The story behind Australia’s Electricity Prices

The story behind Australia’s Electricity Prices


We are a few month down the track from the Turnbull government’s involvement into Australia’s national electricity market. If the results of the South Australian election was truly a referendum about the veracity of Mr. Turnbull’s NEG ( National Energy Guarantee ) strategy then one thing is clear. The Turnbull government’s NEG is very similar to the policy position of the Rann government in 2010, minus the ‘Finkel Review’ recommendations. What is interesting about the South Australian election is that Jay Weatherill’s renewable energy policy during the recent election campaign closely mirrored the advice I gave the Rann DPC ( Department of Premiere and Cabinet )in the same year. So perhaps we should ponder the ongoing electricity pricing debate with this retrospective in mind.

In 2018 the position of both the Turnbull federal government and the new Premier for South Australia, Steven Marshall, is very similar to the Rann government position of 2010. Jay Weatherill fought the election, without knowing it, on almost the identical advice I gave Mike Rann’s DPC. Does this mean that the NEG strategy is almost 10 years behind current best practice? No! My advice to the Rann government was tailored to the needs of the South Australian government at the time. It was advice tendered in good faith and following talks with Unions and Wind farm operators. Most of us knew that the compromise advice I tendered to the Rann government was 10 years behind best practice EU grid code standards. The key points of difference between stakeholders were that South Australia urgently needed to build an embedded storage network to achieve electricity supply independence from the National Energy Market (NEM). AGL immediately recognized that this would undermine its contractual agreement with the South Australian government. AGL saw that integrated DER ( Distributed Energy Resource) zones incorporating DES (Distributed Energy Storage) systems would pave the way for independent renewable distribution zones ( hubs ) supplemented by direct wind and solar farm PPA’s  (Power Purchase Agreements). To stall this debate AGL placed immense pressure on individual communities, Unions and the South Australian Energy Regulator. The push for a ‘Green HVDC Power Transmission line’ and a second interconnector from the Great Australian Bight to NSW was not my preferred solution to the problem because I could not see how a federal Labor Industry Minister rusted onto a gas transition program could possibly approve this multi-billion dollar project. The Green Transmission line was rejected by the federal Labor government. Subsequently South Australia’s energy independence from the NEM with the help of a DES policy was shelved until 2016.

Does this mean that the Turnbull government will approve the second interconnector and the HVDC green transmission line from the Great Australian Bight to NSW? It might ensure that the Snowy 2.0 project may become commercially viable? Don’t get me wrong! I like  pumped Hydro projects. I like them especially if they stack up commercially against other DES solutions. I like them even more if they enhance Australia’s water security whilst promoting the sustainable economic future of regional towns. This implies a considerable amount of detailed cooperative planning and higher order project management skill in both state and federal bureaucracies. Neither government has demonstrated this level of cooperation since 1901 except when the country was on war time footing. Neither has demonstrated the ability to operate at current international best practice standard when it comes to major national infrastructure projects in recent times.

What does this have to do with electricity prices?

No doubt many of the eastern states are just as confused today as they were ten years ago. Is the purpose of the NEG to build a resilient NEM with an emphasis on state energy supply independence, or is the purpose of the NEM to build a resilient national transmission network with a guaranteed 15-18% capacity supply reserve? The Snowy 2.0 project seems to favour the latter. Perhaps the purpose of the NEG is to build a series of large scale wind and solar farms connected to government and Utility owned DES solutions that are supplemented by gas and coal power stations? In all cases we have to ask whether Mr. Turnbull’s assertion that Australia’s Energy Crisis is a crisis of economics and engineering was a perverse Freudian slip for a government unable to accept its own managerial accountability over a dysfunctional energy bureaucracy sadly out of its depth.

In the absence of a clear definition of what a ‘Renewable Energy Zone’ actually is, the ‘Finkel Review’ has left the door open for continued delay in the formulation of a viable Utilities transition policy that will have a genuine impact on electricity prices. This was clearly articulated by US investors during Mr. Turnbull’s recent visit to Washington. What is even more perplexing is that the Turnbull government’s commitment to corporate tax cuts includes no targeted tax measures to underpin the creation of renewable energy zones that would positively impact on lower power prices. This threat to the current and future profitability and international competitiveness of high electricity user SME’s  ( Small to Medium Enterprises ), continues to drag on Australia’s productivity, jobs creation and GDP growth projections. The Trump government’s recent tariff bombshell tends to indicate that much of the Turnbull government’s economic policy is based on prayers and assumptions of friendship rather than sound policy. National debt sustainability through a resilient and self-sufficient industry policy is clearly desirable. Reliance on growing a military manufacturing sector and the vagaries of the commodity markets are speculative strategies for a country in need of a competitive and clearly articulated industry policy. Perhaps we can pin our Westminster ideals to the Dutton Plan and flog goats to South Africa in a giant prepacked Biryani to pay for the Turnbull government’s corporate tax agenda?

The political party Hat trick

We have already been told that Mr. Turnbull and Mr. Frydenberg have worked hard to solve Australia’s electricity crisis. The question on everyone’s lips is a little predictable! What has changed? When I re-started the prosecution for the case of energy industry reform in 2016 the prospect for real change seemed more promising then in 2007. After all, at what point will a politician realize that the uncontrolled cost blowout of a core social service will start costing votes and drive industry and investment offshore? We are lucky that economics is an applied social science rather than a real science. Like ‘politics’, the practice of ‘economics’ is about shaping opinions and managing stakeholder influence by manipulating statistics and cherry picking data to serve an ideological construct. In a western liberal democracy this translates to powerful interest groups having disproportionally greater representation then the citizen paying the bills. Australian’s are pretty basic meat and three vegetables sort people in this respect. They like the idea of kicking the tyres and checking under the hood of their Australian made ‘Holden Ute’. It is great to put the foot to the pedal and listen to those dual exhaust notes. Those twin blowers sound exactly like the noise that comes out of Canberra.

There is no conversation with voters because politicians, public servants, institutional and industry leaders have mastered the ability to talk at you rather then holding a meaningful conversation with you. It’s a lot easier to presume what people want to hear instead of addressing the real issues at the heart of the matter. Everything is just fine ‘under heaven’ when the share of the economic spoils is relatively evenly spread throughout the economy! The problem with this interpretation of the Über economy is the dichotomy between the applications of Taoism and the neo-liberal corporate state in the grip of grey ghost serenity asserting objectives only non-accountable mandarins can call unquestionable truth. It was no surprise that the head of the ACCC recently announced that greater data sharing was inevitable without mentioning the need for consumers to own their electricity data. What was not talked about was data sharing between whom, for what and at whom’s expense and for whose benefit? It was even less of a surprise when the ‘Chief Scientist’ declared that Australia’s electricity mandarins are not accountable for Australia’s electricity crisis. No one doubts that serenity ‘Under Heaven’ must be preserved for all grey ghosts in the machine. The proposition that for over 20 years Australia’s smartest people in charge of the NEM had neither the power nor the tools to enforce grid standards and regulatory compliance to ensure electricity reliability and price affordability requires balls of steel. Not even Pinocchio could have carried those ‘cajones’ without some red faced embarrassment.

This is precisely where the Howard government policies are coming home to roost. The consequence of privatization in conjunction with generous tax and investment allowances are dragging the national economy into debt. Instead of comprehensive taxation reform the Turnbull government has no problem continuing the rapid shift towards a user pays economy. There is nothing wrong with the user pays principle if the accounting practices that underpin it are both fair and equitable. This is where another caution I raised ten years ago comes into play. In all service sectors of the economy the concept of independent data validation and verification must guide the compliance and enforcement mechanisms that inform fair consumer prices. We know that the ACCC, until recently, has been excluded from inquiring into the electricity sector by law. We also know that AEMO and the AEMC have been complaining for years about inadequate and timely access to accurate electricity data. In short, if we are to transition to a user pays economy for all socialised services then at the very least we have to ensure that regulatory and compliance frameworks reflect community standards and do not allow for the deliberate exploitation of users for the benefit of privatized cartel and government sanctioned operators. This includes the privatization / outsourcing of government services to preferred contractors without any quality assurance oversight and regulatory control for the accountability of these services. Once again we come back to three core policies I have been hammering for more than 10 years.

  • Define a DER (Distributed Energy Resource) and DES ( Distributed Energy Storage ) for a renewable energy zone/ hub for consumer groups. Define a standard renewable zone / hub as a minimum 40 MVH independent capacity supply zone that can be grid disconnected during emergencies and supplemented with private PPA wind and solar farm agreements without Utility approval and function independently from the electricity distribution company.
  • Ensure that consumer data ownership policy enables independent 40 MVH Blockchain networks supplemented by transmission and distribution grid embedded DES services that are free from electricity distribution company data interference and data privacy manipulations and data mining.
  • Ensure that each state has sufficient electricity generation and reliable grid capacity to meet is own demand under peak conditions.

What politicians and free market economic theorists don’t want to comprehend is that in respect to socialized services the idea of spreading the cost of socialized services to all users simply doesn’t stack up in the 21st century Über economy. You either retain electricity, water, gas, health, aged care and education as a fully government owned service and spread the cost evenly, or you implement a just in time service that allows the consumer to pick and choose when and what part of the service they wish to use and pay for. You simply can’t privatize a socialized service and then mandate a minimum socialized payment obligation onto all users regardless of their use of the service. This is the very same argument the LNP uses when it wants to attack the legitimate right of Unions to participate in Australia’s industrial process. This hypocritical double standard is why the Australian electorate is so angry. Electricity users pay a daily grid connection charge without knowing exactly what components make up this charge. Now they pay a Carbon charge even though the Abbott government abolished the fixed Carbon price system introduced under the Gillard government. When Mr. Turnbull and Mr. Frydenberg recently announced that they had fixed the Australian energy crisis, by tackling price affordability and grid reliability, the electricity prices promptly increased as the grid struggled under repeated coal power plant failures.

Despite this obvious contradiction Mr. Turnbull and Mr. Frydenbergy stoically maintained that without their intervention in the gas market electricity prices would have been even higher. To the average voter this is about as informative as the dual exhaust on the V8 Holden Ute droning at full pelt. Mr. Turnbull and Mr. Frydenberg are counting on the fact that the average punter has no idea about the difference between Pool prices, Capacity Reserve Prices and L & R Frequency Ancillary Control Prices and how they interact with the Wholesale electricity price.

What is the Wholesale electricity price

Under Australia’s broken electricity market the wholesale electricity is a calculated average price for each state. The Pool price is the contracted supply price. For example:

A state government releases a competitive tender for the supply of ‘X’ MVH of electricity generation. Under the tender the state government will specify whether the tender is for renewable energy or some other generation fuel option. Even though the lowest bidder is not guaranteed to win the tender, recent history suggests that wind and solar farm prices of $60 – $80 per MVH are competitive choices against gas hovering at $110-$150 MVH. The state electricity Pool price is the average of all generators in the state. So if a state has two coal plants with high maintenance and low reliability cost, one gas plant and several wind and solar farms the average Pool price is calculated by adding up the total contracted price for each generator and dividing the total by the number of generators in the state. When Mr. Turnbull and Mr. Frydenberg crowed about fixing the electricity price affordability in 2017 they used the electricity Pool price to claim that power prices would reduce by approximately $100 per consumer per annum. This is serious ‘Pinocchio-nomics’!  Something Mr. Scott Morrison is very familiar with. What we witnessed instead was that Utility companies immediately applied for their annual mandated price increase in daily connection charges to recover the shortfall. This provided Mr. Turnbull with the ‘Pinocchio-politico’ excuse that under Australia’s ‘free market system’ electricity companies are entitled to apply for reasonable and fair price increases under the Energy Market Rules. What Mr. Turnbull neglected to tell the voter and the Media was that the Market Rules don’t work. The Market Rules allow the energy cartels to manipulate the wholesale ‘Spot’ price. We can only presume what was agreed between Mr. Turnbull and the energy cartel bosses. The following is an approximation to what is likely to have happened. Because we ( The Government ) are legislating the ‘day ahead market bidding process’, the government requires that you don’t game the short term electricity wholesale ‘Spot’ price to drive up prices in 2017 and 2018 beyond what is agreed. In turn the government will ignore the gauging of the retail daily pass through charges. Wink, Wink! Nudge, Nudge! Oink, Oink!

