Is Demand Management a Scam?


I am grateful for a fast and reliable internet connection in Asia. I did like to watch Josh Frydenberg in the Canberra Press Club on the 11/04/2018 without buffering.  I suppose I should expect a good network here since I trained a few of the people who built throughout Asia.

I don’t want you to regard this comment as a backhanded snipe at Malcom Turnbull’s inability to address standards, compliance, enforcement and governance in regard to the basic engineering design of a network infrastructure project Mr. Frydenberg. I do want to relate a few questions my friends from Singapore, Hong Kong, Kula Lumpur and Shanghai asked during your presentation.

Let me begin by saying that my friends from China thought you were either a comedian or a snake oil salesman selling sulfuric acid enemas as a herbal aphrodisiac. I had to assure my Asian colleagues that you are a serious politician trying to explain ‘a rules’ based energy market as a free market to a bunch of confused looking journalists. This naturally prompted a few questions from my Chinese friends well versed in state sponsored market capitalism ‘Under Heaven’. Perhaps you would like to clarify the same confusion we first encountered in the late 90’s when the US debate between energy market economists in favour of regulation and those advocating minimum market intervention raged from California throughout the other 51 States?

Can you please clarify these questions for the overseas shareholders of Australia’s electricity assets, Mr. Frydenberg?

The first and most obvious question is this!

Is a rules based market a free market? Correct me if I am wrong but my answer to this question was that this is Australian Liberal and National Party code for the following:

‘Even though I as energy minister acknowledge that the Australian energy market rules favour the coal and gas fired power stations; because both major parties agreed to a coal to gas power station transition approach during the Howard years; the aim of the NEG (National Energy Guarantee) is to convince the three largest energy retailers controlling more than 70% of Australia’s customer base, to abide by the market rules’. Do you think this is a fair summation of the basic wait and stall until the next election NEG strategy of the Turnbull government Mr. Frydenberg?

The second question I was asked is a little tricky and I wonder whether you can help me explain it better to the Asian shareholders concerned for the value of their shares in Australia’s big three energy companies.

Is Australia’s energy market a free market because the Federal government likes to maintain the current competition balance between the existing state sponsored energy cartel ( the big three), or is the government’s recent intervention  in the AGL decision not to sell the Liddell power station;

  • A signal to the energy market that the government’s intervention in the free market is not an undesirable contradiction to the government’s free market principles, or
  • A recognition that the government’s minimum intervention principles in the energy market is an unworkable free market policy, or
  • A recognition that Australia’s existing energy market rules are incompatible and stand in contradiction with the government’s national productivity, jobs and growth and competition agendas, or
  • All of the above.

The third and fourth questions are a little technical and I appreciate your guidance Mr. Frydenberg.

What is the wholesale electricity price cost impact of AEMO’s cross border coal and gas plant contracts that provide FCA (Frequency Control Ancillary) and VC (Voltage Control) services including idle, ride through and firming services?

What is the total wholesale electricity price impact for all NEM contracted FCA and VCA capacity supply backup that is the consequence of non-compliance with grid connect, grid code, maintenance, unscheduled outages, lower and raise voltage control failures, including transmission grid phase and sync issues attributable to the non-enforcement of EU and IEEE grid code standards for all NEM connected assets?

The fifth and sixth questions are from the economist in the group.

You mentioned that you expect that the full 7% of wholesale energy price savings that you claim are due to the Turnbull government’s intervention into Australia’s gas market to be passed onto consumers. We presume that the Australian gas market is also a rules based market and not a ‘Free market’. Therefore the Turnbull government’s intervention in the gas market is presumably justified under your party’s ‘Free market and non-interventionist’ doctrine. What we do not understand is how you arrived at the 7% saving when mandated annual electricity price rises for grid upgrades are set at a minimum of 10% annually? Do you mean that you expect the annual electricity price increase to be 3% not including additional state charges and inflation indexing from June 1 2018? How long do you expect this non-binding verbal accord to last? Do we regard this statement as a statement of faith or fact on your part Mr. Frydenberg?

You mentioned that it would probably cost $100 billion to fix the National Transmission grid if we installed batteries in every major substation and interconnector in the NEM and that Snowy 2.0 without transmission line connection costings is probably cheap by comparison. In 2008 the industry costings for connecting all states with HVDC cables was between $36-$58 billion depending on route and other upgrade options. The cost of running the NBN optic fibre to terabit exchanges around Australia alongside the HVDC to all state’s under a single national connection plan was calculated at approximately $100 billion for both projects combined. Given that I was involved in the purchase of UPS battery storage for several network upgrades I can say that the price of battery storage decreased by 1000% between 1995 and 2005. I can also confirm that the price of battery storage has dropped another 500% between 2005 and 2018. At present prices battery storage is cheaper then gas and our estimate is that battery storage at all major substations and interconnectors will cost less than a third of the total cost estimate of Snowy 2.0. Since the government must fix the national transmission grid irrespective of Snowy 2.0, is the Turnbull government telling the Australian consumer that the NEG can operate without a reliable National Transmission grid and without Snowy 2.0 connected to a reliable National Transmission grid? Is the Turnbull government NEG strategy for reliability and affordable electricity based on the assumption that non-compliance with basic network design standards that ignore IEEE grid code and grid connect standards will deliver an affordable and reliable national electricity network?

The 7th and 8th questions relate to Demand Management Mr. Frydenberg.

We know that the ‘Avoided cost’ of not generating or transmitting energy on 35 degree days by old and poorly maintained coal power stations and over faulty and poorly maintained transmission networks can indeed save money. So can the TELSA battery in South Australia where FCA cost savings are published. What we want to know is this. Given the cost of the AEMO contracted FCA and VCA services and the supply cost per MV in the hundreds of thousands of dollars annually under Australia’s discrete forward capacity market model, who pays grandma for not turning on her air conditioner? Is the electricity rebate for being a panting customer paid by the state from state revenue or is the rebate paid by the retailer from wholesale spot price savings? Perhaps a few pennies are returned to grandma by the retailer from the energy savings she created from the many thousands of dollars she saved the retailer through ‘Avoided cost principles’? What precisely is the rate of ‘Avoided cost’ return to grandma for the many hundreds of thousands of dollars many Australian grandma’s collectively save the retailer by suffering through an Australian heatwave?

Do high energy industry users who already have preferred supply guarantee status and are often operating under a state electricity price subsidy ( e.g. Alcoa ) receive this additional reverse subsidy on top of their existing state subsidies and supply guarantee, or is this time based and weather condition reverse subsidy subtracted from their existing subsidies? How does this reverse subsidy impact on companies with equipment and operational/ production and supply scheduling insurance contracts? Is this reverse subsidy an additional subsidy to either replace part of an existing subsidy or in addition to existing discrete payment agreements between the state and the company?

Questions 9 and 10 relate to subsidies Mr. Frydenberg.

In your Canberra Press Club address on the 11/04/2018 you told the gallery that the Turnbull government has eliminated all subsidies to the energy market. You also alluded to the fact that both the LRET and SRET schemes many no longer be fit for purpose for the Australian energy market. Is it not a fact that the primary beneficiaries of the LRET and SRET schemes are the big three energy companies? Is it not a fact that the primary beneficiaries of FCA and VCA contracts are the big three energy companies? Is it not a fact that the few pennies grandma gets back under AEMO’s Demand Management scheme is peanuts compared to the ‘Avoided Cost’ savings and forward supply guarantee contracts enjoyed by the big three energy companies controlling more than 70% of the consumers and the majority of the network and generation assets across the NEM? Since you claim that you have eliminated all subsidies does this claim include all contracted capacity payments, rooftop solar pricing advantages such as lower distribution and transmission cost savings and all related ancillary and cross state border anti-competition advantages enjoyed by the big three energy companies? When is a failure in market rules that your refuse to fix not a competitive advantage and therefore not a discrete subsidy?

