is 2,200 MW but renewables only provide about one third as much electricity per MW of capacity).  The price is said to be under $60 per MWH, while the state government also garners the subsidies paid by consumers under the Commonwealth’s renewable scheme.  The Commonwealth subsidies forward prices are running at about $20 per MWh.

In negotiating auctions, the Victorian government agreed to a poison pill clause that would prevent a Coalition successor unwinding the contracts without severe penalty.  If the contracts were as good as the government and its gushing media supporters maintain this would not be necessary.

If some of the forecasts paid for by the different proponents of renewable energy subsidies were to be realised the contracts have some superficial attraction. Two sets of future scenarios (by Jacobs) saw prices in the $70-90 per MWh range over the next decade (last year’s Victorian prices averaged $90 per MWH).  Less beneficial as regards the contracts themselves would the fantasy land forecasts of ACiL (under $50 per MWh for most of the 2020s) or Frontier (which saw prices dipping below $50 per MWh before rising to $70 plus later in the decade). ..... Read more

The Bitter Fruit of a Bad Green Marriage

Quadrant Online, 10 September 2018

The service was conducted by the high priests of alarmism, with politicians pledging their love for rent-seeking renewables promoters as a media choir sang of the wonders to come. Yes, we've seen wonders aplenty -- obscene power prices, economic hobbles and the further corruption of science.

Comments from Josh Frydenberg and Mark Butler  show that neither the Liberals nor ALP understand – or, perhaps more accurately, admit to understanding how carbon policies are destroying the economy. Both promote variations on a theme: subsidies to renewables and penalties on coal, which together  have brought uncompetitive prices. Mr Butler even repeats the shibboleth that without the National Energy Guarantee and its thinly disguised carbon tax, electricity prices, as per the latest model’s fabrication, will cost consumers $550 per year.

Mainstream Australian politicians are responding to a dominant scientific paradigm that says reductions in carbon dioxide emissions will save the world. The science is settled and all that. Only a quarter of these emissions result from electricity production, so it’s not as if the sector’s transformation to renewables could ever be a solution in itself to the planet’s alleged peril. Yet these measures are widely represented by politicians and lobbyists alike as key. Abatement policies remain in place notwithstanding the trivial effect that Australian reductions might have, especially when the developing world is taking no action and the US has withdrawn from Paris. ..... Read more

Will abandoning energy subsidies allow the electricity market to self-correct?

Catallaxy Files, 29 August 2108

Coordination of supply in network industries

Network industries involve firms cooperating in order to meet customer demands.  Their success depends upon parties mutually agreeing on certain interconnection standards in order to combine components together.  This need for coordination was often ensured by keeping the major supply components in-house.

Thus, railways were vertically integrated to ensure that the package comprising train types, tracks, junctions, signalling, workshops, stations and other facets could be coordinated without negotiated compromises with independent businesses.  Difficulties arose in the UK system when track and trains were placed with different businesses and each attempted to foist joint costs on to the other.  Some privately owned freight lines continue to operate like this – notably with Brazilian and Australian iron ore supply routes.  In the case of Australia, BHP and Rio spend hundreds of thousands of dollars a year on legal advisors to maintain control of their rail lines and what they carry; they do so to combat constant attempts by regulatory authorities seeking to force them to open their facilities to other users.  Their imperative is to avoid any interruption to their shipments, since even short delays mean huge costs.

This vertical integration was also standard for electricity supply.  Not only were generation and transmission under common ownership but so also, in most cases, was local distribution.  Integration ensured that the lines and the different sources of supply optimised the needs of the market.  In most of Australia that meant maximising the use of the cheapest source of supply, coal, while using more flexible, higher cost gas or supply constrained hydro to fill in peaks and ensure reliability.  The coal generators remain lowest cost but, since most of their costs are in fixed plant and incurred whether or not they are generating, only when they can continue running continuously for prolonged periods.  Coal generators are also not easily adaptable to stop-start operations.

..... Read more

A Simple Rx for the Energy Mess

Quadrant Online, 23 August 2018

Power prices have ignited the current leadership crisis and there are few signs of sufficient understanding of what caused this in the political firmament or, for that matter, in the mainstream media.

Malcolm Turnbull engineered the now comatose National Energy Guarantee to disguise his ideological imperative of a planned energy system that is fundamentally based on those wind/solar/battery technologies he regards as the shape of things to come.  He says:

Our primary focus is to bring power prices down.

No single measure can achieve this   ….   there’s no single reason why power prices have been so high and there’s no single solution. So that’s why we’re taking action right across the board, with retailers, distributors, generators.  And together, our measures will deliver cheaper electricity.

Turnbull is thrashing around, looking to place the blame for the energy mess on market manipulation by retailers and deceitful price offerings.  His key solutions are

  • price fixing disguised as some form of regulation of “standing offers”

  • new powers for the ACCC to order separation of vertically integrated firms; and

  • underwriting support for some form of new dispatchable energy.