We know that the wholesale ‘Pool’ price is notoriously unreliable as an indicator of wholesale electricity prices. Perhaps this is the reason why politicians like using them. Industry never uses the ‘Pool’ price other than as a base indicator for investment return. The industry prefers to use the long term projected ‘Spot’ price in conjunction with future usage analytics and marginal returns offered by ancillary supply services. The latter is based on private industry owned data about grid integrity and generator resilience under optimum demand conditions. The industry knows exactly what part of the NEM and which generators are likely to fall over under high demand conditions. AEMO has known this as well for many years. This is of course where the energy market cartel makes its money in collusion with the grey ghosts of the energy bureaucracy. We know that Frequency Ancillary Services are contracted at serval hundred thousand dollars per MV supplied into the NEM annually. For this reason any coal or gas fired power station contracted to provide Frequency or Voltage control services can show a profit even though the generator might run at a loss for most of the year. Even though the electricity ‘Spot’ price is capped at $14,200 per MV, this price simply does not apply to capacity reserve markets. The South Australian Tesla battery impact on the NEM in 2017 reduced the cost for FCAS from over $250,000 to about $50,000. This should have had an impact on consumer prices in South Australia if the government had passed these savings onto the consumer. Since the South Australian government also contracted a high cost gas power station the Tesla battery cost savings simply subsidized the gas power stations in this incidence. The reason is twofold! The Tesla battery is not contracted by AEMO to provide short term FCAS into the NEM. The regulation that mandates a 5 or even 2 minute settlement period for fast response storage and ramp up technology doesn’t even exist and its introduction will be resisted by the large energy cartels until at least 2021 or beyond. In other words, South Australia didn’t get paid for the intervention of its battery into the NEM because the battery is not contracted by AEMO to provide this service to AEMO. Since the CAPex for the new gas plant and the battery still needs to be paid for the South Australian government budget would have struggled to lower energy retail prices even if it wanted to.

Once again we witness Mr. Turnbull and Mr. Frydenberg engaging in nothing short of political thuggery by claiming that South Australia’s irresponsible renewable energy policy is entirely the fault of its own making. I don’t know whether this was a deliberate political strategy to influence the outcome of the recent South Australian election. Perhaps the motivation is the perverted aim of slowing Australia’s renewable energy transition in order to buy time until the Turnbull government finds a Clean Energy Policy prior to the next federal election. We do know that any federal Clean Energy Policy on similar lines to the Rann policy of 2010 is not enough to address our international obligations. What I can say with certainty is that the Rann government renewable policy in 2010 was already 10 years behind best international practice. Implementing a NEM strategy with a ‘Finkel’ bolt on would effectively consign Australia’s Clean Energy Transition program to being 20 years out of date. It is not surprising that US investors simply scoffed at the industry and super fund heads who accompanied Mr. Turnbull on his recent visit to Washington. Australia still has no renewable energy transition policy worth investing in. This is the energy reliability crisis the Turnbull government has engineered for Australia under a fake energy price affordability caveat.

How is the Retail Electricity Price Calculated?

We know that the state wholesale electricity is the spot price + the contracted frequency and voltage control prices + any unforeseen contingencies. Generator companies can make profits by exporting any excess capacity to other states + any carbon credits this might entail. It was the Clean Energy carbon credits the Rann policy was banking on through the Victorian and South Australian interconnector. Since Victorian customers are also paying for the HVDC underwater connection with Tasmania the net dividend to South Australia was never going to eventuate unless Victoria closed the majority of its coal generators. It was the Victorian coal generators supporting a South Australian grid built without a mandatory storage requirement that supplied the power when the wind wasn’t blowing. It did this at enormous cost to the South Australian consumer. In turn, Victorian customers benefited greatly when the ‘Roaring Fourties’ made the wind turbines go like the clappers because the wholesale electricity price dropped like a stone. Once again the lower costs where not passed onto the consumers in either Victoria or in South Australia because the minimum Pool price came into effect. Even then the extra cash disappeared into the Cartel coffers as South Australia tried to balance its energy revenue against an excessive interstate energy import bill during the lean times and a low Pool price in the good times. This sort of ‘Pinocchio- nomics’ only has one outcome as the Weatherill government discovered in 2016.

If there is any legitimate criticism to be levelled onto South Australia, then the failure to listen to my 2010 DPC advice is it. Recently I listened to a boffin from some right wing industry group who claimed that South Australia purchased 60 million dollars’ worth of Victorian coal power annually to keep the lights on. If we assume that this is the gross subsidy that the South Australian government was channelling into its own energy market in order to balance the books I can understand why the Weatherill government was sorely disappointed at the blatant rip off from the other states in the NEM and AGL. This however does not explain why Victorian, NSW, Tasmanian and Queensland customers are facing the same rip off.

We know that wholesale prices plus transmission charges, substation and interconnector charges as well as distribution costs, state taxes, GST, data metering charges, billing charges and carbon charges make up the retail electricity price. We also know that the vast majority of these fees and charges are undisclosed and agreed to behind closed doors between state government ministers and the Utilities. Transmission charges are levied on distance. No one knows what the interconnector and substation charges are. I do know that the Tasmanian interconnector costs Victorian electricity consumers about $1million every year in maintenance alone. We know that distribution charges are agreed behind closed doors and take into account grid integrity, terrain, maintenance, insurance, bush fires and climate impact, street lighting discounts for local councils and the elderly etc. We also know that electricity company employees never pay more than half the recommended retail price.  Built into the retail energy price are a raft of hidden cross subsidies and concessions that everyone else pays for. Don’t get me wrong! I am fully in favour of concession prices for anyone on welfare. I am fully in favour of concession prices for anyone suffering serious hardship and illness through no fault of their own. That’s what an equitable socialized service should do. What I am against is this piecemeal attempt to wrangle concessions for those who can’t pay their power prices ordinarily when the legitimate retail price should be between 30% – 50% lower for all. I am against corporate welfare disguised as a legitimate service charge.

We are not just dealing with a broken electricity market in one state. We are dealing with a broken market and pathetic government in all Australian states. It is simply unacceptable that local councils negotiate a new rate for their street lighting without making a real effort to replace their ML 40’s with smart LEAD street lights. Last time I looked the replacement cost was $5000 per light with battery backup in the pole. $50 from 1000 rate payers can pay for 1 smart Lead street. $50 from 20,000 rate payers every year can replace the majority of all ML 40’s in a local council jurisdiction quick smart. So what is local government doing with all the rates we pay?

The future of Australia’s reliable and affordable energy market

The federal ‘Ministerium’ of population and liveable resilient communities is fully aware that Australian cities are facing a massive infrastructure crisis. No doubt age old concepts of increased urban densities and linear rapid transport corridors to regional towns will feature heavily in the deliberations of urban planners and designers in the future. We might even see the revival of the 19th century ‘Garden City’ and the German idea of designated green belts between cities and regional towns. What we haven’t seen from urban planners and politician is common sense. If we assume that high rise apartment living will become the norm in Australia’s major cities, then we should seriously think about the impact these energy guzzling shoe boxes have on Australia’s national electricity grid. Until we can include reasonably priced and efficient transparent solar glass in the design of the next high rise apartment block we should think about retrofitting all apartments and office blocks with energy storage batteries. I favour a planning and building code amendment that specifies a 1:4 consumption to storage ratio for all apartments and office blocks. This national mandated amendment to local council planning and building codes could not only turn each high rise apartment and city office block into a giant ‘Tesla Power Wall’, but it could form a significant storage hub for each 40 MVH renewable energy zone postulated under the ‘Finkel Review’. Funded through a Green Bond and a targeted Tax credit mechanism the energy storage of each city high rise can cement grid resilience, lower ‘Spot’ prices and reduce FACS costs in one elegant low cost solution. So why don’t we have such a national policy?

Australia’s politicians don’t think elegant solutions. They are enthralled with a user pays philosophy where consumers pay private companies a premium for a social service that could easily pay for itself in most circumstances. What is wrong with this simple idea in a user pays democracy like Australia? What is wrong with the user pays principle is that those on higher incomes spend disproportionately less of that income on basic social services such as electricity, water and sewage. They also pay a lower proportion of their income on food, rent, house repayments, council rates, health and education. Australian federal governments have spent years talking about tax reform without doing anything. The Turnbull government is prosecuting the case for lower corporate taxes in readiness for the next election without any reciprocal obligations on Australia’s corporate citizens. What is not discussed is the simple concept that lower tax revenue under continuous public service growth requires that revenue to pay for public servants and social services must come from somewhere. Only a few people are talking targeted tax reform that addresses the social inequalities the corporate welfare system has created in the last 30 years. No one is talking about smarter government policies that target the scourge of government and private business fees and charges that have replaced tax revenue over the years. Oh yes! Direct user pays principles are fairer and more equitable the liberal think tanks maintain. Bollocks! Look at the electricity market and tell that to the pensioner with rooftop solar paying 1000 Kwh of solar generation per billing cycle to cover daily pass through grid connection charges. The perverse thing about this is that same power is resold by the electricity distribution company at 3 times the retail price as the pensioner pays GST for the privilege of trying to live sustainably on a pension.

What we have seen over the last 30 years is a steady increase of cost recovery by all three tranches of government in Australia. Increases in fees and charges under the user pays principle have reached the point where base service charges predominate at all levels of government regardless of usage or equity. As a tax replacement this method of cost recovery simply does not stack up. At no point in this discussion do we see targeted tax and service fee charges that actually reflect real time usage. At no point do we discuss the undue influences of powerful stakeholder groups and perverse ideologies that benefit the top 10% at the expense of everyone else. This is particularly true when more intelligent solutions are starring Malcom, Scott and Josh in the face!

We don’t even discuss the concept of leveraging ever rising social service costs against intelligent service provisions that can generate their own income and lower the burden on all community members fairly. We don’t do that because we have privatized and outsourced essential public services to private business without any effective checks and balances. This is precisely what is wrong with neo-classical economic theory in the 21st century Über economy. Users demand to pay only for what they use. They expect that service providers are capable of providing a just in time affordable service tailored to the needs of the customer. Customers do not expect to pay a socialized service fee for an essential service to a private company. This is especially true when the private company can earn additional revenue from other sources and maintain profit margins through more intelligent management of their existing revenue streams whilst it minimizes its tax obligations through offshore accounts. Customers do not expect to subsidize the corporate bottom line because of governance, regulatory compliance, standards and enforcement failures that are the responsibility of the government. Customers demand integrated and customized services that demonstrate that both governments and corporates are fully engaged responsible citizens of the national economy.

At what point do politicians finally work out that the Australian Energy Crisis is not a crisis of reliability and affordability but a crisis created specifically by government to benefit the few. It is the sole responsibility of governments to work cooperatively on smart integrated solutions that benefit the community. It is not the government’s responsibility to work for the express benefit of the top 10% income earners and private corporations who minimize their social and tax obligations to the national economy. But of course you say! As long as we ignore the failures of western liberal democracy in Australia, all must be well ‘Under heaven’.


Powering our future Inquiry into modernizing Australia’s electricity grid, House of Representatives Standing Committee on the Environment and Energy. Canberra 2017

Fact Sheet The National Electricity Market

Regulated Electricty Prices 101115 PDF document – How are Electricity Prices Set in Australia

IBISWorld Industry Report D2630 Electricity Distribution in Australia, 2014

State of the Energy Market , AER publication May 2017

Essential Services Commission Report RPT-2014-15 Comparative Performance Report Customer Services 20160502 PDF

Electricity Prices and network costs 2, Energy Networks Association, 2014 Report

2017 Review of Climate Change Policies, Australian Government, Department of the Environment and Energy

Independent Review into the Future Security of the National Electricity Market – Blueprint for the Future, June 2017

New business models in the electricity sector, Jake Brooks, July 26, 2016

Roadmap 2030 Financing and implementing the Global Goals in Human Settlements and City-Regions, World Urban Campaign, the ecological sequestration trust

Competition Policy Review Final Report, March 2015

Author Biography


Mr. Angerer has more than 30 years’ experience as a government adviser and senior consultant covering all aspects of Climate policy and context specific solutions for urban and rural development. Mr. Angerer has a multi-disciplinary background in Architecture, Engineering, ICT, GIS & Mapping, Urban and Rural Development, International Development Law, Transport Systems, Environmental Management, Business and Project Management, Risk Analysis, Change Management as well as E-Learning, Education Management and Training. Mr. Angerer has developed the UN compliant E-WASH system with a focus on poverty reduction, food and income security, whilst enabling positive investor returns at the lowest risk for developing nations. Mr. Angerer’s expertise is in strategic government and business policy and business development for all aspects of renewable energy and Blockchain peer to peer VPN managed community owned smart grids for integrated E-WASH grid connected and off grid system. Mr Angerer also has an extensive background in employment and training policies and curriculum design standards at national and international level.