The Australian Industry Group seems to be heavily influencing the Turnbull government position on anti-competition policy under the NEM. When is the failure to enforce compliance with grid connect and grid code standards that result in the deliberate gaming of the energy market rules not a discrete subsidy to coal and gas power station owners? At what point do we consider anti-competition  practices as either state sponsored capitalism ‘Under Heaven’, a failure of governance, or a discrete cartel subsidy scheme to preferred suppliers?

Asian and US investor groups would appreciate your response as quickly as possible to these questions Mr. Frydenberg. You can no doubt appreciate our dilemmas. Under the current NEG strategy the Turnbull government is proposing that many shareholders are likely to sit on lower dividend returns because of the stranded asset risk the NEG entails. This is particularly so as Australian consumers either decide to go off grid or opt into closed 40MVH behind the meter peer to peer connected Block Chain managed closed smart-grids.

Concluding Remarks

We are trying to decide whether we should recommend a strategy of leasing distribution grid assets to these communities or advise our clients towards a greater consumer service focus whilst outsourcing some of the more expensive and least reliable assets to third party management. We don’t expect any new coal fired power station construction contracts after 2025, nor any new gas power stations to be constructed after 2035. Our risk analysis does not forecast a significant increase in gas usage for electricity generation beyond 2025. We do however expect a dramatic use in hybrid electric / hydrogen vehicles for long haulage and public transportation. For this reason we believe that investment in hydrogen plants and in particular, dual purpose facilities in waste to energy with a hydrogen spin off to warrant greater investor attention for the Australian and Asian markets in general. A national energy policy beyond the current simplistic and confused ideals that comprise Australia’s coal to gas national energy transition political focus would be highly relevant to our portfolio risk management strategy.

The Turnbull government’s work on protecting existing financial institution assets by its refusal to reform the Australian energy market rules is a welcome high risk strategy by institutional shareholders. We do not expect GDP targets above 3% and unemployment targets of 3% to be achieved under either the Turnbull or Shorten government tenure. Subsequent low productivity and continued commodity market fluctuations are unlikely to reduce government debt in the anticipated time frames. This offers further opportunities for asset consolidation and foreign ownership opportunities as the decade progresses. Do you feel comfortable with this general risk assessment of the Australian economy going forward Mr. Frydenberg?


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.

Local Government ready for Australia’s Energy Master Plan Mr Turnbull

It is clear that the Federal Government’s fake coal debate is a distraction and a stalling tactic. There is no appetite for coal power in the electorate or in the industry. Testing the water for a national gas energy policy is equally unsettling to a sophisticated electorate increasingly knowledgeable about the issues of energy security and price affordability. The federal government’s media agenda to disrupt, confuse and distract from the real issues is neither new nor unexpected. The reality is that even if Australia where to change all existing coal fired power stations to gas in the next ten years, the Turnbull government could not meet its international carbon obligations, or its stated twin priorities of energy security and price affordability. It could not meet any of these objectives because the problem of energy transmission integrity and quality assurance remains. It could not meet these objectives because wholesale electricity market reform remains a strong impediment. It could not meet is objectives because Australia does not have a creditable wholesale and retail National Energy Market Regulatory Framework. Mr. Turnbull has talked at nausea about the opportunities disruptive factors provide to the Australian economy. Yet, his government refuses to discuss the disruptive effects of the grid and the systemic policy neglect of electricity market reform. What is clear to everyone, including local government; is that a cheaper and more effectively solution is available. The embrace of an electricity demand market reform plan focused on local self-generating smart-grids must be placed on the national agenda. It must be placed on the agenda because the real international debate is focused on two primary solutions. This shift of focus happened about fifteen years ago without Australia’s major parties even noticing. The twin objectives of every credible international economy are:

  1. upgrading the national grid, and
  2. crafting an energy demand side market policy to counter supply side market failure

Mr. Turnbull’s fishing policy foray might have had more credibility if a federal coal to gas conversion plan had been formulated in the 1990’s. The energy sector is a capital intensive industry requiring long lead times. Successive Australian governments at both federal and state level have failed to formulate such a policy. Mr. Turnbull’s current utterances about gas can only be regarded as deliberately misleading, irresponsible and party politically motivated. This is especially true when local governments in all states have been waiting for a responsible state and federal government transition policy since the Howard government era. A policy that only considers the supply side equation favouring the major energy cartels in an existing market framework without a strong regulatory framework is the cause of Australia’s energy security and price affordability problems. It makes no sense for the Turnbull government to pursue a failed policy agenda and everyone knows it.

The idiocy of the state bureaucracy

Key public servants in some states are impediments to change. COAG regulations that restrict domestic and commercial solar and small wind installations to 100 kw of solar and 10 kw of wind respectively are the drivers of numerous and entirely unnecessary legal disputes and delays between local government and community groups in some states. The state of Victoria is a case in point. Despite Lili de Ambrosio’s ( Victorian state minister) announcement that the state of Victoria will be carbon neutral by 2050, her own department continues to enforce these redundant COAG regulations in surprising ways. The state of Victoria is littered with local government and community applications for self-generation projects exceeding the COAG size guidelines. From the South Melbourne Market rooftop solar project to regional community smart-grids along the New South Wales boarder, community frustration with the mixed messages coming out of Spring Street threaten a community boil over.

In 2010 I discussed regional smart-grids with the 2 department heads the Minister is responsible for. I was told that local self-generating smart-grids must be approved by the relevant electricity distribution company and that any local smart-grid project exceeding the COAG set guidelines would be considered as a power station. I was further informed that energy storage included in any smart-grid proposal would also be considered as a separate power station proposal if the combined storage exceeded 100 kw. This interpretation of the COAG regulations would apply regardless of whether the installation is a single smart building or a distributed self-generating smart-grid. I inquired if this also applies to LED Smart Street lighting if the lights are fitted with battery storage. The answer was yes.

I have to admit that I erupted after hearing this stupidity from senior state public servants. I informed these morons that under international regulations any grid or smart building embedded energy storage device is classified as a grid integrity device. Distributed self-generation embedded in or attached to a building or public infrastructure such as street lights is not classified as a power station even if they are connected to a self-managed smart-grid. They are classified as a grid connected mini grid or smart building management device. This international regulation applies even of this mini grid is serviced by a Utility controlled virtual power station. In fact, the only power station would be a Utility controlled virtual power station. This power station can be as simple as a single smart meter located at the edge of the mini grid, or as complex as a Siemens / GE wide area virtual power station managing internal smart-grid and external supply variations. All internal smart-grid demand variations managed by smart-grid software between buildings are classified under the international IEEE regulatory framework as a grid integrity and grid security management device. This includes any embedded energy storage. To my surprise the two senior public servants simply told me with a snickering smile, that this is not the EU or America, but the state of Victoria. In Victoria we interpret state regulations. If however, the federal government would provide all states with some regulatory guidance, the issue could be resolved in due time. Well, ladies and gentlemen! There you have it! Despite the minister announcing that Victoria will be net carbon neutral by 2050 she clearly has no control over her own department.