The energy crisis was created by the subsidies to renewable energy, feted at every turn by green activists and supported by all the major research consultancies whose models saw this as a key to lowering prices, on the basis that the subsidised renewables, having their costs covered by subsidies, would bid in the market at very low prices forcing the established players to follow suit.  Such regulatory initiatives neatly expropriated the established businesses, especially the coal-fired generators which, like wind generators, have low variable costs but, unlike wind, have long asset lives and do not, of course, get the subsidies.

All the major modelling firms — Frontier, ACiL, Jacobs — forecast that energy prices today would be of the order of $40 per MWh or less, compared to their actual levels of $80.  All of them expect the same policies to bring overbuilding of wind with negligible marginal costs again resulting in prices of $40 per MWh two years from now. ...... Read more

Turnbull’s new approach to electricity: smoke and mirrors

Catallaxy Files, 18 August 2018

The idiocy of Turnbull’s handling of electricity policy now, once again, looks likely to cost him the leadership of his party.  Faced with termination, he is seeking to extricate himself while pretending to reform the policy that has revealed his incompetence.  His new proposals at modifying the National Energy Guarantee (NEG) are bromides that leave intact his destructive objectives for the electricity supply industry.

Turnbull’s automatic default position is to override the market and substitute his own perceived wisdom.  Ten years ago, on a joint ticket with the ALP to close down fossil fuel electricity production and replace it with wind, he lost the leadership to Tony Abbott.

He has long considered “modern” wind and solar to be superior to the geriatric coal power stations that gave Australia the cheapest electricity in the world.  Among his missions is to effect the replacement of those dinosaurs.  He will not be swayed by arguments that the alternatives are dearer and less reliable and will remain so.  And no amount of evidence will dissuade him that global emission reductions are either unnecessary or unachievable.

His ratification of Australia’s emission reduction commitments in the Paris Agreement the day after Trump’s election victory torpedoed that agreement was the act of a man determined to cement in a favoured cause irrespective of its impossibility.  This was a gesture similar to that of another ego-maniac, Kevin Rudd, in pursuing the Copenhagen conference’s express-train to decarbonisation even after fellow believer, Barrack Obama, had accepted that the policy had to be shelved for the time being. ..... Read more

Regulatory restraints on land use: harmful to affluence and to recreation

Catallaxy Files, 6 August 2018

A couple of weeks ago I launched an excellent book, GOING ‘GREEN’ Forests, fire and a flawed conservation culture by Mark Poynter.

I recalled that in earlier years there was a body that grandly called itself the Competent Authority.  It was in fact just a bunch of bureaucrats who acted as a retarder to the vehement calls of the green left for preservation of forest on one justification after another – protecting some rare critters, protecting any critters, promoting tourism, stopping erosion of river banks and so on.

So, as Mark Pointer notes, in Victoria we have gone from a situation where some 80 per cent of the forest was open to wood harvesting to now where it is 10 per cent and the industry is destroyed.  Other nations have managed to keep highly productive industries – Finland has over 90 per cent of its natural forests open for harvesting.

At least in the 1980s Australia had a forestry departments that understood the dangers as well as the benefits of forestry.  Burn-offs were recognised as vital to stop the very hot fires that are the result of non-management in Victoria as is also the case in California and other places where the forestry department is fused and taken over by the environmental activists.

Global myths are all part of the agitprop – the Amazon will be totally cleared in 48 days if one of the factoid’s that WWF devised were to be true.  These agitators are reinforced and amplified by taxpayer funded activists within the Universities –and Mark makes special mention of those at the ANU including David Lindenmeyer, graced, as are so many radicals, with an AO.  Another one, also within the Australian peerage, is travel entrepreneur Graeme Wood who funded much of the anti-logging activity ..... Read more

Australian energy policy driving us on the road to Venezuela?

Catallaxy Files, 31 July 2018

The absurdity of the oxymoronic “National Energy Guarantee” continues.

Minister Frydenberg is urging all the states to sign onto his carbon tax with its fairyland projections of declining electricity prices on the back of higher roof-top investments. (The Government and its advisers did not get the ACCC’s memo that this subsidy should, in line with developments in the UK and China, be eliminated).  But the renewablesphile, fossil fuel-phobic state and territory ministers are dithering because they want to replace coal with renewables even faster than Turnbull thinks he can get away with.  Such policies would, of course, only hasten us over the economic cliff.

And they are joined by others, including wind farmer Goldwind whose CEO says, “We are at a pivotal point and the structure without the substance of an emissions target which is going to really be meaningful is something I’m not sure will really move us forward.”  This is the firm that claims it has sold its wind energy including the renewable entitlements for $60 per MWh (the market price without the subsidies is far in excess of that)!  So much for the plinth on which the NEG stands that renewables are now or will soon be so cheap that no subsidy will emerge from the new regulatory regime!