The National Energy Guarantee needs a Tax Plan

Since the announcement of the NEG (National Energy Guarantee) many commentators have analysed its intent and impact on Australia’s ‘Energy Only Market’. Few have bothered to explain this clever pre-election marketing phrase in terms of Mr. Turnbull’s declared engineering and economics objectives. This might very well be because details of what this fossil fuel power generation asset revaluation scheme actually is are yet to be announced in greater detail. Despite this, the federal government has not been averse to making a series of unsubstantiated claims about the efficacy of the scheme to Australia’s long suffering consumers. This ‘elegant solution’ to a tricky political problem will by some accounts reduce energy bills and ensure that customers will be spared from future brown outs and black outs.

Preliminary modelling by a carefully selected and cartel approved consultancy firm reveals that Australia’s coal fired power station operators have been declared National Treasures. Indications are that in addition to an asset revaluation they are to receive a discrete reserve margin administrative allowance. Most of us capable of reading the tea leaves have a fair idea where this subsidy train is going. So far the modelling has not defined ‘dispatchable capacity’, nor bothered with recent data on wind and solar CONE ( Cost of New Entry ) value with integrated storage costs. The preliminary modelling ignores all industry storage and hybrid self-generation and self-storage projects currently in the pipeline. Any idea that this will be an authoritative or independent modelling exercise was never on the Turnbull government agenda. What we do know already is that the veracity of the governments claims on reliability and affordability rest somewhere between economic ‘La La Land’ and the highway to paradise.

There has been none of the regular trolling out of academics prepared to eulogize a scheme designed to underwrite energy cartel balance sheets and executive bonuses. The poignant poetry of Jim Morrison reverberates in Australia’s sacred chambers as the ATO shakes it’s booty to the allure of the back door man. We are assured that our national energy experts appointed to the new ‘ESB’ (National Energy Security Board) will eventually come up with a policy somewhere in the range of a forward capacity multi-tranche bidding market with perhaps a day ahead bidding process and a bi-annual capacity reserve auction.  The battle front will be the aggregated demand side policy measures as the 5 minute settling period is pounded out over the next two or three years. Modelling this mess will demonstrate the financial and engineering sanity of a proposal that kicks the prospect of stranded asset write downs a little further down the road. The NEG carrot has always been about fixing the debt to asset ratio for the large energy cartels first. What will remain in the coming years will be an unconvincing taxpayer subsidy scheme to soften the battle ground over market rules whilst addressing the market dominance of vertically integrated large generators. For now the large cartel owners know that their status as a preferred taxpayer dependent is guaranteed. Even the Bankers are breathing easier as the executive piss ups on the Rutherglen Red begin in earnest. Since no one has any clear understanding about the actual policy design of the NEG, we can assume that any future ‘ESB’ /AEMO modelling will remain firmly within the confines of magic pudding economics.

The elegant accounting of the energy magic pudding

There is little doubt that the NEG is an elegant solution for those who are benefiting from it. Few believe that the NEG will in fact reduce energy bills and even fewer agree that the NEG will spare retail customers from electricity brown outs and black outs in the future. As usual, the devil is in the detail. With the LRET (Large Renewable Energy Target) quotas almost filled for the year, the prospect of no new wind and solar farm approvals elicit a collective sigh of relieve for the owners of inflexible coal generators. Not that this actually matters much since administrative payments from retail outlets in the form of daily charges keep ticking over in excess of $3.6 billion very nicely every year. What is clearly more valuable to the large vertically integrated cartel owners is the implied guarantee that enables a discrete default reserve margin for balancing / ancillary services to be implemented at the ESB/AEMO/ AEMC market management level. Under the NEG proposal this would require a RES (Renewable Energy Supply) curtailment of typically 5%. The net effect of this is the systemic undermining of decarbonisation and state renewable targets at higher consumer energy prices. This will be true even if wind and solar farm operators integrate their operations with grid embedded storage and localized community / large consumer owned demand side response smart-grid operations, managed under a third party behind the meter Blockchain.

What will be of particular interest to all is whether the state ministers at the upcoming 2017 November COAG Energy summit will point out to Josh, Mal, ScoMo and the Belgian waffle, that any NEG without substantial market rule reform is worthless. A dud NEG not only limits, but actively prevents participation of demand side resources and response aggregators ( third party service providers )  in the NEM ( National Energy Market). Large pools of aggregated response resources arranged in smart-grids and Blockchain systems combined with energy storage provide low cost bi-directional flexibility that is invaluable when it is integrated with wind and solar energy. The 2014-15 US figures for the Pennsylvania –New Jersey –Maryland Interconnection demonstrate that demand side market participation saved customers 10%-20% in reliability costs and 30% in constrained power zones culminating in total consumer savings of $1.2 billion. In a market growing only at 2% per annum owning customer data and controlling rooftop solar and customer storage assets remains the cheapest way for larger energy cartels to earn a dollar.

I am certain that state energy ministers will have been briefed about this before the November meeting. They will also know that any talk of demand side aggregated response and integrated bi-directional flexibility will raise the meeting temperature. The cartel will fight tooth and nail against third party demand response and reject any foray into behind the meter technology. They know full well that any third party competition not owned or controlled by them is simply not in their interest. That’s because not one of these dummies has done the math on the profit margins that can be achieved under avoided cost conditions. What will be of serious interest to all of us is whether the state energy ministers will agree to buy into a federal money deal for new state interconnectors in return for ‘X’. Ignoring an uncompetitive and dysfunctional market owned and controlled by a handful of large energy companies, knowingly and deliberately stealing from the Australian taxpayer, will never be forgotten by the Australian people. Any COAG energy deal between states and the federal government will need to pass a stringent pub test.

We all love a deceptive and meaningless marketing phrase

If you look at the official peak demand data for each state you will notice that projected electricity shortages for the NEM member states amount to less than 20 days per year from 2018 to 2025. Projected shortages in a market averaging a 2% annual demand increase are likely to occur in New South Wales and Victoria until new wind, solar and grid embedded storage solutions are completed. This does not include the installation of any state or industry commissioned demand aggregate response resources. It must be remembered that AEMO predictions have never been reliable and have generally trended towards the alarmist. Some would argue that it is normal for energy market authorities to remain on the conservative side of any prediction. Australia’s energy Quango’s have always been the patsies of the large generators. The dominance of AGL in the South Australian market stands as a clear warning to anyone thinking about creating a privatized taxpayer dependency. Finding a way around a 200 year contract using corporate anti-cartel and competition laws is likely to be a protracted legal smorgasbord.

South Australia, Tasmania and Queensland are likely to be net energy exporters for the 2018-2025 forecast periods. South Australian wind contributions to the NEM will continue to drive energy wholesale prices into negative territory for an average of 3 weeks every year if the interconnector doesn’t melt down again. This benefit is unlikely to be passed onto consumers as energy cartels leverage profits across generation platforms as well as transmission, distribution and retail assets beyond state borders. Within their elaborate matrix of parent and child companies a fair share of profits will continue to be siphoned into tax heavens via offshore marketing companies and overseas loan arrangements. These arrangements have matured during the last ten years with the willing assistance of the ATO (Australian Taxation Office). Why the Australian treasurer continues to prosecute the case for an untargeted corporate tax reform agenda given that the last effort produced zero results, continues to stun the punters. Surely, a smart tax package with a targeted micro-economic reform agenda would make a lot more sense.

South Australia, the ACT and Tasmania are well on the way to becoming 100% renewable by 2050. Significant wholesale price stabilization will come into effect with new grid embedded storage construction leveraging lower retail electricity prices by 2030. New South Wales and Victorian state energy policy settings appear to be marching towards a substantial renewable energy transformation with some grid embedded storage. Advice on coherent demand side policy options that would drastically reduce retail energy prices and infuse much needed wholesale market competition are blowing in the wind.

This leaves the rouge state of Queensland. No one is certain whether there is something in the northern waters that consistently drives state energy policy to excessive and unrepentant consumer filching and unrealistic fossil fuel mania. Perhaps this irrational behaviour is a hangover from the Joh Bjelke-Pertsen’s era. Those who have had dealings with some of the senior public servants doubt that the peculiarities of the state bureaucracy demonstrate any capacity for lateral thinking. Then again, I seem to have experienced the same myopic and self-serving stupidity in most Australian state public service venues during the last ten years. Perhaps it is my passionate approach to German demand side energy diplomacy! Perhaps it is my low tolerance for corruption, bullshit and the self-serving sycophants who run these government departments! It makes no difference to the basic premise that the NEG will have absolutely no impact on the reliability of flexible energy generation, or the capacity of transmission and distribution assets to withstand maintenance outages, bush fires and storm damage. All we have is Mr. Turnbull’s silky smooth assurance that the ‘ESB’; our smartest energy experts, are on the job and working on the best solution the federal government can hope for. For me, trust needs to be earned. To be honest with you, I don’t trust any of these dodgy buggers.

Is the ESB some type of Stalinist command economy joke?

The ESB! Wow! Sounds like something from a 007 movie! Do these super smart beings come with their own uniforms? Maybe the Dutton plan can include something chic. I like the red Star Trek jumpsuits.

Irrespective of Mr. Turnbull’s glittering report card for the incompetent lot that has been running Australia’s energy Quango’s on behalf of the cartel, the political reality is far more basic. In times of policy confusion and political chaos the practice of every Australian state and federal government has always been to create another semi-autonomous department and charge the unelected grey ghosts with the responsibility of burying uncomfortable truths deep under a public service rug of colourful marketing hype and bullshit. We have a public service code of conduct. We don’t have a specific public charter for the energy Quango’s that requires adherence to the highest standards of social and corporate responsibility. Consumed by process and itemized tasks these people have no obligations for the welfare of the Australian community and the overall health of the economy. This also includes the individual decisions and choices these people make during the course of their work and the downstream consequences that may result. There is no charter for any of the energy Quango’s to serve the national energy security interest and make decisions for the economic benefit of the nation. We just assume that these people come with the moral and ethical stuff to do the right thing by the rest of us. That’s probably why we are all so bitterly disappointed and disillusioned with the Australian political process.

Without any accountability to the Australian people these bureaucrats come fully operational without a public charter that defines their responsibilities to the community. Well, not quite! In the case of the ‘ESB’ we are fully aware that its responsibilities are to the energy cartel it is charged with managing under an as yet undisclosed service agreement. Do you trust them?  We are already witnessing a raft of stupid ideas dribbling out of the mouths of these ‘ESB’ members. You might remember the recommendation to increase administrative charges by a 10% annual minimum in order to cover expenditure for poles and wires. How about the need for a half hourly $0.001 smart meter service charge buried deep in your daily electricity network connection fee? Yep! You probably didn’t know that smart meters are four times more expensive to run and manage then the old guy who used to come around and read your meter every 3 month. Here are a couple of new ideas from these super brain energy heroes running around in their new ‘ESB’ Star Trek uniforms.

  • Let’s vary the voltage by 3% so the energy companies can save money.

I don’t know whether you have read the warranty agreement on some of the electrical devices you have bought. Every one of them includes words to the effect: ‘Frequent voltage variation due to unreliable electricity supplies /electricity supply faults, may result in your device operating unpredictably. Unreliable electricity supplies may reduce the normal operating life of your device by half. In severe circumstances your device or some of its constituent parts may fail. The company takes no responsibility etc…..’ In short, the electricity distribution companies who have been experimenting with a voltage reduction strategy for the last 12 – 18 month have effectively voided every warranty for every electrical device you own. Can anyone tell me what happens when your house burns down because of a faulty device caused by the distributor stuffing around with the voltage to your property?

  • How about the other great idea of paying people to turn off their appliances?