What should be done?

There are some simple ways State ministers can provide regulatory clarification. If the idea of removing the COAG regulations is too hard, then perhaps mandating a 40 MW limit for all self-managed smart-grid or Utility controlled embedded mini grids is an option. Exempting all smart-building applications from the COAG regulations would also be an intelligent thing to do. Legislating unrestricted grid access for any third party is another ‘smartgov. au’ policy. Then of course we have the contentious policy of removing Utility veto rights for any smart building or self-managed smart-grid on the grounds that grid integrity and energy security are primary state obligations to industry and the community. This can easily be achieved under existing supply guarantees, despite current state Utility contract agreements.

Additional powers in line with the above specified changes should be given to the state regulator. These powers should include control over wholesale pricing to control spot price manipulation. Since smart-grid communities could differentiate between internal and external pricing for supply. Additional regulations that enforce a Utility non-interference clause should be considered. This is particularly true since neither Transmission, nor Utility pass through charges apply to internal smart-grid customers. Enforcing the right for any local government or community owned smart-grid to charge their own internal smart-grid prices would entail a regulated set price for the use of Utility owned electricity distribution infrastructure. This must take into account the benefits self-managed and self-generating smart-grid energy export to the grid.

The benefits are in the form of improved grid integrity and supply security as well as the elimination of the entire retail segment of the market. Removing the retail segment of the market allows electricity distributors to deal directly with smart-grid owners. It makes no difference whether these smart-grid owners are local government’s or community groups. Downward pressure on prices would be felt immediately as cost savings for electricity distribution companies come into effect.

Finally, states should consider a green bond financing mechanism that would allow large institutional investors access to secure long term investment opportunities underwritten by local government rates and existing public building asset values. A policy that provides a 30% tax reduction for a 20% public building and industry energy efficiency gain might also be considered in conjunction with the federal government.


Australia’s Energy Master Plan demands a Regulatory Framework Mr Turnbull

Australians are pleased that our third world energy system is finally getting some attention. So far this much awaited debate has been less than spectacular. Once again we are witnessing the slatted policy ribs of Canberra’s feral dogs baring their mouldy teeth over matters that can only be described as irrelevant point scoring. After years of ignoring the issue of wholesale electricity competition policy and clear evidence of spot price manipulation, Australian businesses and consumers demand a national electricity market regulatory framework. Despite this urgent need of reforming a market that has failed Australian consumers for years, you are telling us that energy affordability is a clear goal of your administration Mr. Turnbull? Why are you wasting our time by stating the obvious? We are interested in hearing solutions Mr. Turnbull.  If you are not prepared to do anything about wholesale electricity market reform, how about doing something at the retail end of the market?

We know that you have solar panels on your pink house Mr Turnbull. You don’t have 5 kw of solar panels on your roof like my pensioner mum. Nevertheless, you are a smart man and read your electricity bill. Not with standing that unlike my pensioner mum you may have an electricity gold pass, your bill will still state a ‘daily charge’ as well as your consumption charge. Your bill will also tell you how much electricity you deliver to the gird, if any. What does this ‘daily charge’ consist of Mr. Turnbull? I am not sure whether it is entirely legal under NSW or national consumer affairs laws to issue a customer bill that does not clearly show what the consumer is paying for? Why are electricity customers charged for something that is not itemized on the bill of sale? No other business would dare to issue such a bill because they are liable to be sued for misleading and perhaps fraudulent conduct. After all, if you found an unspecified or anonymous item on your grocery bill you would query it. Right! Yet for some reason electricity retailers are allowed to charge for unspecified items under the name of ‘daily’ or ‘pass through’ charges. What are these charges?

Let me give you a heads up Mr. Turnbull. We know that these ‘daily’ charges very likely consist of the following items.

  • Generation charges
  • Transmission charges
  • Distribution charges
  • Smart meter operational charges
  • Smart meter data management charges
  • Smart meter data warehousing charges
  • Generator account management and billing charges
  • Transmission account management and billing charges
  • Distributor account management and billing charges
  • Retail account management and billing charges
  • State taxes and royalties
  • GST

Note: If you have solar panels on your roof you can add another lot of GST for selling your excess energy into the grid. You also add another lot of distribution and data charges etc.

In a privatized electricity market it is likely that a minimum of four different companies are involved in billing each other even though these companies may be part of the same parent company. Since businesses are required to add GST ( unless exempt ), we can assume that a minimum of four GST increments are added discreetly to each customer bill.

Is it not true Mr. Turnbull that the major part of your electricity bill consists of these daily charges and not the electricity you consume? So why do you insist that electricity price affordability is directly related to the cost of renewable energy? Why are electricity companies allowed to issue bills that contain hidden fees and unspecified charges? Is this not a clear breach of Australian Consumer laws? After all, no other business is allowed to issue a bill or receipt for goods or services that contain information that may be regarded as deliberately misleading. Why is this Mr Turnbull? How much are each of these hidden fees and charges Mr. Turnbull? Are there different charge rates for different times of the day, distance, or perhaps gold plated wiring?

Let’s consider your neighbour who has made a commitment to pay more for his electricity because he specified to his retailer that he wants to buy green certified energy. Does your neighbour know exactly where his electrons are coming from? I asked my neighbour the same question. My neighbour presumed that the 8 MW of solar energy I deliver into the grid each year would directly flow 6 meters across the street to his home. Unfortunately I could not reassure my neighbour that my excess energy is powering his home. So much for paying a premium price for a environmentally responsible choice! No electricity retailer / distributor can actually verify the origin of the electrons supplied through the grid. Is it not misleading to market or sell a product that cannot be verifiably supplied to the customer? Once again Mr. Turnbull, I am not a legal guru like you. However, as a simple man, I do know that both the marketing and sale of a product or service that claims to be something other then what can be verified is surely not legal. Is it? I am sure that you would get upset if you paid for a bottle of wine and received home brewed beer instead. Perhaps there is a law firm that wants to take this matter on as a class action. What do you think?

Like most Australian’s I would like to see you discuss electricity prices so that the common folk can understand it. We struggle with the current level of debate in federal parliament on matters of relevance and transparency Mr. Turnbull.

Australia’s Energy Master Plan is no shouting matter Mr Turnbull

Australian’s are sick of being talked at by politicians. We are sick of being told what to do and what to think by politician pushing their peculiar version of the truth. In matters of energy security and price affordability every Australian consumer knows how we must move forward. Despite this we are ignored by our elected representatives.

For years I have advocated that the entire system of National Energy Quango’s must be reformed from the ground up. No rational nation allows the principal national energy regulator and management authorities to be the play pen for the Utility companies. There is a large question mark hanging over the role these organizations going forward. Does a 21st century energy system based on dynamic load sharing and shimming even require these authorities? The answer is clearly no! If we consider that existing smart grid sensor technology and software we know we can adjust demand within less than 5 second respond time within any closed smart grid system. What is required is an economically rational national master plan to make this happen. Instead of addressing wholesale energy market reform we get political stunts in federal parliament coupled with an insane display of bravado that defies economic and climate policy adaptation logic. Yes Mr. Turnbull! The argument is not about coal or climate change. The debate is about wholesale prices and energy market reform. Never have Australian’s witnessed a more irrelevant political party, Mr. Turnbull. Trying to score political points in a parliamentary shouting match that does not even address the core issues exposes you and your party an as the ship of fools floating in the political slum of irrelevance.