The hypocrisy and self-serving goes well beyond this.  Today we saw the release of wind farmer Infogen’s annual report.   Reported revenue is $200 million this year. $120 million of this is subsidies and much of the rest boosted by subsidy-forced plant closures. Directors paid themselves $11.2 million in 2017.

And the Clean Energy Finance Corporation annual report  out today illustrates the degree of wasteful malinvestments the taxpayer is shouldering in this nefarious body’s activities.  In the 12 months to June 2018, new commitments were $2.3 billion ..... Read more

Modelling, Schmodelling! How to rationalise policies that would destroy the economy

Catallaxy Files, 25 July 2018

In a reprise of the feeding of the 5000 with five loaves and two fish, the Energy Security Board has offered salvation for the Australian economy with the National Energy Guarantee (NEG).

A cunning scheme has been developed by the alphabet soup of acronymic agencies charged by the government to prepare a plan to regulate the electricity market. The objectives are to gradually remove the lowest cost (coal) generators, thereby reducing emissions, while lowering prices and raising reliability.  All at the same time!

The NEG proposal remains confidential, (as does Minister Frydenberg’s subsequent offer to the state energy ministers) in spite of it being leaked to all major news outlets.  Under the scheme, the existing generators are predicated to stay on line as long as needed – even though their economics is undermined by rival wind/solar generators.  These are currently favoured by the $80 per MWh subsidy under the Renewable Energy Target (RET) ($40 for rooftop solar). To place this in perspective, the total price before the policy madness started to bite was $40 per MWh.  Under the NEG, renewables – apparently, in a tax boost to government, including hydro – will benefit from an energy intensity scheme (aka a carbon tax).

The level of the carbon tax under the NEG is carefully disguised and is likely to fall both on generators and retailers, the former because the coal generators will have to accept a price discount on their contracts as a result of the increasing level of low emission electricity the retailers must source.  Of course, like any other cost the new carbon tax will be passed on to customers.  The fossil fuel generators also face a forced reduction in output as the “must run” renewable generators get priority. ..... Read more

Energy: Addicted to Waffle and Disaster

Quadrant Online, 18 July 2018

Like dogs with a taste for worrying sheep, politicians' destructive meddling with our energy regime appears to be a compulsion. As Australia's debacle grows ever more ruinously absurd and an election approaches, has it not occurred to them that betraying the flock invites summary justice?

Over the past year, we have seen the misnamed report into “energy security” by Chief Scientist Finkel, the ACCC’s report (“restoring electricity affordability”) — and now a new annual report by market operator AEMO.  These are in addition to a couple of dozen reviews into specific market-machinery matters and the regular reports from Code administrator AEMC, price and informational regulator AER, and AEMO. 

All these outputs derive from resources poured into government management of a sector to provide reports produced by people who are not participants in the actual supply and use of electricity.  Ostensibly, the reports are trying to undo the mistakes made by the predecessors of those currently in the regulatory chairs and their political masters, mistakes that have needlessly doubled the cost and reduced the reliability of electricity.  The market meddling, mainly the subsidising of renewables, has robbed Australia of its natural position as the home of the world’s cheapest power into the most expensive.

The latest AEMO report follows the now well-trodden path to disaster.  It ostensibly offers a blueprint for what it regards as “the least-cost option for an orderly transition to renewables”. As AEMO chief Audrey Zibelman says, “We are witnessing disruption across almost every element of the value chain  …  Care must be taken now more than ever to manage this transformation in order to minimise costs and risks and maximise value to consumers”.  But there is no discussion of this transformation being caused by subsidies, the latest encapsulated in the 26% emission reductions said to be required by the Paris Agreement.

..... Read more

Is there logic in Bjorn Lomborg’s climate change proposals?

Catallaxy Files, 15 July 2018

The Australian’s opinion piece writers on the energy and climate change issue include Judith and Henry as well as Maurice Newman, Chris Kenny and Graham Lloyd.  They are all doing terrific work in addressing the myths and self-serving agitprop that has the main political parties in thrall.

But where does Danish statistician Bjorn Lomborg fit in with this?  Articulate and courageous, he converted himself from being a member of Greenpeace and a climate change believer into a skeptic of sorts.  He did so 20 years ago, after critically analysing but failing to repudiate Julian Simon’s assessments that environmentalists’ alarmism is unfounded.

His position became that any environmental damage humans might be creating would easily be solved by technological developments and that these developments would come all the more readily and cheaply if we refrained from imposing costs on the economy.

He was excoriated for this apostasy in Denmark and elsewhere, (including by establishment academic journals like Nature and the Scientific American) as only a reformed leftist can be.

Even so, back in 2008, he was named one of the “100 the most influential people on the planet” by Time, a “global leader for tomorrow” by the World Economic Forum, and “one of the 50 people who could save the planet” by The Guardian. ..... Read more

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