This demand management idea is straight out of the US. I presume that people with medical conditions are excluded from this brain wave for now. As a demand response management tool this silly idea will only work if consumers actually adhere to their voluntary decision to curb demand during peak periods. This makes voluntary demand reduction not only unreliable but an utterly useless management tool because supply will still have to be forward contracted from some kind of capacity reserve. A far more useful tool for consumer participation in the market is a system where consumers can actually see the real price of energy at any given moment in time. I am not suggesting that consumers sit in front of their computers and monitor the energy market. I am suggesting that large pools of aggregated response resources are arranged in smart-grids and Blockchain systems combined with energy storage to provide low cost bi-directional flexibility. Let the smart-grid manage localized energy generation and storage distribution as well as excess energy sales into the wider grid automatically. This will eliminate forecasting uncertainty and deliver an integrated grid management response solution for wind and solar farm resources at significantly lower cost with greater network reliability. You definitely won’t need ‘Hele’ coal technology some of the LNP nutbags want the taxpayer to fund. You also won’t need a fair chunk of these ‘ESB’ people as we replace them with intelligent energy demand management software over time.

Transitioning the Cartel

In a mature energy market controlled by a small number of vertically integrated cartel players competition policy is a tuff ask. This is especially true in Australia where everything always seems to happen backwards. There are a few reasons for this. Much of the historically and culturally embedded stupidity is related to a British convict legacy. Let’s not talk about Brexit for now. British deaf dumb and blind is a story for another day.

Large vertically integrated generators with their own transmission, distribution and retail assets will always favour minimum market rule intrusion and a traditional forward capacity mechanism. It is only in this sense that we can interpret the NEG coal fired generation asset elevation to the status of priceless National Treasures. This is no doubt an elegant accounting solution to a tricky investment problem. In truth, there has never been a problem with investment in new renewable energy capacity when the states have tendered for projects. What has always been the problem is the lack of policy direction that will facilitate decarbonisation and a responsible renewable energy transition whilst maintaining a reliable, affordable and flexible national energy network. Knowing what to invest in has been the problem during the last ten years of political paralysis. Allowing the large generators and vertically integrated cartel interests to run the energy market at their leisure has been a bigger problem for the last ten years. This is the negligence and utter stupidity we are confronting today.

No ETS, CET, ARENA, CEFC or fixed carbon price transition mechanism can resolve a fundamental lack of clear bi-partisan political leadership in this regard. It doesn’t matter that we have argued for a responsible grid embedded energy storage plan for the last ten years. I think this message has finally been received by the political elite. It doesn’t matter that we advised against the ETS and a temporary fixed carbon price because Australia was not ready for it. Australia has always needed clear wholesale and retail market rules that would protect consumers and infuse much needed market competition first. Australia has always needed a demand side aggregate resource response policy to balance centralized capacity supply market manipulation, gaming and ring fencing by the large generators. I don’t know if that message has finally been understood by everyone in the political and bureaucratic elite. If the next COAG energy summit doesn’t demonstrate that this understanding Australia will most certainly deserve its status as a banana republic.

If the NEG is a political re-boot designed to buy time for a government in disarray and haemorrhaging in electoral crisis, then we still have to ask ourselves, where is the policy? Where is the 5 minute settlement rule? Where is the multi-tranche bidding process? Where is the demand management aggregated response resource policy? We are still waiting Mr. Turnbull. Your time is running out. Perhaps we should consider a policy reboot that would suit our federal treasurer Mr. Morrison before we tackle the more thorny issues of market regulation and competition rules?

How about a Company Tax cut with an Energy Policy twist?

Let’s assume that the Turnbull government will want to take a corporate tax cut to the next election. Let’s assume that Mr. Morrison wants a highly targeted and effective tax policy that will deliver real jobs and real growth. Mr Morrison has plenty of experience with tailored tax reform. He also knows from the last round of company tax cuts that a dumb sledge hammer approach delivers no measurable economic benefit.

For this reason I will assume that the Turnbull government will commit to a policy that will reduce unemployment to 3% and increase economic growth above 3% by 2020. The genius behind aligning a surgically targeted company tax cut with an anti-pollution and decarbonisation policy will make Mr. Morrison the envy of every economist in the Asia Pacific, Africa and throughout Latin America.

Let’s call this policy a targeted Green Bond sliding scale tax dividend investment initiative, ‘GBSDI’. We can also call it Power UP Australia, ‘PUA’ or anything else you like.

Let us assume:

Four types of Green Investment Bonds:

  • A built environment infrastructure bond for Urban and Regional cities and towns;
  • A managed environment bond for farming, land, water, forestry and oceans;
  • A transport and communications infrastructure bond and;
  • An industry bond that includes all mining and heavy industry;

A 20% pollution reduction target covering decarbonisation, waste management and all types of human activity caused environmental degradation. This 20% reduction target is set in line with:

  • Australia’s international  emission obligations;
  • The overall 100% reduction target agreed to by all stakeholders by ‘Year X’ (e.g. 2050);
  • The 20% pollution/ carbon reduction target is a one fifth increment of the agreed final ‘Year X’ carbon/ pollution reduction plan and equal to the Green Bond maturation period for each 20% increment;
  • The fixed bond maturation period for each 20% pollution / carbon reduction increment is approved by the Australian Tax Office and ARENA for project implementation.

How does it work?

Tax dividends are assigned to each project on the basis of a sliding scale. The sliding points scale is defined by a set of project criteria that score the intrinsic net worth of the project to the community and the economy as a whole. In the energy sector ‘Avoided’ cost of transmission and distribution as well as grid embedded storage and renewable energy generation attract a high score. E.g. A flat 15% corporate tax rate for the duration of the project. If the project integrates localized pooled smart-grid Blockchain operations with rooftop solar and customer storage the same project might attract a flat 12% corporate tax rate for the duration of the project. ( Please note: These examples are for demonstration purpose only)

Example 1:

A demand management aggregated response resource demonstrating localized community self-generation with localized energy storage fully integrated with wind and solar farms would attract a very high tax dividend. (E.g. 12 cents in the dollar) Why? The localized integrated smart-grid and Blockchain solution delivers substantial transmission and centralized coal fired power generation cost savings to the consumer and the taxpayer. It also delivers community health benefits whilst providing essential energy market competition. For this reason a tax rate of e.g. 12 cents in the dollar may not be unreasonable.

Example 2:

This example follows our campaign in India. I am glad to see that an Indian steel mill owner has brought it back home to Australia. Let’s ScoMo-nize it with a tax dividend add on.

A steel manufacturing company proposing to reduce its reliance on external electricity supply provides its own localized self-generation and storage capacity. Grid integration service addition and seaweed growth tanks feeding on steel furnace carbon fumes would also qualify for the lowest tax threshold under this scheme.

In both cases the low tax threshold is available for the approved project to attract large institutional investors.

All Green Bonds are assigned to the approved project and are not transferable between projects even if a company decides to apply for a 40% reduction in the same time frame. There is no reason to disallow greater investment and faster decarbonisation as long as the ATO approves the low tax rate for both project components and any combination of leveraging projects for the maturation period of the Bond.

Example 3

A centralized coal, nuclear, gas power station without storage or a wind or solar farm without storage may only qualify for a tax rate of e.g. 25 cents in the dollar because the project does not avoid transmission costs nor leverage grid embedded storage or localized customer based storage options in the project design. In short, poorly integrated and dumb design will not attract maximum tax advantages.


A smart corporate tax plan can easily integrate into a responsible decarbonisation and renewable energy transition policy. It can operate independently of any wholesale and retail energy market reform whilst turbo charging both the Australian economy and the decarbonisation of it. This proposal addresses Australia’s low growth and high unemployment issues. It also addresses the problem of Australia’s uneven economic development by delivering targeted corporate tax relief where it can make a measurable difference. This tax dividend and Green Bond development option can easily be applied to any emerging economy in the Asia Pacific.

If lower corporate taxes are on your horizon Mr. Morrison, then why not make your tax package a surgical micro-economic reform instrument that delivers real benefits to the Australian economy. The design of a responsible, resilient and affordable energy system can begin with a Green Bond tax dividend mechanism that lowers corporate taxes in a targeted manner. You might find that a good tax design can eliminate a lot of really stupid ideas later.

Does Australia need a forward capacity market?

This report by Australia’s Cyber Dream Time and Thought Monitoring Agency (ACDMA) is classified above Top Secret!

Authorization: Alpha, Zulu, Lucy

Classification: Random white fella dream time story recording

Purpose: To monitor thought manipulation by foreign agencies and subversive individuals intent on damaging Australia’s national security.

Security Alias Protocol: Spoof

Dream Time Subject: Malcom Turnbull, PM

Dream Time Scan: 2 am – 3 am EST

In a previous article I hinted that the Turnbull government would not go ahead with the implementation of a CET (Clean Energy Target) or even an ETS. This anticipated outcome was predicated on the assumption that there is little appetite for a clean energy subsidy scheme supporting Australia’s energy cartel. Then another obtuse idea thundered through the corridors of power from the opsimath of public persuasion squatting in the bureaucratic recesses of panopticism. Let’s persuade Australian consumers to agree to an agnostic energy technology subsidy for the benefit of Australia’s energy cartel. The gods of thunder and lightning could be forgiven for misunderstanding the true intent from the Abbott of wrath and retribution. Claims of sabotage and even disloyalty have hounded the broad church as its hall of mirrors collapsed into chards of indecision and vailed acrimony. Amidst this pantomime nearly everyone forgot the one question few have dared to ask. How does a political marketing gimmick birthed by the peon of energy policy stack up against the weight of national interest and national security? Hang on! Wait a minute here! Do we need someone in a uniform to stand around in the background before we can answer this? Perhaps this is not even the right question to ask in Australia’s current political climate. Maybe a more appropriate question to ask is this. How does a political party nurtured on free market ideals reconcile its moral and ethical obligations to the nation whilst engaged in the self-interested pursuit of power for the benefit of a convenience deal?

Everyone agrees that Australia urgently needs a national energy framework that outlines a coherent national energy market master plan. What is perhaps less clear are the discussions around what a national Clean Energy mechanism looks like in a poorly regulated market controlled by less than a dozen companies protected by state self-interest. At the political level Australia’s free market emperor remains hidden behind the security fence that surrounds his Canberra castle at ‘Mole Hill’. In this obvious predicament, this ‘Top Cat in a Top Hat’, has chosen to be more concerned about asking his tailor to market his conservative brand of clothing and apparel wear, instead of tackling the fundamental contradictions that govern the rules of a broken energy cartel market. During this apparent confusion the robber stoats and their henchmen are lying prostrate in front of the security fence surrounding ‘Mole Hill’ praying for leadership. These guys actually want greater regulatory control in the national interest! The cynicism of those who understand the stakes of this enormous game of chicken played out on the national stage knows no boundaries. Few could have predicted that emperor ‘Top Cat’ is now actively pursuing his own political survival as the robber stoats eye the gold in the treasury under his hill. A few months ago the smiling confidence of the emperor promised a national energy blue print. A new suit of clothes fit for a new age conservative who is both a queen’s man and a staunch republican. The appointment of professor ‘Underhill’ emerged as a critical mission in the education of a struggling seething Canberra mass in their quest to understand how individual state owned enterprises morphed into a privatized cartel operated for the express benefit of the bothers ‘OFI’ (Overseas financial interests) and ‘Sloth’ ( Government sanctioned siphoning of Australian tax dollars into legal overseas tax heavens). How such a transition is explained within the ideological precepts of a conservative political party wedded to the free market remains a conundrum the ‘Cat in the Top Hat’ has so far failed to explain.