If I am to assume that the current federal LNP government will continue to ignore the obvious, then this National Energy Market policy document will be clearly aimed at our state leaders. Ladies and Gentlemen; you are going to have to go it alone because there is not a single intelligent brain cell visible inside the ACT molehill. What must you do!


Firstly you should repeal the COAG regulation that limits solar and wind domestic generation. These COAG rules are not only stupid; they limit your own capacity to deal with your imminent energy price affordability and security crisis.

2.) You should legislate that consumers own their Utility billing data. This includes the full disclosure of hidden fees and charges.

3.) You must repeal any laws that require consumers to install a Utility owned smart meter. These meters are a significant cyber security risk and they are simply not very smart. In fact, these meters do not even adjust for daylight saving time. This simple fact provides Utility companies with a disguised profit windfall.

4.) You must remove any restrictions to 3rd party grid access and make it illegal for any Utility / distribution company to hamper any domestic solar or wind (hybrid ) facility from entering the market. This should include a comprehensive review of any municipal planning and building codes that restrict domestic and commercial self-generation and energy storage.

5.) You must legislate a fixed price distribution line leasing arrangement for any community / local council owned and operated closed smart-grid. This legislation must state that any closed smart grid must be free from any 3rd party Utility smart meters or any other Utility management hardware likely to interfere with the secure and independent management of the closed smart grid.

6.) You must legislate that communities / municipalities and regional government authorities have an unrestricted and rightful obligation to build, operate and manage their own closed smart grids. This right is a national cyber security, energy security and price affordability priority unchallengeable under any state and federal law.

7.) You must legislate that any community / municipal and regional government authority is fully within its own right to set its own energy prices independent of any Utility as long as this price does not exceed the average annual state energy price. ( Note: We have calculated that a closed smart grid energy pricing standard is dependent on maintenance, lease, management and ROI. Mandating a dual pricing arrangement that differentiates between an internal smart grid and an external price, automatically puts downward pressure on the national wholesale energy market spot price.)

8.) You must create a Green Utility Bond and Energy Infrastructure investment vehicle that is able to be floated on the stock exchange. This will allow large scale institutional investors as well as insurance companies to invest in community / municipal / regional smart grids directly. Investment bond duration ranging from 5 years ( without energy storage ), 10 years ( with energy storage ) and 15 years + for large scale biogas / biomass, hydro, wave, tidal, compressed air or combined solar wind with storage projects. This measure will provide the long term secure investment opportunities large institutional investors are seeking now.

9.) You must begin to negotiate HVDC transmission connections with neighbouring states and speed up the development of any geothermal potential within your state.

10.) You must facilitate the transition of the traditional oligopoly /monopoly controlled Utility wholesale and domestic distribution energy market in your state into a fully interconnected and interdependent dynamic customer focused service industry. There is simply no justification for the outdate method of load sheading in a fully dynamic 21st century energy system. Overseas modelling tells us that demand load shifting and shimming methods are not only profitable for the Utilities, they are also far better for maintaining energy security and price affordability.

You are on notice Mr. Turnbull. We will not tolerate your ship of fools Mr. Turnbull.

Australia’s Christmas wish for a 21st Century Energy System!

In this exclusive interview with Father Christmas the common man asks the important questions and finds out what is in your 2016 Christmas energy security and price affordability stockings.

Let me welcome you Nick to this ongoing debate on “What a 21st Century Energy System” should look like, going forward. I know you are a busy man at this time of the year and energy lessons from a little backwater country like Australia are not a top priority on the global climate change league table.

Q.) CM

Josh Frydenberg recently made the comment that closing Victoria’s Hazelwood coal fired power station is going to increase electricity prices. This surely must impact on your global business plans Nick?

A.)  Nick

It is not easy to spread good tidings and peace upon the world when you are dealing with self-interest, nepotism and people who manipulate the common good with opinions manufactured for a 30 second media grab. I have been watching Josh ever since he organized his energy security emergency in Adelaide. In my opinion it was another “ Jolly” step party to nowhere!

Q.) CM

I don’t understand your answer Nick. Can you elaborate?

A.) Nick

Look CM! Nothing is ever spoken or written without some kind of agenda. So the context and intent everything is said in or written for is really where my good and bad ledger begins. Let me share my dwarf’s research with you.

First of all, you have to understand that Josh’s comment was a coded message to the Victorian State government. The message confirmed that no federal funds would support the closure of the Hazelwood power station. Without a national energy security plan agreed to by all stakeholders the Turnbull federal government will consider the progressive closure of any coal fired power station premature. Mr. Frydenberg’s  words where a specific warning to the Andrews government. Without a responsible fossil fuel to renewable energy transition policy that includes a targeted regional industry growth and development plan, the closure of Hazelwood or any other coal fired power station in the nation is ill considered and irresponsible.

Q.) CM

So you are saying we should not close down Hazelwood or any coal fired power station?

A.)  Nick

Here you go again! The problem with trite populist journalism is the jump to conclusions based on assumptions. You got to stop ludicrous assertions that appear to be reasonable on the surface but really don’t muster up to close inspection. The devil is in the details! What I can tell you is what is in the Christmas ledger. I cannot tell you what is in the wish list for all state and federal energy ministers. That goes against my oath. I can say that the Christmas wish lists and the presents I have been asked to bring have not changed in the last 25 years. The emphasis has always been on ‘Policy’ and a large gift of ‘Courage’ to forge coherent national energy wholesale market reform among other things. Please understand!  I don’t do miracles. That is not in my job description.

Q.) CM

You are saying that political and economic policies have been out of touch with common sense for a long time?

A.)  Nick

What I am saying is that all the states have been waiting for some kind of federal leadership on an energy transition plan that includes a targeted industry plan in a logical urban and rural growth policy format. It only dawned on some people sometime during the sixties that you actually need all three to work in conjunction with an integrated environmental plan. The fact that the four policies have to be seamlessly integrated at the regional and national level has remained in the too hard basket for a very long time. Australia has struggled since 1901 with the notion of fully integrating multiple government departments across local, state and federal level that function with a common purpose and for the common good. Your constitution is specifically written to deny such co-operative value driven national objectives in favour of residual values that protect state parochialism.

It is not a question of not being able to come up with a coherent national energy transition plan. There have been plenty of ideas over the years. The problem is that it requires consideration for the natural advantages each state has to offer in respect to their existing and future industrial outlook. No such long term analysis has ever been carried out. Don’t get me wrong! We have seen plenty of population forecasts. We have had more than our fair share of industry specific papers, research analysis and a boat load of PHD’s on trees, water, health, cows, milk, beef, paper, clean coal, solar, wind, geo-thermal and who knows what else over the last 100 years. What we have not had is anyone with sufficient practical knowhow to make sense of it all. These academic papers and consultancy studies remain apparently unrelated without a single shred of courage for a coherent strategic plan for the La Trobe valley or any other Australian coal producing region.

The simple truth is that all states have been competing against each other to attract the same industries irrespective of whether their location and functional integration into the regional economy actually offers a long term competitive advantage without continuous subsidy relief. Since both affordable energy prices and high quality education and training form the backbone of any post-industrial economy, gutting an essential service infrastructure without an adequate contingency plan is economic suicide. What is clear is this! The Paris accord demands international compliance. It means that the smart money is divesting itself from much of the fossil fuel sectors whilst hedging its bets on viable alternative technologies. The new paradigm is distributed small scale self-generation interconnected in closed smart mini grids. Without a government agenda that sets out a clear road map for the future, any government that ignores the need for an alternative national energy security plan is likely to suffer no matter how many pretty words Lord Turnbull sooth says.

Australian history tells us that even if an industry is critical for a regional economy there is no guarantee it will be supported by a logical industry policy. The failure of continuous, coordinated and integrated research and investment support undermine the long term viability of any regional economy and their communities. Under such political and bureaucratic paralysis it is easy to put your head in the sand and hope that the good times roll on. The recent mining boom shock is part of the boom and bust anthem that Australia has been playing for a very long time. Hoping for a miracle does not lessen the obligation of planning for a responsible future for all citizens in any country. Perhaps that is something that has somehow been forgotten in Australian politics. Perhaps it is something relegated to an ancient past when folklore and urban myths informed the natural order of things!

Q.) CM

So you are saying the problems are both historical and systemic. You are saying that the real problems rest within the structural and functional characteristics of our political system.

A.) Nick

Let me give you several historical examples. Many years ago Siemens attempted to locate a wind turbine blade manufacturing and advanced materials research division in the La Trobe valley. Even though this industry would have been a small step towards an industry lead energy transition plan, the inability of the then state government to come to terms with this Union supported initiative resulted in its loss to New Zealand. The same can be said for a plan to clean up the Hazelwood cooling ponds or the urgent need to deal with the fly ash that is costing Victorian electricity consumers $100 per ton.

Let me illustrate the point! The fly ash industry is controlled by a monopoly. Fly ash is used in the concrete, brick and asphalt industries. It can also be used as an agricultural soil conditioner and fertilizer. However, the fact that the entire industry is controlled by a monopoly has restricted the establishment of new industries for many years. What the common man does not know is that Australia’s coal fired power stations produce more than 10 million tons of fly ash every year. The vast majority is managed as toxic waste despite its potential in the paint, aeronautic, ship building, electronic, plastics, and fire retardant industries. Advanced materials research and the formation of new industries built around a toxic waste product make a lot of sense in any coal producing region. That fact that these industries have had no investment support despite the enormous cost of managing this waste resource remains simply staggering.

So here is perhaps the first of the many wonderful contradictions that are simply ignored as lost opportunities. The Australian tax payer pays an export coal subsidy price to the industry of almost $5.20 per ton. In addition, the electricity consumer pays an annual levy of over a billion dollars to manage the fly ash residue. If both these subsidies would have been offered as targeted payments for the establishment of new industries that can utilize the dumped minerals when coal is heated above 900 degrees, several advanced materials manufacturing industries and associated research institutions could have been operating in the La Trobe valley today. Instead, nothing has been done. This situation is so insane that the cost blow out of the Adelaide desalination plant can be directly attributed to the Boral monopoly.

Instead of using fly ash from the South Australian coal fire plant, Boral shipped the fly ash for the Adelaide desalination plant from New South Wales. Apparently it was the only shipping terminal that could handle the order. Trucking it a few miles from the South Australian thermal coal facility to Adelaide obviously never entered into the equation here. There was some argument that the quality of the NSW fly ash was more suitable. However this is simply rubbish. The truth is that Boral manipulated the fly ash supply chain to maximize its profits and to cut independent South Australian concrete suppliers out of the deal. The resultant South Australian fly ash shortage meant that small independent local concrete companies were stock piling South Australian fly ash in disused grain silos in order to keep their own operations viable.

What is perhaps even more mind boggling is that no state or federal government has ever considered a policy that mandates a subsidy program that would pay for cleaning up the environment whilst growing new businesses from existing ones. The idea of generating secondary income streams for the coal generators is either so novel that no government official or minister can understand it or it is so intelligent that no one can grasp the concept. This type of “” policy approach seems entirely alien at all levels of government. It is a policy approach that is fundamentally foreign to the manner in which our state and federal bureaucrats think about key industries. What we can conclude from this is that there is a disconnect between the purpose of a subsidy and the need to make a public gratuity a self-funding regional industry growth and jobs security policy priority. It seems easier to grant a subsidy for keeping existing coal fired power station in ramp up or idle mode for up to 10 month of the year whilst charging consumers for the privilege of what is in essence an unproductive subsidy investment to an industry that is both an essential service and in need of being shut down.

This single example demonstrates why the common man wonders why federal and state governments repeatedly fail to connect the obvious dots. It matters little which of the two major parties is actually in power at either state or federal level. The same disconnect is apparent with both of them. Whether this is ideological or part and parcel of the poor advice politicians receive from their respective departments is difficult to ascertain. What is certain is that the influence of stakeholder groups and powerful sectional interests are flavouring the policy broth to suit their own commercial interests. In the wake of the Boral fly ash monopoly example I ask you this. Is the concern with the ABCC legislation and the supposed irregularities in the building industry a primary concern, or is the real issue that a monopoly / cartel is manipulating supply and artificially pushing up costs? These costs are paid for by the taxpayer and consumers alike? Is it not the federal government who has the power to legislate the activities of monopolies? Maybe that is a state matter as well? Is it not the federal government’s own failure to control key monopolies and cartel behaviour in key industries that are the real reasons for sector wide cost over runs and supply distortions, inefficiencies and price gauging activities. Lord Turnbull’s willingness to demonize unions for demanding fair wages and a safe working environment is obviously an easier target than tackling the real failures in Australia’s free market economy.

What I am saying is that the common man is tired of watching an ideological political pantomime more concerned with building a corporate welfare state at the expense of ordinary people. Even though the masters and servants act is part of Australia’s legislative and historical heritage there is no justification in resurrecting its modern equivalent. There is simply no justification in destroying a regional economy in the hope of resurrecting the Victorian charity system as a viable replacement for the social welfare safety net. The question is how long we can stall the inevitability of these long term consequences whilst our leaders engage in their “Punch and Judy” side show.

Neglecting the most basic aspects of a long term integrated energy transitions policy is simply not good economics. There was a need for a regional industry growth plan that is connected with a rational energy transition plan before any of the states decided to privatize their electricity generation and supply networks. This simple fact was ignored in favour of a short term financial gain for a very small number of beneficiaries. Confidential sale contracts for public assets never seem to disclose the cost of ongoing subsidies and future taxpayer bail outs and grants. They do not disclose the anticipated consumer price impact down track. The impact of future insurance, public health and other liabilities are never analysed or disclosed to the common man. These costs surface years later when the public is presented with a bill. The Hazelwood mine fire and its ongoing health costs alone amount to more than a billion dollars. If we add the cost of successive bush fires and the rehabilitation of the Hazelwood site, legal and insurance bills as well as the need to support La Trobe valley workers and their families, the Victorian taxpayer must surely wonder when this managerial incompetence will actually stop.