It is an irony that has not escaped the robber stoats. Sending their loyal servant AEMO of NEM to do battle with the power hungry overlord of AEMC in the den of royal penance was a sign of true genius. To the administrators of panopticism it was a clear message about who intends to be in charge. Naturally the soothing crooning harmony for a better world had the emperor’s tailors and royal attendants crowing in delirious bliss. The announcement that all interested parties and  robber stoats associates would welcome Australia’s gas addiction, if they are allowed to design and control a forward capacity market mechanism for the benefit of national energy security and affordability, was almost a side line medley. After all, the NEM was created as an artificial wholesale and retail market from a privatized state owned monopoly under specific contractual agreements to absolve the states of ‘Tedium’ from any ownership responsibilities of their people’s assets. No responsibility and all the benefit has been the creed of ‘Friedmanites’ pursuing the blood oath of monetarism since the dawn of time. The fact that state and federal jurisdictions ignored the regulatory environment of these artificially created markets cannot be blamed on the cartel of stoats managing these assets for the express benefit of the states who are ultimately liable for the provision of reliable, secure and affordable energy for their own regional economies under their jurisdiction. Plausible deniability was a contractual commitment agreed to by all parties and guaranteed in some cases for the next 99 years or more. State governments have long benefited from favourable tax, royalty and related administrative arrangements in return for unfettered interference in the daily operation of a business dependent on continued taxpayer support. In this business discrete administrative fees and charges, for auxiliary services as well as other related undisclosed service payments, are important traditions in a brown paper bag system of finance. As such, it is entirely conceivable that a trade-off for greater market intervention and industry transparency should entail a subsidy of perhaps $60 per MWh in an effort to maintain the competitive integrity of an Australian energy market in transition.

There is little doubt that the nature of this absurdity has not escaped the emperor in the ‘Top Hat’. For those of us with a longer political memory then the goldfish under the hill, the epic sagas of the countries of the West, North and the Queen’s wood are lore of legend and awe. Resource export trade deals remain a permanent reminder of the ethical and moral fibre that characterizes the true nature of the servants under the hill. No one can claim particular pride in the royalties for regions epic, or the international laughing stock concocted by the administrators of the West Australian capacity market model. Even though the current iteration of this concoction deserves another year of observation, there is little doubt that the debt laden legacy of a morally bankrupt Western Australian LNP government leaves little to be admired. In stoic reflection of their cousin in the West, the greedy administrators of the Northern Territory and Queensland have little to be proud of either. Few would question the prevailing winds of self-interest that howl around the stench of the Northern Development Corporation and the Adani Carmichael mine. Those with better memories then most wince over the organized resource theft of Timor-Leste by the Howard government. No realist is under any illusions about the motivations behind the government commanded by the emperor in the ‘Top Hat’. The enormous game of chicken playing out on the national stage between the robber stoats and the peons of panopticism has always been about favours owed and favours earned. The mug in the middle simply pays the bills as the straw man theorists compete for the rich waters of the billabong the rest of us need to parch our thirst. We can take little comfort from the lessons we should have learnt from the Texas energy regulator or the various European capacity market model iterations. Australia’s political establishment will continue to hammer out its ideological irrelevancies in a disgusting competitive pissing contest regardless.

So what is the answer? Some kind of weird religiously inspired technological agnosticism? In a stroke of pure ‘Bright Spark’ the emperor charged his tailor with the quest for the perfect suit of clothing. This ‘Top Cat’ is no hollow man vainly trying to tap dance to an outdated conservative ideology. No way; old man! In a particularly humorous twist the emperor of swing caught sight of the tailor ‘ScoMo’ who enterprisingly advertised himself as the best in town. With the silk sold for trinkets and the waters of the billabong used for dying cloth contaminated with flies and maggots; tailor ‘ScoMo’ set about convincing the emperor that he could spin cloth so sheer it would make him glow like twin rainbows over the plains of plenty. In the mean time! The rest of the LNP hierarchy realized that the ideological hallmark of its founders had no place in a market owned and controlled by the cartel they had created. So they set about rebranding the true conservative vision as the enemy of treacherous security threats hatched by radical right wing economists and their left wing LGBIT followers. How could this fake news have happened? The LNP and every institution of the nation has slavishly served the same agenda for so long that this level of betrayal must have seemed like discovering that god has always been a transvestite. What a bitter pill to swallow! Oblivious to this crisis of faith and the carnage on the floor of the house of penance, ‘ScoMo’ the tailor, continued spinning the emperor’s new suit. Scheming in his swimwear, the Abbott of agnosticism called for a return to the religious roots of conservative values in true self-serving fashion. These are values the high lords from the minor kingdoms of Oz cherish in their own way as they rushed to congratulate professor ‘Underhill’ for his earnest efforts to unite the tribes. One was not amused when the emperor regaled the world in his new suit! Amidst the merriment, the high lords of Oz declared their undying commitment to serve the gas addictions of the people of the East in return for much gold, tax concessions and federally funded gas pipelines.

No one should be more agnostic to the fervour of the contradictions inherent in the LNP diatribe then the burghers suffering these daily brain farts. What is at issue and what has always been at the core of the national energy crisis is the lack of specific focus on a national energy market regulatory framework. To this end we can all agree with AEMO the loyal servant of NEM acting in the name of the cartel.  I have long maintained that the ordered implementation of a national market regulatory compliance, standards and market rule enforcement mechanism is a precursor to a flexible, competitive and low cost energy transition market that maximizes system resilience within a responsibly planned investment environment. Whether these objectives eventually create a CET (Clean Energy Target mechanism), an ETS (Emissions Trading System), a forward capacity market subsidy system, or all of the above, is not even an issue until we have designed a viable and fully transparent market regulatory framework. This is not a question of engineering but entirely a question of market transparency, market competition and stakeholder compliance and market rule enforcement. Fixing the energy market regulatory framework is a mandatory requirement for a national energy market master plan. I will go as far as to say that Australia cannot have one without the other. This is true irrespective of the political twists and turns executed at both state and federal level of government. We cannot escape the need to fix Australia’s broken energy market regulatory framework first. Even the stoats lying prostrate at the gates of mole hill know with certainty and with a glint in their eye; that the doors to the castle treasury must eventually open. It was not their fault that the lords of the land had given away their silk and the gold under their lands whilst draining the sacred billabongs of their forefathers in exchange for worthless beads and trinkets.

What if there is a third way? A way that goes ‘Beyond’ forward capacity markets! A way that integrates better market rules and a clean energy target with the LNP religion of technological agnosticism left intact for the true believers! What does this new way look like?

It starts with taking responsibility for the duties of governance instead of outsourcing them to a marketing company. It begins with some basic honesty. The Australian people have a right to know who has got their hands in their pockets and for how much. Malcom, mate! Wake up from your dream time delirium! Buddy, we need you to make some decisions right here and now!

No business let alone a government can afford to be indifferent to its future strategic direction. The purpose of any responsible management team is to chart the future profitability and long term sustainability of the business. The objective is to minimize costs and to pick winners. No rational business leader, let alone a national political leader, can claim ambivalence in relation to the necessary governance matters including the strategic business decisions relevant to the future profitability of the business. This is especially true when both the nature and meaning of technological agnosticism, let alone the levels of energy affordability and reliability, remain undefined within the context of a national energy security framework. At a serious strategic policy level we must ask what the precise definitions of energy affordability and reliability are to the Australian consumer. So far the Turnbull government has not delivered a clear definition. What has been stated categorically is that Australian consumers are unlikely to enjoy neither affordability nor reliability in the foreseeable future unless we accept energy technology agnosticism as a policy option. To any punter engaged in charting the progress of national productivity, employment and growth, this absurdity is little comfort going forward. It is also a self-reinforcing circular argument containing several assumptions and undefined assertions that have never been tested against any serious factual analysis. It is a rank populist argument that calls for faith in a government gambling its managerial credentials on a critical national infrastructure issue at the expense of a key national productivity input.

So far we have witnessed announcements for major hydro storage as well as ongoing negotiations to secure a short term gas reserve. We have witnessed state based initiatives in the development of battery storage and auctions for new wind and solar farms. The recent discussion over an AGL owned NSW coal fired power station indicate that technological agnosticism is not a consideration in the Turnbull government’s approach to fixing Australia’s energy crisis.  A creeping sense of desperation and the inability to find agreement between the various stakeholder groups is. This sense of desperation is clearly at odds with the religious fanaticism that is characterized by the hard right of the LNP. These people are steadfastly advocating the virtues of a cartel operated centralized energy capacity market owned by the brothers ‘OFI’ and ‘SLOTH’. How a political party committed to the principles of free market competition is able to reconcile these apparent ideological differences in its own conservative platform is a pantomime of breath taking scope and exceptional oral gymnastics. Is the Turnbull government committed to increased energy market competition and improved energy affordability and reliability; or is the Turnbull government committed to subsidizing the existing energy cartel? No one seems to know! Those who are clearly in the dark about any of this are the loyal members of the LNP stalwart who don’t seem to be able to grasp the inherent contradictions between these publically stated positions and the conservative values they claim to hold dear to their bleeding hearts.

The conundrum is that old centralized coal fired power stations supplying baseload power are neither viable, reliable nor affordable in an energy market transitioning to DER ( distributed energy resources ). Australian renewables are experiencing a rapidly decreasing marginal cost curve comparable to the rest of the world. With a CONE ( cost of new entry ) value for new coal hovering at $200 and gas cycle power stations between $110-$150, the very notion that Australia’s energy affordability crisis can be avoided by a series of piece meal measures designed to manage transition via a short term gas forward capacity market supported by a regime of managed coal plant closures is nonsense. Even if we consider a $60 per MWh forward capacity market subsidy for all existing and new generators, the cost of new gas exploration, including unconventional gas supplies, will increase the burden on an already out of control national budget. It will not provide any assurance for lower energy prices nor increased capacity supply reliability. Existing gas power station costs hover at $94 with imminent increases forecast for new exploration. The members of Australia’s gas cartel are fully aware of this because the easy access reserves are almost depleted. For this reason Mr. Turnbull’s repeated efforts to bully the states into releasing new exploration licenses is both perplexing and confusing. Why would anyone claim that opening new exploration leases will somehow result in lower energy prices and greater energy reliability when the exploration costs and forward export contract deferment costs would make both propositions unlikely?

Negotiating a temporary export moratorium to increase national gas reserves for domestic use can hardly be described as a major policy success when the cost of this short term forward capacity reserve has not yet been revealed to the Australian consumer. Everyone presumes that this cost is calculated at the current international export price. No one knows what the dollar value for contract default, legal and other costs relating to the voided export gas contracts now reserved for the domestic market actually is. Unless the government can somehow contract the import of cheap overseas gas for the domestic market we can safely say that non-subsidized gas has priced itself out of the Australian energy market in this renewable transition phase.

This forecast does not help heavy energy users and those industries who gambled their profitability on shifting their energy reliance towards gas. It does make it clear that the AEMO proposal for a forward capacity market with a 10-15% 6 month capacity reserve under a day ahead bidding system bolted onto the existing energy only market is likely to be a very costly subsidy scheme. A cost effective alternative to a flat rate undifferentiated capacity market subsidy scheme is a variable rate targeted scheme punctuated by bi-annual capacity supply auctions contracting guaranteed peak load supply. Australia’s energy capacity supply problem is not a baseload power issue. Australia’s energy capacity supply crisis is a peak load net demand shortfall exasperated by asset retirement and insufficient generation flexibility to address that shortfall. This suggests that a properly designed targeted capacity market can contain an embedded clean energy transition mechanism without compromising the Turnbull government’s commitment to technological agnosticism. We are witnessing considerable religious tolerance by the LNP government towards long term large scale hydro storage. The combined cost of both solar and wind farms plus storage is currently on a decreasing marginal cost trajectory of approximately $80 per MWh. A national energy storage mandate for all existing and future solar and wind farms might be a very bankable alternative if it was agreed at the next COAG energy summit. Not only would such a national policy address generation flexibility, grid stability and energy reliability under long term cost efficiency gains, it would also offer attractive auxiliary market returns. The assumption is that traditional financial leakages in the form of administrative and auxiliary service payments are retained by the energy cartel operators in the short term, in return for the following agreements:

  • That new market players specifically focusing on customer and grid embedded storage and self-generation are allowed to operate behind the meter as a block chain customer focused
  • That all customer focused block chain systems are allowed to enter into forward supply  supplement agreements with suppliers of renewable energy under fixed price transmission  and distribution agreements between 12 midnight and 6 am.
  • That all customer lead block chain systems are allowed to export and import any excess energy, or supplement any local supply shortages through local distribution and                       transmission networks at a fixed price set by a national energy pricing commission.
  • That reviews of national transmission and distribution prices are fixed by the commission subject to regular evidence based reviews required under formal submission by stakeholders
  • That regular bi-annual auctions are to be held for forecast supply capacity shortfalls three years in advance of the expected shortfall.
  • That an independent energy authority regularly report on anticipated supply capacity shortfalls for each state and territory for up to ten years in advance.
  • That medium and long term energy capacity supply shortfalls are expected under normal market conditions and that this does not by itself warrant unreasonable panic, political                rashness, nor policy stupidity.