What is certain is that we have all known the answers for a very a long time. Let’s consider the clean-up of the Hazelwood cooling ponds. We have known for a long time that the establishment of a combined solar and wind facility on or near the Hazelwood site would provide the energy to clean up the cooling ponds. By combining this with a methane co-generation system that deals with the sewage from regional towns in the La Trobe valley several income streams could easily have been developed during the last 10 years. One of the most obvious examples is a hydrogen production facility. With a global hydrogen price hovering around the $3.60 – $4.00 USD per kg and bio-gas / bio-mass co-generation delivering energy at around 2.5 cents per kwh over ten years, a large scale hydrogen production facility makes a lot of economic sense. This is particularly true since many of our Asian neighbours are in the process of formulating a hydrogen based public transport policy. At least two of our major Asian trading partners have viable space industries whilst Virgin, NASA, SpaceX, Russia and the European Space Industry are actively seeking hydrogen on the international market. Instead of targeting our coal industry subsidies to support future industries and regional growth opportunities, our federal politicians are actively engaged in vacillating over the size of a renewable energy target to facilitate investment. The lack of any coherent industry plan that facilitates the transition from a fossil fuel based economy to a renewable smart and agile economy has never been more urgent. Whereas India is forging a hydrogen public transport policy our state and federal politicians ignore it. Gambling on a coal and LNG led export recovery is not a policy. It is a plan that will consign Australia to a backward economic basket case in the Asian century.

Q.) CM

Isn’t the Renewable Energy Target ( RET ) supposed to be the market driven transition to renewables?

A.)  Nick

The purpose of the RET is to manage the energy capacity market from the large cartel electricity producer and distributor / supply side. Any government that aims to rely on a mandated target without a commitment to a strong regulatory wholesale market mechanism is inviting cartels to manipulate prices. Most economists in Australia would probably shrug their shoulders at this and simply argue that these types of market irregularities are a necessary temporary manifestation that must be tolerated in a privatized free market. I am not sure what the justification for this ideologically driven nonsense actually is? Perhaps it is a carefully calculated apology for regulatory incompetence. What is clear is that it remains an excuse not to regulate the wholesale electricity market because the various stakeholders, which include the states, need to maintain their relative financial stakes at the expense of transparency. Just as much as the South Australian taxpayer was burdened with the undisclosed cost overruns for the Adelaide desalination plant, electricity consumers pay the cost of generator supply manipulation and distributor price gauging practices throughout the national electricity network.

Setting a renewable energy target to manage transition has absolutely nothing to do with managing the transition process. They are two very distinct things. The issue in Australia is the systemic failure of managing the transition process at both state and federal level. Once again I repeat that the failures are at the regulatory and legislative level. When these failures are combined with an inadequate energy demand side policy and compounded by a non-existing regional industry growth policy the common man is right to question both the competence and the sanity of political leadership. Without a vision for investing in targeted industry support we can feel the depth of despair in our regional economies running like a cancer throughout this country. Every Gippsland dairy farmer could benefit from a wind turbine or two to supplement their income. They would welcome targeted investment that would establish bio-gas co-generation on their properties. Many would welcome the establishment of regional farming energy co-operatives and subsidized organic fertilizers produced from sewage and fly ash. Instead we have a federal agricultural minister vexing lyric over ugly wind turbines. Rather than engaging in the debate at an appropriate level that focuses on real solutions for farming communities we get a deputy PM who claims he represents rural interests.

So if you really want an answer about the RET there is only one conclusion that makes sense. The RET is a fossil fuel industry protection policy designed to prolong an unsustainable and entirely inappropriate subsidy scheme. Unless our scientists manage to deliver fusion technology tomorrow there is only one RET. That RET is 100% renewable energy. Anything less is a stalling tactic that will see Australia sink in its own morass of indecision and poorly articulated excuses. Amid the politically confused pandering to vested old industry interests the common man is desperate for some transparency.

Q.) CM

Despite all these feisty words Nick, I have to conclude that you basically agree with Josh Frydenberg. The closure of the Hazelwood coal fired power station will increase retail electricity prices. There is simply no other way I can interpret this.

A.)  Nick

You have to consider everything that is said by anyone in the context in which it is said in and the reason for which the comment is made. Retail electricity will increase regardless of whether Hazelwood closes or not. AMEO’s own wholesale price projection on a 1.2% annual demand increase over the next 10 years project a minimum 20% price increase. This factors into the equation the closing down of coal fired power stations and the changeover to LNG ramping generators. There are of course state variations in this projection but the overall national trend for wholesale prices under the current electricity policy regime remains clear. What is conveniently ignored is that all AEMO pricing projections assume policy as usual. That is to say, the only thing that really matters is a statistical analysis from the capacity market supply side of the equation. It is true that the AEMO analysis does include some basic assumptions about the uptake of solar, solar hot water and efficiency gains made from consumer white goods and battery storage. This is how AEMO arrives at a national energy demand increase of 1.2%. This analysis is however fundamentally flawed. It assumes a basic business as usual policy approach that AEMO has recommended from day dot to any state or federal government. That is to say, AEMO recommends that the only viable way to deliver electricity in Australia is to use a supplementary centralized capacity supply market approach. There is simply no policy for switching to an augmented capacity demand side self-generation program. Let me explain the concept of an augmented capacity demand side approach.

Let us assume that Australia’s state and federal governments are actually interested in controlling retail energy prices because they recognize that energy prices are a fundamental drag on national productivity. Let us further assume that state governments have actually worked out that one of the main drivers for maintaining and attracting new industries to their states is more than a slick marketing campaign and a few overseas trade jaunts. Let us assume that state governments agree to unilaterally support a minimum 20% energy efficiency requirement for all government buildings and for all industries generating revenue in excess of $1 million dollars per annum. Much of this could easily be paid for by the current coal and fossil fuel subsidies as well as a levy on mining exports. After all, it makes no sense that India charges a $1 per ton Australian coal import tax that is paid directly into its own renewable energy fund. Let me further assume that the Victorian government has worked out that 400 solar panels on each of its 3000 plus public school roofs can generate at least 3000 MV of clean energy per annum. Since the closure of Hazelwood requires the state to commission at least 12,000 MV of new renewables the questions the common man would have to ask the minister are:

a.)   What is cheaper?

b.)   What reduces the state’s carbon liability faster?

c.)    What delivers a better investment return and stabilizes energy retail prices faster?

I think you can see where this simple shift in government policy will take the entire demand side equation for the national electricity capacity market. The real question is this. How much energy can be self- generated by all government buildings, hospitals, nursing homes, kindergartens, schools, sewerage farms, supermarkets, industrial estates, warehouses, Universities etc, etc? Now that I have your attention let me expand this simple proposal into a national energy security policy. Let us assume that all states agree to make all regional towns with less than 60,000 inhabitant’s energy self-reliant. We know that a simple formula of 1 daily consumption to 4+ 1 daily energy self-generation + a minimum of 2* daily energy storage can make any community virtually energy independent from the grid. We also know that if we combine a variety of self-generation methods that include rooftop solar, distributed wind ( including small rooftop wind ), small hydro, with a sewage / bio-gas / bio-mas co-generation facility and storage, we can not only eliminate grid reliance, but we can actually export surplus energy into the grid. This is particularly true if we combine our community self-generation with compressed air, flow battery ( hydro) and standard domestic battery storage. Let’s run the numbers for the economists among you.

a.)   Solar comes in between 4 – 5 cents per kwh wholesale.

b.)   Wind comes in between 4-5 cents per kwh wholesale.

c.)    Biogas/ bio-mas cogeneration comes in at 2.5- 5 cents per kwh wholesale over ten years

d.)   Compressed air and flow battery ( hydro) storage comes in at 2.5 cents per kwh over 10 years.

e.)   Small hydro generation comes in at 5-8 cents per kwh depending on water flow rate

f.)    Standard domestic battery storage comes in at between $300 – $500 per kwh and reducing.

What these figures indicate is that any regional town can easily become entirely grid independent as well as a net electricity exporter for less than the annual national fossil fuel subsidy. What is required, is a state government policy and a national energy efficiency plan that mandates that all regional towns with a population of 60,000 or less are to be turned into self-generating closed smart-grid energy hubs.

What are the pros and cons of such a policy? Well, for one thing, all state governments have to acknowledge that all consumer data including utility data is actually owned by the consumer / prosumer. That means that all regional towns that own and run a self-generating closed smart-grid are not required to install any smart meters on any domestic or commercial premise. Smart-grids are by definition a self-managing electricity network. This means that any Utility owned device is by definition an illegal 3rd party device inside a privately owned smart-grid. The only smart meter should exist at the edge of the closed smart gird. The purpose of this single meter is to manage all electricity sold by the community into the grid and for any supplement to be drawn from it.

It doesn’t really take an economist with a triple PHD cluster on his shoulder pads to work out what the impact of this policy on national energy prices and national energy security would be. In fact, the policy would allow for a dual retail pricing policy. A standard inflation and CPI protected retail energy price can exist within the closed smart-grid whilst another external price can exist for the Utility owned part of the grid. This would protect regional communities against future energy retail price fluctuations; attract new industry and jobs. If this approach is supplemented with a hydrogen production and a large scale heat exchange hot water facility the community could establish an undercover year round food production industry growing anything from strawberries to fresh lettuce and tomatoes. The hydrogen facility could deliver a lucrative energy export industry for the state.

What is far more important is the impact this policy will have on Australia’s international carbon obligations and the future of rural economies. In addition, we can argue that the impact of closing Hazelwood, or any other coal fired power station, would in fact be irrelevant.

Q.) CM

Hasn’t the Victorian government just announced its intention to fast track the development of wind and solar farms in order to address the projected 12,000MV energy shortfall the closure of Hazelwood means to the state’s energy supply?

A.)  Nick

I am entirely supportive of renewable energy CM. What I don’t support is stupid policy that will make no impact on energy security or retail price affordability. The knee jerk policy of the Andrews government to rapidly expand concentrated wind and solar generation in rural Victoria is politically driven. It has nothing to do with I am saying this for the following reasons.

Firstly, the Victorian minister is poorly advised by her own department. There is simply no justification to lock Victorian energy consumers into fixed price PPA energy agreements with any wind or solar firm wanting to meet the 12,000 MV annual short fall anticipated under a Hazelwood closure agenda. In this sense I have to agree with Josh Freydenberg. The closure of Hazelwood will increase wholesale energy prices. If we consider that the AGL owned Loy Yang A power station has already been converted to gas, the Victorian retail energy price has simply no other short term option. Even though a flattening out of wholesale prices is predicted after the new wind and solar resources have been constructed, the short term prognosis of this policy is both risky and irresponsible whilst locking consumers into long term PPA agreements. This is simply stupid policy because all Victorian tax payers are still paying a subsidy for Loy Yang B as well as an LNG export price subsidy because we have no domestic LNG price cap. The reason I call this policy approach stupid is because the entire basis of the policy advice the minister is receiving is predicated from the industry capacity market supply side of the equation. There is no intelligent approach that tempers this policy with appropriate demand side self-generation and a state wide energy efficiency program that addresses the regional growth opportunities of the state’s rural towns.

Secondly, the lack of a regional industry policy that is seamlessly integrated with a responsible energy transition plan relegates the people of the La Trobe valley to become a national dessert for misery and human despair. The cost of rehabilitating the communities of the La Trobe valley and paying for all the ongoing Hazelwood closure costs will remain an additional burden for all Victorian taxpayers for the next decade. These facts are privately acknowledged by the senior department officials that have actually formulated the Andrews government renewable energy plan. What I find ironic is that the same people are selling this policy as “entirely within AMEO predicted wholesale price forecasts”. At issue is not energy security or indeed energy price affordability. At issue is the need to factor into the equation a GST, royalty and related state government revenue grab that is relatively guaranteed over the next 10 to 20 years. This is the basis of the Andrew’s government renewable energy policy. It has been the basis of every state government energy policy since the privatization of the state energy network. Actually coming up with an intelligent energy transition and regional industry growth policy is simply not a priority for the Andrews government. It has not been a priority for any Victorian state government from the day the electricity network was privatized. The only thing that counts is state revenue and paying for the state bureaucracy to give bad advice to successive governments.

Q.) CM

But hasn’t the Victorian minister just announced a 20% domestic solar feed in tariff increase to be phased in over 2 years from July 2017?

A.)  Nick

That is true! The annual minimum 10% increase in energy distribution and related fee charges makes a mockery of the freeze in domestic solar tariffs. That is in effect what the proposed phase in policy proposal is. Increasing the average feed in tariff from 6.5 cents per kwh to 8 cents per kwh is hardly a gift. The AMEO and NEMO negotiated minimum annual domestic transmission and distribution fee increases agreed to several years ago have reduced domestic solar viability to the point where a pensioner with a daily consumption profile of 2.2 kwh has to install 6.5 kwh on his/her roof in order to break even. Utility charges for high efficient domestic energy users are on average four times greater than their actual consumption costs. This discrepancy makes a mockery of this policy reform attempt. In fact, you would need a domestic feed in tariff above 12 cents to reverse the damage the annual minimum mandated price increase has done to retail energy prices during the last 6 years. Perhaps most curious about this entire saga is that the RBA agreed to this annual increase. Excluding the increase from the CPI is nothing short of collusion in my books. So here you have it. The basic rational of the 10% annual energy price increase is all about a state revenue and GST bracket creep. Even though all increases above 10% are included in annual CPI calculations, the basic 10% annual increase is not. In other words! The pathetic gesture to increase domestic solar feed in tariffs by 20% over 2 years is a slight of hand. All it will do is maintain overall feed in tariff values at 2016 levels for 2 years. Naturally this is sold as an effective price freeze. In fact, it is nothing of the sort for anyone with or without rooftop solar. Even those with rooftop solar are unlikely to applaud. The AEMO forecast minimum wholesale price increase of 20% over the next 10 years stands in stark contrast to an effective 2 year feed in tariff freeze without any relief from the annual connection, supply or hidden fee increases. The devil as always is in the detail my friend! If the government was serious about making a difference it would have mandated a solar FIT increase of 50% and capped the annual network and hidden fees to the CPI.


Thank you very much for your time Father Christmas. I know you are busy at this time of year when children everywhere worry about whether their parents can keep their Christmas lights on. I know that all children are secretly grateful that Rudolf’s nose isn’t owned by an energy company or subject to political backdoor deals.

A.)  Nick

Ho, Ho, Ho! Merry Christmas and Peace to the world.


You know I recently had a Utility executive offer me a 40% reduction on my energy bill if he could plug Rudolf into the grid and shove a smart meter up his proverbial. I declined because the sums didn’t add up.

Australia’s first debate on Energy Security and Price Affordability

There is little doubt that Australia needed to have a debate on energy security and price affordability 30 years ago. We should have had this debate before the states decided to privatize a large chunk of our national electricity assets. We should have had this debate before we considered smart meters, an ETS or even a temporary fixed carbon price regime. We should have had this debate because no country can plan for a renewable future without defining the national policy ground rules first. Europe had this debate in the 1970’s in the wake of the oil crisis. Australia ignored the lessons we could have learnt from the Europeans because we are blessed with an abundance of coal, wind and sunshine.