No one is interested in suffering the indignity of the ‘Cat in a Top Hat’ parading before the world in a rainbow coloured birthday suit. No one is interested in the game of chicken Canberra wants to play with the cartel bosses. Let’s call the bluff! Let’s implement a highly targeted forward capacity market with a reducing marginal cost curve below average gas operating cost rates and we shall see the robber stoats fall in line. We might just get greater competition and a more transparent consumer focused energy market in the bargain. What do you think?

Please Note:

Development Bank members reading this in the context of ‘Active’ renewable energy loans for the Asia Pacific and beyond should be aware. Current project planning and risk assessment that includes gas generators must be urgently re-evaluated. This covers all active ADB and Australian supported DFAT projects in the Pacific, Indonesia etc. The CONE value of these projects will demand ongoing subsidies of between $57-$65 per MWh making loan repayment and local consumer energy affordability (per population density equation) high risk.

Designing a National Clean Energy Master Plan

Every development professional knows the ‘Universal Development Matrix’. This is true whether you are working in the field of integrated ‘E-WASH-E P’ (Energy, Water, Sanitation, Health, Education & Poverty reduction) or advising governments on ‘FAC & LGD’ (Forestry, Agri-business, Aquaculture, Coastal & Land remediation and Demographic sustainability solutions). The application of the ‘Universal Development Matrix’ always conforms to the desired government, community and business project outcomes relevant to the socio-cultural, ethnic and economic context of the project analysis. As a methodological framework this is true, irrespective of whether you are empowering women, addressing child trafficking, designing green liveable cities or fighting corruption. I am certain that the world would be a better place if the ‘Universal Development Matrix’ became a pre-requisite knowledge tool for politicians, bureaucrats and business leaders. ( See Figure 1)


The ‘Universal Development Matrix is relevant to developing and developed nation. It can be readily deployed to address a range of local community, national and business project development targets and issues. It is highly relevant in the design, development and deployment of Australia’s National Clean Energy Master Plan.


Finkel’s Time of Future Past

The ‘Finkel Review’ published in 2017 advocated a technology neutral CET (Clean Energy Target) mechanism. On balance, this statement is nonsense! It is nonsense because any renewable energy target requires the setting of basic industry and market rules. These rules must describe the following in some detail:

  • The CET must be cheaper than any none renewable generation option.
  • The CET generation option mix must be acceptable to the electorate, e.g. not nuclear if the electorate does not agree to a nuclear option.
  • The CET is always a 100% renewable energy target achievable in a defined and agreed time frame.
  • The CET is always a 100% renewable energy generation protocol under an agreed fixed price energy transmission and distribution capacity supply reliability guarantee.
  • The CET is always a 100% renewable energy generation protocol that will not increase a nation’s international emission obligations during the transition phase.
  • The CET is always a 100% renewable energy generation protocol that will not cause hardship to any citizen irrespective of the mix of energy generation chosen.
  • The CET does not favour any stakeholder or allow the manipulation of energy market mechanisms to promote anti-competitive behaviour and entrench cartel control of the market in part or its entirety.
  • The CET has a strong and independent regulatory framework that includes an Electricity Pricing Commission that save guards the market from arbitrary price increase, ambit claims, hidden fees and pass through charges.

The responsible design of any CEC (Clean Energy Credit) mechanism within a time specific CET ( Clean Energy Target) framework requires the articulation of a defined set of policy priorities. These policy priorities are defined in a ‘National Energy Master Plan Development Framework’. The ‘National Energy Master Plan’ clearly describes energy supply and demand constraints. The inclusion of governance matters relevant to market regulatory, compliance, standards and enforcement are always a necessary precursor to the development of a workable ‘National Energy Master Plan’. The job of the ‘Finkel Review’ was always to educate Australia’s politicians, its public servants and the media. It was in political terms, an attempt to reset a hysterical national political debate going nowhere and running out of time and options. Avoiding the prospect of political irrelevance is no longer an option for a federal government afraid of demonstrating its commitment to political leadership. This boat left the harbour a long time ago! With 49 out of 50 ‘Finkel Review’ recommendations adopted, pushing the CET and CEC $ value debate to the year 2020 is not doing Australia’s international climate credentials any favours.

What the ‘Finkel Review’ neglected to tell us is that the current wholesale energy price including the fossil fuel subsidy program puts an effective price on carbon above $55 per ton. The Chief Scientist failed to point out that Australia is paying a very high price for allowing the gas market to set the electricity spot price. The emergency use of gas fired power stations in the NEM (National Electricity Market) is less than 30 days per year. So the claim that Australia needs to drill new wells for conventional and unconventional gas is at best misleading. A survey of national gas reserves earmarked for energy generation predict an average shortage of 1 day per year. This is significantly less than the crisis scenario presented by the industry to hysterical politicians and paranoid punters. In terms of the national clean energy roadmap 2050, the consensus is that the domestic gas sector has effectively priced itself out of the market. The industry should really focus on consolidating its export markets. North African competition and the emergence of the Indian gas market by 2030 will put significant pressure on international gas prices and Australian market influence.

The argument that the CET must be technology neutral is one of those dumb political statements that really should be shoved where it belongs. At best we could justify the political dumbness as an olive branch to the LNP right wing extremists. At worst it is a confused utterance that ignores price realities with a warped idea of risk management and the dreams of another time and place. A good design uses the most price competitive and best technology of the time. A great design adjusts to future technologies without any changes to the original design. All Australians are well aware of the NBN farce. It is not what I call a great design or indeed a rational project management outcome. Knowing how incompetent government is in the area of managing large scale complex technology based projects we have to ask ourselves a simple question. Should anyone trust our politicians to design, manage and build a ’21st Century Clean Energy System’ without reference to the best practice universal development methodology, engineering and governance standards? In my opinion, no!

Filling the Leadership Vacuum

If you run the numbers on the CET the LNP is prepared to accept under the Paris accord and the target the state and federal labour party are promising there is very little difference. Whether we are talking about a RET or a CET makes no difference. In both cases the target is 100%. There has always been only one 100% target. The difference is whether we get there by 2050, 2065 or 2070. Assuming we start in 2020 the effective target is 20% every five to seven years. This is irrespective of whether you believe the LNP, Labour or the Greens . Australia has to reduce its emissions by 20% every five to seven years from 2020 to meet its international obligations and raise its national productivity. Doing both of these things at the same time is clearly not in the political innovation vocabulary of the Turnbull government. Reducing emissions by 20% every five to seven years was clearly beyond the ‘Finkel Review’. It doesn’t seem to fit into the jobs and growth agenda because in order to achieve both, the government has to involve itself in a very messy wealth distribution and wide ranging inequality debate. Detailed forensics and inclusive public debate are definitely not something a modern politician wants to engage the electorate in. Mimicry, party tricks and cheap one liners are all the go these days! Someone told me that politicians don’t want us to panic. Oh yeah! Is that why the Turnbull government places no necessary urgency on defining a credible CET and CEC mechanism? After all, the mad monk and his jack boot extremists would have us believe that this is a socialist conspiracy hatched by crazy heathens and homeless LGBTI nut bags intent on bringing back the carbon tax. Since our current energy policy has created an effective carbon price above $55 per ton, any return to a fixed price carbon mechanism will only be as a compliance and enforcement tool. Do we need to worry about any of the old school right wing political hacks testing our patience with their drivel? In a future NZE energy market operating in a NZB consumer driven environment the actual question is, how do we transitioning the Utilities?


Australia is an island of dispersed demographic centres. The majority of us live on or near the coast. The location and distribution of our regional towns and major cities make the entire country absolutely perfect for the implementation of a ‘Just in Time’ DER ( Distributed Energy Resource ) management model. As the energy market moves beyond the dumb shunting of electrons from A to B we are appreciating the integration of a ‘Just in Time’ demand management model within a delayed capacity supply market. This allows us to consider an entirely new energy market that will force existing stakeholders to adapt to new competition conditions. The CET and CEC $ value model suited to Australian conditions incorporates both a NZE (Net Zero Emission) design and a NZB (Net Zero Billing) consumer outcome. This is demonstrated in figure 2. A critical design element is the decision for a CET or similar clean energy transition mechanism. I have already said that irrespective of which party is in government at either state or federal level, the interim target is a combined 20% clean energy generation, energy efficiency and energy storage gain every five to seven years from 2017 – 2020 onwards. This CET is set by Australia’s international obligations and by the commitments both major parties have expressed. These commitments leave very little time for sorting out the design and project management details of ‘How’ this is to be achieved.

As you can see in the NZE model (figure 2), the most effective manner of achieving this mandatory 20% target every five to seven years is the deployment of a closed loop energy management platform. Each urban and rural clean energy development zone is both a net zero emissions zone as well as a net zero billing precinct. Grid embedded energy storage is supplemented by additional storage options for each renewable energy generation zone with localized storage in the closed urban and rural renewable precinct. This maximizes the grid management impact of the FCM (Frequency Control Market) and VCM (Voltage Control Market) in a net zero consumer billing environment, whilst distributing CEC’s throughout the model at the lowest cost. If we add additional storage and localized self-generation into the industry segment identified as the Clean Energy Credit Zone at a 20% level every five to seven years, the entire model would require minimum reliance on gas or coal generation over the projected CET time frame. Thus, allowing the orderly retirement of aging coal plants without the construction of new gas power stations during the transition phase. The progressive quarantining of gas fired power stations in this model will put further downward pressure on the wholesale spot market with no impact on grid stability and energy supply reliability. A key risk management function of the model is the achievement of critical self-generation and storage reliability and the progressive phase out of all fossil fuel subsidies.

A comprehensive national building efficiency, self-generation and storage requirement in addition to the model will impact positively on the capacity demand side of the energy market. Incremental efficiency targets for new and existing buildings of 20% every five to seven years can easily be legislated for all government, commercial and domestic buildings. A similar regime for public transport and all commercial and government fleet vehicles can merry with the plans of car manufacturers to progressively switch to the manufacture of clean emission vehicles. A simple 240 volt white goods and appliances phase out by 2030 and a switch to high efficiency 12 volt devices would side step the current aggregate demand management debate. The impact of behind the meter technology has the Utilities petrified. The only reason Utilities are pushing their right to access behind the meter peer to peer data management technology is because their entire business model is predicated on the privilege of owning consumer energy data. It is this same privilege that underpins the Utility right of charging consumers hidden fees and passing on unspecified charges without having to justify price gauging to a strong and independent Energy Pricing Commission. All these privileges are eliminated as peer to peer data management, customer self-generation, storage and consumer data ownership provide greater competition and market transparency.


Figure 3 clearly show the inequality in the current energy market. Rooftop solar customers in Australia must generate an additional four daily units ( 4 UFC) of energy to achieve a net zero energy bill without storage.

The Utility proposed aggregated demand management model would provide the Utility with unprecedented access to any smart appliance, including any home automation and energy storage devices. It would also allow the Utility to profit from this activity without any guarantee of a fair return to the consumer. Utility ownership of consumer energy consumption data as well as all self-generation and stored energy data and any functions associated with this data belong to the consumer / prosumer. Without legislation that provides binding protection to consumer/ prosumer energy data from Utilities any CET design will fail. Without national consumer energy data validation and verification requirements that are binding and enforceable on Utilities any CET will fail. Figure 3 shows that consumers are already struggling to gain transparency of existing Utility fees and charges because of Australia’s weak regulatory, consumer protection and privacy laws. There is simply no guarantee that this will change under the Turnbull government. The resolution of this matter is essential before Australia implements a national CET and CEC mechanism.