The Paris agreement comes into effect in less than 30 days. Recent transmission grid failures have only highlighted how ill managed our national transmission network truly is. Failures of the Bass Link, the SA inter-connector as well as storms and technical failures abound in Queensland, Western Australia and the Northern Territory. A liturgy of incompetence, poor management, negligence, bad design and ignoring transmission grid standards are the legacy of the stakeholders in charge of our national electricity networks. Of this there is little doubt as taxpayers and consumers suffer the consequences of natural and technical events that could easily have been avoided.

It is clear that our renewable energy generation resources fully comply with grid connect and frequency variation standards set by the EU and US. It is also clear that Australia has adopted the EU grid standards but has failed to comply with them. What is not so clear is that our current federal minister continues to confuse grid connect standards for renewable devices with the issue of forecasting renewable power availability. Mr. Frydenberg’s statement that links intermittency of generation with transmission frequency variation clearly demonstrates that we have some way to go in educating our politicians. It is a fact that transmission frequency and transmission loss has been managed by the oversupply of coal fired electricity into our network. With closure of coal fired power stations this reliance on a free grid compensator is no longer guaranteed. I should be careful here. Nothing is free in this world. Consumers have been paying for Australia’s transmission grid inefficiencies for years. We have been paying for the average 18% transmission grid loss for so long that we simply accept the cost of it as just another hidden charge on our power bills. Simply put, it is the energy that is generated but that never reaches the household that we still pay for. Naturally the estimated 18% national transmission grid loss is only a rough “gestimate”. The rule is that transmission loss increases the further you get from the source of generation. This simple rule should make it clear to you that the losses in far north Queensland, NSW and Western Australia are far more significant. For some of our most remote aboriginal communities the loss is more than 50% if the community is grid connected at all.

Since EU transmission and distribution grid standards specify a 95% efficiency rating with a .5 hrz frequency variation; it should be clear to even the most casual observer that Australia’s transmission and distribution networks simply don’t comply with EU grid standards, even though we have adopted these standards. We also don’t comply with basic grid redundancy/ reliability standards. These standards state that government / grid owners must install at least one technical redundancy feature for each of the major transmission networks connecting our major cities, manufacturing and distribution hubs. At the distribution grid level the standards state that power line and transformer failure and cut off sensors must be installed between major distribution lines and substations. Once again these standards have been largely ignored. Victoria only recently implemented some of the sensor technology that has been available for more than 20 years to address bushfires caused by poorly maintained infrastructure. As any IT manager will tell you this is poor cause for applause. The frequency of micro-spikes within urban areas of Melbourne can be as frequent as 9 per day with an average spike variation of up to 25 hrz for average durations ranging between 5 milliseconds to 1 minute. For those of you who have ever wondered what this frequency variation does to your white goods, computers, TV’s and air-conditioners you should read your manufacturers specifications. Every IT manager knows that these frequency variations reduce the life expectancy of your device by at least 2 years. There goes the insurance claim. That’s the reason every data centre and Telecom service provider spends thousands of dollars on batteries to protect critical systems including computer disks.

We all agree that a clear national energy security and affordability plan is urgently needed. What is less clear is how this will be achieved with the current management of AEMO, NEMO and related stakeholder groups. We know that the second Bass Link interconnector as well as the green transmission line from the Ayre peninsular via the South Australian Geo-Thermal facility to NSW was urgently needed years ago. We also know that Western Australia and the Northern Territory must eventually be connected into the national electricity network. We know that the ancient transmission network should have been replaced with more efficient underground HV cables. As part of this design paradigm, regional towns and remote area centres should have been developed as independent renewable energy hubs feeding directly into the transmission grid to lower the national grid development cost. This national policy for the development of independent regional smart-grids has not even entered the national political consciousness. In the same vain the idea that regional towns can actually earn a revenue stream by combining hybrid solar and wind farms with bio-gas/ mass Co-generators remains ignored. We know that hybrid solar and wind farms can generate at an average cost of 5 cents per kwh. We also know that bio-gas/ mass utilizing human, animal and organic cellular waste digesters can produce energy at 8 cents per kwh reducing to 2.5 cents over 10 years. What is probably more significant is that a combination of flow batteries and compressed air storage can deliver energy security and grid stability for approximately 8 cents per kwh reducing to between 4-5 cents over 10 years. The simple act of removing the most remote rural towns and settlements from the transmission grid by making them a net energy provider would significantly boost Australia’s national grid efficiency and reduce the overall cost of transmission network upgrades over time. The fact that such a simple and obvious solution has not entered the political vocabulary remains perplexing to every thinking Australian.

What is even more perplexing is that all Australian states simply ignore the simple act of legislating a self-generation policy for all government buildings. The simple act of implementing a 25% self-generation policy for government buildings, schools, aged care facilities, offices, hospitals and other government infrastructure would assist with distribution grid reliability. It would also significantly reduce Australia’s carbon footprint whilst implementing a grid resilience program for communities against natural events and technical outages. This simple policy is however not as simple as it appears. Much of the heavy lifting would have to be done by local councils. It would require a national building efficiency code that stipulates that a building can only receive a 7 star energy rating if it generates 100% of its own energy and recycles 100% of its own grey and black water. Even though many states have worked hard to achieve some type of building energy efficiency code, the state by state guidelines remain confused and inconsistent. By-enlarge existing regulations governing building codes as well as grey and black water on site treatment for example, make the implementation of such a policy too expensive for the average home owner. Even large commercial co-generation and waste management plants remain too expensive under most existing state regulations. Reforming these regulations and removing the cost of red tape and authority charges could prove a significant step towards lowering future infrastructure costs. Reforming electricity wholesale pricing for rooftop solar owners would also provide an essential boost to national electricity security. GST exemption for all rooftop solar owners who generate more than 3 times their own annual consumption in combination with a net metering policy would significantly boost rooftop solar uptake. In addition, all states should consider a combined hybrid wind / solar, BlueGen gas/ bio-gas domestic self-generation policy. A hybrid self –generation policy that exempts all self-generators delivering more than 3 times their own annual consumption from grid connect taxes and charges would reduce electricity prices and significantly increase energy security. It is unlikely that we will ever see a net metering policy with a discount from Utility taxes and charges under the current state regulatory framework. It is unlikely because it would require that states actually mandate a policy that includes domestic self-generators as legitimate contributors to Australia’s national energy security. At present rooftop solar / wind and BlueGen owners are treated by Utilities as a cheap source of energy. State governments treat them as GST revenue mugs.

This could change of state governments simply legislated a requirement that states that:

  • Any local community that wishes to form an independent and self-managed smart-grid within the existing distribution grid network must be given priority treatment by all electricity distribution companies / grid owners.
  • That any local community that wishes to form an independent and self-managed smart-grid is entitled to a fair wholesale price as well as fair grid usage charges.
  • That any local community that wishes to form an independent and self-managed smart-grid must not be required to install any Utility owned smart-meters or any other non-approved 3rd part party device within the boundaries of a self-managed smart-grid.

If you think that the above points will ever be on the agenda of the upcoming national enquiry into Australia’s energy security and affordability you are dreaming. The stranglehold the Utilities have on our national electricity network will take a fundamental reform of the entire AEMO / NEMO structure. After all, what country has its own taxpayers pay the Utilities to dictate government policy? Yeah, you guessed right!