Whether consumers / prosumers agree to a NET Zero Energy Billing contract in return for 3rd party access to their rooftop solar and battery is an entirely different matter. Most Australians would see little fault with an agreed trade off under a zero privacy intrusion provision with a 100% behind the meter energy data transparency and data ownership guarantee. This is however not the Utility aggregate demand management model recently tabled in Brisbane. A simple piece of legislation that phases out all 240 white goods and appliances and mandates high efficiency 12 volt devices would eliminate the Utilities demand for behind the meter access. It would also sharpen the focus of discussion on consumer rights and privacy. This is the legitimate debate we must have. No one is interested in wasting time on closed door lobbying and dodgy car park dealings designed to hobble outcomes in favour of existing market participants. It is time Minister Frydenberg rolls up his sleeves and draws a line in the sand.  No more claim fencing and pissing on consumer rights. We all want an affordable, reliable and clean 21st century energy system. Here is your model, drawn and illustrated in plain text Mr. Turnbull. There are no more excuses.

How do we transition Australia’s Energy Utilities?

For many years a quiet revolution has been sweeping across the globe. Individualized and personalized participatory democracy is a powerful driver of institutional and market change. Adding principles of personal motivation and inclusion makes this driver of social and economic change even more potent. With many people affiliating themselves to broad cause and effect issues the voices calling for reform are quietly seeking alternatives. Climate Change solutions that do not include appropriate risk assessment of ‘NATURAL’ and ‘SOCIAL’ capital are increasingly viewed as pandering to entrenched interest groups. This trend is the primary cause of the political, institutional and industrial crisis sweeping entrenched liberalism. Some have attempted to quantify and qualify this trend as a disruption to the business as usual model. Others have used this trend as a rallying cry for reform. In both cases the rhetoric stalls at the questions that ask simply. Where do we begin? How do we proceed and for whom? In all cases this is precisely where these simplistic debates cease to be of relevance. The real question is how do we change our institutions and our global market structures to include demands for individualized goods and services in a world where everyone wants personalized services and participation in decision making processes? These underlying motivations are visible at all levels of contemporary society regardless of race, ethnicity, sex, religion, sect, caste, class, as well as social and economic status. It is also a trend that identifies the basic contradiction in the social contract. How do we value and respect the wishes of the individual in a society organized on ‘Weberian’ principles supporting centralized monopolistic market behavior and principles of governance as the most rational and cost effective way of managing essential services. The issues of wealth distribution and market inclusiveness make the principles of liberalism a questionable precondition for the ethical values that underpin the notion of governance for the ‘Common Good’. The contradictions that all liberals and conservatives of any persuasion have to content with are the principles of fairness that underpin the modern ideals of participatory democracy and inclusive market participation for the benefit of all. There appears to be no obvious contradiction within the ideology of liberalism that some are more equal than others. Just as much as it is acceptable to pontificate the virtues of superior moral and ethical values in the name of and for the exclusive benefit of the good burgher.

The pathetic notions of team contributory ‘value add’ are simply stupid when individuals ask themselves, ‘for the benefit of whom’? Does the value I contribute to society and the   workplace align with my own understanding of the common good and the personal         expectations that reflect my estimation of my own individual worth? Is the economic return for my contribution enough to satisfy my wants, desires and needs, or do I feel alienated from the feast of benefits that are available for the few? These questions may be dismissed as the sociological pessimism of the time. A leftover aberration of the 60’s and 70’s that has come to haunt us in the form of a twisted world view serving the confused. These sad individuals may also be viewed as the new wave of mass psychosis sweeping the globe in ever growing spirals of radical political and social movements articulating extremist intolerance. However these conflicts are represented by established interest groups is beyond the question of mere tolerance of difference and exclusion. They strike at the heart of legitimacy by questioning the ethical and moral obligations of the ruling elite to the people they claim to represent and serve. In Australia this crisis of legitimacy is nowhere better represented then the hiatus that remains over the country’s national energy plan. Crowing about achieving a COAG consensus for the 49 of the 50 ‘Finkel Review’ recommendations can hardly be seen as a moral and political victory by the Turnbull government. Far from it! At best the ‘Finkel Review’ stated in simplistic terms the status quo that has existed for more than two decades as the consequence of a failure in governance. This failure to engage with the core issues has plagued the national energy sector. The subsequent flow on effects throughout the Australian economy continues to stifle national growth and remains a significant drag on national productivity. The responsibility for this national disgrace has to be laid squarely at the feet of all state and federal politicians and political parties both past and present.

The failure by our politicians to accept collective responsibility is perhaps best articulated in the Turnbull government view, that the adoption of the 50th recommendation is best achieved with due consideration for proper planning, mathematics, engineering and economics by 2020. No Mr. Turnbull! The adoption of the 50th recommendation is best achieved by the implementation of governance, planning, and engineering standards in conjunction with market regulatory, compliance and enforcement standards that meet community and industry expectations now. If it is the intention of the Turnbull government to drag out the core design requirements of the CET (Clean Energy Target) and the definition of a CEC (Clean Energy Credit) dollar value, the Turnbull government will stare into the abyss of its own relevance. Some of us would probably welcome this prospect. Others would argue that the nation can ill afford another stalling tactic by a federal government suffering from indecision and internal division.

Since the ‘Finkel Review’ has for now achieved some sense of broad census and perhaps, a limited spirit of collaboration among political parties, we should assume that the proper design of a CET mechanism is within reach sooner rather than later. The Chief Scientist made the point that the design of a CET should not be difficult since it can easily be modelled on the existing RET scheme. This simplistic analogy may be convenient for the consumption of the ignorant masses. It hardly satisfies the savvy Australian punter who has long regarded the RET as a means to preserve and service the bottom line of Energy and Utility cartels. Constructing a CET subsidy scheme along similar lines to the existing RET is clearly not an option for a responsible 21st century energy market system designed to underpin the future growth and productivity objectives of the Australian economy. What is at issue is whether the existing energy market bodies are able to serve the needs of Australia’s 21st century energy market. Since COAG has accepted that Australia’s energy market bodies must be reformed in order to be more responsive to Australia’s future energy market needs, we have to ask ourselves what is the nature of this reform in detail? Is it acceptable that Australia’s future prosperity is held to ransom by the gas cartels? Is it the view of the Turnbull government that gas is no longer a viable transition fuel? What is the future of Australia’s Energy Utility companies and will they continue to exist in their present form? To what extend will the design of the CET incorporate fundamental reforms to the Energy Utility market by encouraging the transition of Energy Utility companies to become responsible service corporations that place the consumer at the heart of the energy equation? Already we are witnessing dramatic changes in the European and US markets. New entrants to the Australian market are offering rooftop solar plus storage installation deals in return for a zero energy bill to consumers under specific usage guidelines calculated over a 10 to 15 period. At least one of the Utility companies is experimenting with a ‘SolarCoin’ crypto currency model. The growing acceptance of both financial models in the domestic and commercial energy space is likely to fundamentally change both the relevance of the existing energy market institutions and the manner in which Utilities relate to their customers.

 What is abundantly clear to anyone familiar with the energy market in Australia and around the world is that renewable energy technologies as well as the financial models that drive the industry are increasingly focused on servicing the customized energy needs of individual consumers. Smart grid / micro-grid equations that used to read rooftop solar plus storage connected block chains managed by Tag-e (Transactional grid elements) between ‘Prosumer’ groups now include ‘SolarCoin’ crypto currency payment systems. Do we need Utilities to manage our energy bills if community groups organized in local renewable energy zones can manage their own billing whilst owning their own billing data? If we add to this equation the desire by individual renewable energy clusters to achieve a closed renewable supply loop ( Net Zero Emissions ) by supplementing their own supply capacity with a direct power purchase agreement from large scale wind/ solar, hydro, wave, geothermal and tidal facilities via grid integrated battery or thermal storage or waste to energy conversion facilities we have to ask:

  • What is the role of gas as a transition fuel in the economy?
  • Has gas already priced itself out of the equation?
  • What is the role of the Energy Utility in this equation?
  • What is the relevance of the existing market institutions (AEMO, AEMC, AER, NEMO, etc) in this DER 21st century national energy market model?
  • How do we facilitate unrestricted market and grid access for 3rd parties to sharpen competition and provide real consumer value?
  • What is the role of state and local government?
  • How do we effectively manage and reform our institutions to facilitate a positive transition of our energy market to reflect the desire of the individual consumer to be the beneficiary of this new reality?
  • How will Australia’s federal and state governments address the need to transition our Energy and Utility cartels so that they act in the service of the national interest, whilst delivering real value to individual consumer?
  • How hard is it to calculate a Clean Energy Credit dollar value when the effective cost of doing nothing for the next two years is the equivalent of a carbon price above $55 per ton?

 These are the core questions at the heart of the CET design. These are the core questions the Turnbull government and all state and federal politicians have to address in a comprehensive and inclusive national debate if Australia wishes to have an affordable and reliable 21st century national energy system. It is a debate that goes to the very heart of liberal values that Mr. Turnbull’s pragmatic centrist vision of liberalism wishes us to believe in. Yet we see no evidence of his commitment to address the values that underpin our earnest desire for the respect we deserve. What we see is the Energy and Utility cartels ring fencing their existing market shares and manipulating market access in collusion with state governments and existing stakeholders. We see no evidence any comprehensive reform agenda because it would require a fundamental intervention in the market. The level and type of market intervention required is contrary to liberal economic dogma. This is the contradiction in Mr. Turnbull’s liberal party that will play out for the remainder of his tenancy. It is also the real reason why there is no urgency for the design of the CET or setting a realistic CEC dollar value. Planning to release the CET as an election manifesto is not proactive politics that places the issues of electricity price affordability, consumer hardship and the state of the national economy front and center. It is a political game to stall for time and perhaps fool the Australian voter into believing that Mr. Turnbull is not quite the ‘Tin Man’ but instead, a gambler playing the Australian people for mugs.

Decoding the Finkel Review for the ‘Common Man’

Following the ‘Finkel Review’ into Australia’s electricity market we are witnessing reviews of a ‘Review’, unsolicited and uninformed opinions, as well as party political and industry motivated brain farts. Let us debunk these first. The ‘Finkel Review’ of the Australian electricity market is a ‘Review’. It was not an Inquiry. The ‘Finkel Review’ is essentially a report card on the current state of the electricity sector. The ‘Finkel Review’ ‘Recommendations’ are a list of market failures that Alan Finkel advises should be addressed if Australia wishes to have:

  • A secure, reliable and affordable energy system for the 21st century
  • A properly functioning and responsive ‘Energy only Market’

The Finkel ‘Review’ documented a variety of governance, regulatory and market mechanism failures. These issues have been long standing; are a function of both state and federal government failures, market body infighting, overlapping responsibilities, incompetence, poor planning and the lack of a national strategic vision. There is simply nothing new about this. For most of us who are even vaguely familiar with the issues, the call for a ‘National Strategic Policy Vision’ followed by a ‘National Energy Framework’ that clearly articulates energy supply priorities for a ‘National Energy Policy’ has been a long standing battle. Despite stating that a ‘Business as usual approach’ is no longer acceptable, the Finkel Review contains several contradictions without offering any real solutions. To be fair, the purpose of a ‘Review’ is to review the current state of play. By definition a review is not a document aimed at delivering solutions beyond the provision of a list of recommendations under the defined terms of reference.

This is precisely what the ‘Finkel Review’ is. The shortcomings of the ‘Finkel Review’ are the assumptions that underpin it and a failure to detail the CET / EIS modelling methodology used. Let’s consider the first of these failures. Finkel clearly worked under very specific political constraints. Even though I consider the notification of a generator closure period to be a reasonable recommendation under a German targeted capacity market model, Finkel rejects the German model in favour of the current ‘Energy only Market’ model operating in Australia. In the same vain the chapter on Australia’s gas market recommends a limited regulatory intervention response with a preferred option of securing new conventional and unconventional gas supplies as critical. With the Howard government ignoring the need for regulating a domestic gas supply, despite Labour calling for it at the time, the subsequent neglect by the Rudd / Gillard years to secure a national gas reserve remains a missed opportunity.

This policy vacuum was identified by overseas and domestic bankers as a risk management strategy against the closure of existing coal fired power stations. As far back as 2012 I discussed this issue with two Bankers who attended one of the conferences I was hosting. Both maintained that their current risk exposure into coal is best served by a transition into gas fired power stations. ( Either new or as a coal to gas conversion) The reasoning was surprisingly simple. The projected domestic gas price increase can be leveraged against international forward contract risk under current state and federal regulatory arrangements. For this reason I must question the Chief Scientist’s reasoning that any future expansion of gas generation in order to meet supply shortages, black start, frequency and voltage system stability with some type of ‘Target Capacity’ supply reserve under an ‘Energy only Market’ model is actually possible? You just can’t have it both ways. You cannot categorically rule out the need for an energy reserve to meet supply shortages, black start, frequency and voltage system stability needs under an ‘Energy only Market’ system whilst advocating it as an urgent recommendation for consideration. This fundamental confusion in the ‘Finkel Review’ may have a lot to do with the terms of reference, the political imperatives and the position the Chief Scientist took on reforming the energy market bodies controlling the NEM. Others factors that might have contributed to the Chief Scientist’s thinking on this matter might have been the Western Australian Review into its capacity market model as well as the ‘Vertigan and Harper Reviews’. Alan Finkel does acknowledge that both the ‘Vertigan and Harper Reviews’ are gathering dust in Canberra. Pretty much like my own ‘Energy Efficiency’ recommendations to the Rudd government that eventually and perhaps bizarrely informed India’s ‘Renewable Energy Policy’ (MNRE). On the flip side, the Western Australian capacity market model has been roundly criticized as the most shambolic and incompetent energy market model anywhere in the world.

Perhaps the other key consideration was the need to balance ‘Transmission and Distribution Network’ costs with the need for an affordable energy price going forward. Even though the Chief Scientist makes some very good points here, the fundamental contradictions remain. If Australia’s future energy system will contain substantial gas fired power stations in order to meet energy demand, supply security, network stability standards and emissions reductions targets, then pegging the future on gas will not reduce the consumer energy price. Alan Finkel acknowledges that current market spot prices as well as future prices in the FCM and VCM markets going forward; are determined by the gas generators. This simply makes a mockery of the idea that we can contain electricity price increases within a reasonable margin when only days after the release of the ‘Finkel Review’ various Utilities in three state jurisdictions announced price increases in multiples higher than the Chief Scientists CET model projects by 2030. The key failure of the ‘Finkel Review’ in this respect is that he did not recommend an Electricity Pricing Commission with the authority to restrain price increases to the CPI and the means to hold proper evidence based market inquires. Australia has a Wage Commission system. Why not an Electricity Price Commission? Is this a function of the AEMC, AEMO, AEMR, or who? Perhaps neglecting the very concept of an Energy Price Commission is partly due to a reluctance to tinker with a failed market model and an ideologically abhorrence to acknowledge government responsibility for this failure. No doubt the omission of such a key recommendation was calculated not to offend the far right of the LNP. It didn’t really make any difference because we were still bombarded by the ‘No Energy Future without Coal’ and the ‘Over my Dead Body’ simpleton positions splashed across the media.

To Alan Finkel’s cedit, he did at least imply in his report that Australia’s energy future could be achieved without excessive reliance on gas and coal. He discussed storage at some length but without any real rigor. We all agree that hydro storage is a good long term opportunity after 2025 when the various options proposed by the Turnbull government are likely to be commissioned. Hydro doesn’t solve the issues facing various state jurisdictions in 2018. Very few options will! Biogas generated from sewage sludge could be implemented relatively quickly and at a relatively low cost. This generation option is not enough to replace a coal fired power station. The best solutions mentioned in passing by the Finkel Review are ‘Renewable Energy Zones’, embedded Mini/Micro/ Smart-grids, Grid embedded storage ( other than hydro) and adding storage to new and existing wind and solar farms. By now you are wondering why you need to read the Finkel Review because it is beginning to sound like my Blog without the acid lampooning of our political elite. Well! Alan Finkel did not go into any details about what he meant by a ‘Renewable Energy Zone’ so let me assume this privilege.

Let’s assume that Victoria’s Regional Towns along the NSW boarder all agree that they wish to become independent grid connected renewable energy zones. In accordance with the local council objective to reach a zero carbon target by 2050, each will implement a strategy of rooftop solar with either an on-premises installed or a zone collective storage hub. These regional renewable zones will be an autonomous DER using TAG-e technology in a block chain connecting each household and small industry customer into the embedded mini/micro/ smart-grid zone. The management authority of each mini/micro/smart-grid will in turn enter a clean energy supply agreement with any of the wind and solar farm operators in the region. There are a few of them. Since all energy markets are ‘Capacity Markets’ this localized supply agreement would form a target capacity market system under the existing ‘Energy only Market’. In essence, a decentralized time base energy dispatch model, to be more accurate. If the wind/solar farm operators agree to install their own storage and the Victorian government approves a third party grid embedded storage solution between the wind/ solar farms and the regional smart-grid ( renewable zones ) we solve:

  • energy supply security,
  • price affordability,
  • black start,
  • FFR under an internationally compliant FCM, VC stability standards model,
  • spot market volatility and market gaming,
  • transmission and distribution grid investment,
  • bushfire and storm risk
  • Future investment in renewable energy capacity as the localized clean energy supply guarantee acts as a default PPA with a known capacity

We can solve all issues identified by the ‘Finkel Review’ and acknowledged as the lowest long term cost solution in the review without bothering to invest excessively in new gas or CCS compliant coal technology. This would solve the problem of over investment and misdirected investment in transmission and distribution lines. It would solve all data collection and forecasting issues. It would even create NZE ( NET Zero Emission ) zones that can earn multiple credits under the ‘Finkel Review’ CET system. It would do all that at the lowest cost to the government and prosumers long term whilst it would send a serious spot price and FCM signal to the Utilities. Unfortunately Alan Finkel did not even bother to model this solution. Offering a sensible solution was clearly outside the terms of reference of a review.

In Conclusion

What new information or great insight did the Finkel Review deliver to the ‘Common Man’s’ understanding of the Australian Energy Market? Not much, really! None of the recommendations can be described as visionary, radical, exceptional or outstanding. On hind sight though! I will reconsider my call to get rid of the Energy Market Quangos and start from scratch. I agree with the Chief Scientist’s view that it would be too expensive and at the cost of lost institutional knowledge would be too great. To be honest! My gut tells me different. Let’s see if the politicians in Canberra actually read the ‘Finkel, Vertigan and Harper Review’ and stop talking nonsense.

Contemplating the role of the Australian Wind Industry in a 21st century energy system

As the sun sets on the Pacific Education and Development Forum at Hawaii’s Pacific University I am heartened by the stoic determination of my peers from America’s leading Universities. I suppose it is always the same. When leadership fails the rest step up to fill the void! It was not surprising to hear the measured criticism of the Trump decision to step away from the Paris accord. More interesting was the determination by America’s leading institutions to invest into Asia Pacific development programs. Specific targeted programs aimed at expanding Climate solutions with identified research, student and teacher exchange projects linked directly to industry investment opportunities where high on the agenda. This positive agenda was marred by the now ubiquitous reports of marginal projects that failed to integrate with individual country visions, or lacked integration and compliance with overall development goals. Once again the role of Australian DFAT associated NGO’s and agencies warranted mention. None compliant TAFE programs, substandard education programs and research support services mixed with reports of wasting up to 38% of funds on internal administration. The prevalence of employing local education / ex-pat staff who did not have the necessary qualifications to undertake duties described in the original funding brief was noted in a raft of related practices by several organizations. This included:

  • Poorly drafted briefing notes designed to employ specific individuals
  • Employing locals to do the task of specialist advisers at lower pay rates then specified by funding proposals approved by the ADB and related funding bodies
  • Using funds for entirely unrelated activities
  • Supplementing the income of influential locals for the purpose of retaining exclusive contracts

These ongoing issues where frequently mentioned as part of a wider discussion on how to improve the effectiveness of the money spent in remote island communities.

It was not long before the conversation moved to the regional influence of China. As we discussed how best to engage China, news of Australia’s first offshore wind farm proposal filtered through the meeting. Many of my peers from CalTec, Harvard, Berkley, MIT and others asked whether I would once again waste four years of my life on lobbying Australian governments and Universities to support a $300 million Asia Pacific certified wind training and research industry. My response to this question was guarded. After wasting four years from 2008–2012, I am reluctant to spend another quarter of a million dollars without a glimmer of hope. I don’t relish the thought of wearing out another set of shoes travelling the government corridors of South Australia, Victoria, New South Wales and Canberra in an attempt to convince the various department heads that Australia needs an internationally compliant wind industry training program because there are 15000 islands stretching from Papua New Guinea through Indonesia and across the Pacific to Manila that could benefit from it. There is little point when the Australian Skills Councils specifically undermined negotiations with UK City& Guilds in 2012. It is one of the reasons Australia still does not have a internationally compliant wind energy training certificate with the provision for the training of TAFE and University staff who could run such a program. There is even less hope for such a valuable education industry training package when the Australian wind sector maintains the position that internal industry training is simply too valuable to allow someone else to run it. It doesn’t matter that current industry training programs are not certified under Australian or international training standards. After all, the industry position is very simple. Even if the first Australian offshore wind farm should get federal and state approval we have more than enough trained people in India, China and Europe to build and support the Victorian offshore array. So why would anyone train or employ local people when the North Sea super array is nearing completion and the workers can simply be brought into Australia under a 457 visa arrangement? Besides, we have no intention of handing a multi-million dollar value add education business to any institution here in Australia.

Here is the nub of the question. Does the Turnbull government actually want a viable onshore and offshore wind industry, or does the Turnbull government want an industry dependent on fly in and fly out workers? This was the questions several US and European Blade and wind turbine component manufacturers asked me nearly 10 years ago. We like the idea of using Australia as a spearhead into the Asia Pacific region. We like the idea that Australia offers a relatively robust basic education system. We like the idea that Australia is politically stable. However, if we have to spend money on training technicians and PHD graduates to meet our industry needs then we might as well relocate directly into Asia and bring our people from the US or Europe. Why? Because we have the training courses and the PHD programs as well as the expert academic staff in place. So why train up Australian workers and the staff in Australian Universities.

My friend from CalTec made his point eloquently over dinner. You know that we have all been through the same experience in dealing with Australia. You know that the Universities will argue that we should pay them so they can submit a funding proposal to Canberra before considering any positive industry engagement. It just doesn’t work that way in the US or Europe. Leading institutions are leading institutions because they invest in training and applied research. They work with industry because there is a tangible benefit to both. In Australia we have to put money on the table so the Universities can employ the staff to write a grant application before they start the courses and train the teaching and research staff. This is a three to four year commitment before we see any return for our dollar. You saw that yourself when you tried getting traction for both the ICS (Industrial Control System ) training program as well as the large Wind Turbine training courses from 2008-2012. Even India decided to source the ICS courses directly from the US, Canada and Europe when you tried again in 2013-2015. So why do you want to go through another four years of pain in a country that simply lacks the vision to invest in supporting a renewable industry from the ground up? We might be suffering a Trump hiccup, but we have not stopped out investment in renewable education. We have not stopped in supporting world leading climate research at institutional level.

The problem I see in Australia is that the entire country and all its institutions are suffering from a colonial hangover. You basically need a warder to give you permission to take a piss. Mind you! We in the US like the idea that we can simply buy your best and brightest ideas because as a country you lack the guts to develop anything useful on your own. You like to sell anything and everything because you long for our approval. Even China has worked it out! Look at the Indian coal miner running you guys ragged in the full knowledge he doesn’t have two coppers to rub together. As an American I can see the irony in that! Hell! Your industry advisers still haven’t work out that the world has a shortage of HVDC cables and if the Victorian offshore wind project actually does go ahead, Australia will need to import those cables because they ignored your advice to build a HVDC manufacturing facility years ago.

So why don’t we just build an Asia Pacific wind training program through the US. After all, we already have everything in place. We know how to build local smart-grids. We know how to build virtual power stations and we know how to integrate those with large solar and wind arrays. Take a drive around Hawaii and you will see that a state 90% dependent on fossil fuel and with the highest electricity prices anywhere in the US, is transforming it’s grid to peer to peer rooftop and grid embedded storage. In Australia you don’t even have a rational national electricity policy framework and your government is trying to sell the idea of clean coal and fund it from money earmarked for renewables. Why do you want to go back to Australia and chew stones for another four years? It just doesn’t’ make sense! At this stage my friend from CalTec had certainly made his point. Beer and a seafood platter looked a lot better on a warm Hawaiian evening. Certainly better than ruminating over another one of Australia’s many lost opportunities!