(IWCCI) lauded the decision of the government to phase out power subsidies

BUSINESS PERISCOPE : Govt’s decision to cut power subsidies hailed

http://www.dailytimes.com.pk/default.asp?page=201379\story_9-7-2013_pg10_1

ISLAMABAD: Islamabad Women’s Chamber of Commerce and Industry (IWCCI) lauded the decision of the government to phase out power subsidies gradually terming it in the best interest of country. It is very difficult for Pakistan to survive without foreign aid in presence of power sector and energy subsidies, Farida Rashid said. The subsidies have not benefited poor but rich while it misbalances the budget. Subsidies leave little funds with government to spend of public welfare, it boost demand while reduces investment in renewable. Subsidies also contributes to social injustice, discourages private sector and push up the global warming, she added. She said losses of the power subsidy have reached to an extent that it has become an issue of national security. Last year our oil import bill was $14 billion, which will touch mark of $50 billion in seven years, enough to leave Pakistan bankrupt. app

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Fuel cell maker switches focus abroad

"The job of commercialising in Australia is just too difficult" . . .  Ceramic Fuel Cells' managing director, Brendan Dow.“The job of commercialising in Australia is just too difficult” . . . Ceramic Fuel Cells’ managing director, Brendan Dow.

A high-tech energy company spun off from the CSIRO two decades ago says entrenched power companies and shifting government policy are forcing it to all but abandon Australia.

Ceramic Fuel Cells, which makes small fuel cells that generate power and heat from gas or renewable energy, has shed 60 of its 110 Australian staff since July, and expects 98 per cent of its sales to come from overseas this year.

The company will retain its research and development work at its headquarters in the Melbourne suburb of Noble Park but will shift most of its operations to Germany.

“With the current conditions, the current support that we have, the current incumbent utilities, it means that the job of commercialising in Australia is just too difficult,” Ceramic Fuel Cells’ managing director, Brendan Dow, said.

Known as BlueGen, the company’s product creates electricity and heat by passing natural gas over ceramic fuel cells. It comes as a box, about the size of a small washing machine, that sits next to a house or in a car park.

The company claims it is 85 per cent efficient, and cuts the average home’s annual carbon dioxide emissions by 18 tonnes.

Mr Dow said power consumers are at the mercy of the dominant power generators and retailers such as Origin, Energy Australia and AGL, which have little incentive to innovate or improve energy efficiency.

Without bipartisan support for a sweeping overhaul of the industry, it was unlikely the federal government’s energy white paper, to be released next week, would make much difference, he said.

“In a market that’s got powerful incumbents, a highly politicised area, it doesn’t make it easy,” Mr Dow said.

“We’re focusing on those markets that give us the absolute certainty.”

That certainty includes financial support, with the company able to tap into a €250 million ($312 million) business development fund offered by Germany’s North Rhine-Westphalia state.

One of its Blue-gen fuel cell retails for about $30,000 in Australia but as little as €10,000 in Europe, Mr Dow said. The company sold 40 of its units locally last year but the number may fall to as few as 10 this year.

Generous feed-in tariffs mean an operator of the unit can generate about €2600 a year in Germany, more than twice the $1500 average return an Australian operator can expect, he said.

The company expects to make its first annual profit in the next year or two, with sales now doubling every six months. Revenue in the year to June 30 totalled $6.7 million.

The company plans to retain its domicile in Australia and its listing on the Australian stock exchange.
Read more: http://www.smh.com.au/business/carbon-economy/fuel-cell-maker-switches-focus-abroad-20121101-28mjg.html#ixzz2PBIVhvgT

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Electricity and Price Controls

  • We want price controls – Do not we ? RESULT = Ration.
    I mean previous Pak Governments NEVER told Pakistanis = ALL ELECTRICITY costs money even that made from river. River water created LIMITED electricity is very unreliable. Cost of electricity includes NEARLY HALF spend on TRANSMISSION. Australian PRESS opened my eyes and Pak press only Teaches us price increases are WRONG. Taliban are okay.
  • Jihadi Mirza Jamal I know no one likes price rises. See no electricity !! Even long Musharaaf rule could not “get cheap” electricity. Bad education. Rent control or Utility Price control = No vacancy or Ration.

Australians lead in fitting solar panels on homes

Australians lead in fitting solar panels on homes

Date : August 18, 2012
Ben Cubby

Ben Cubby

Environment Editor

Shining homes ... about 392,500 new household solar systems were switched on last year.Shining homes … about 392,500 new household solar systems were switched on last year. Photo: Quentin Jones

AUSTRALIANS put more household solar panel systems on their roofs than anyone else in the world last year, new data from the Clean Energy Regulator and the International Energy Agency show.

The statistic astonished many in the solar industry, given Australia’s small population compared with renewable energy market leaders such as European Union countries, China, Japan and the United States. About 392,500 new household solar systems were switched on last year.

Australia still generates far less solar electricity than those countries, but the nation’s preference for small, individual panels mounted on detached, owner-occupied suburban homes means a greater number of systems were actually installed.

”It took me by surprise that we were first, because Germany and Italy are so big,” said Ric Brazzale, the president of the REC Agents Association, a body representing traders and creators of renewable energy certificates.

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”Australian support for solar has had a lot of support at the residential level, and all political parties in the country have supported residential solar. Elsewhere in the world, most policy is geared towards much larger-scale commercial projects.”

Altogether, 785 megawatts of solar power was installed in Australia last year, virtually all in the form of small-scale panel systems on homes and businesses.

This meant Australia just scraped in ahead of Japan and Germany, which deployed about 759 megawatts of small-scale solar power – although that represents only about 10 per cent of total German solar production. Similarly, in other big solar nations such as the US and China, government incentives emphasise big solar power plants, and only a small proportion of renewable energy comes from household rooftop panels.

The end of generous state feed-in tariffs, such as the NSW Solar Bonus Scheme, had created a late rush to get panels on roofs, said Nigel Morris, the director of market analyst Solar Business Services. Mr Morris analysed the data, which was then scrutinised by others in the industry and found to be accurate, after cross-referencing with International Energy Agency figures for last year.

”In terms of total megawatts, Japan and Germany still beat us,” he said. ”In Australia you have a combination of factors, but especially the renewable energy certificate system that’s optimised for [rooftop solar] systems of 1.5 kilowatts. Our market is designed to favour small systems.”

Based on an average household size of 2.5 people, nearly 4 million Australians now live in a house or work in a business with solar panels on its roof.

The amount of electricity generated by rooftop panels has increased almost tenfold between 2009 and 2011, and continues to grow despite rebates and tariffs being wound back.

Altogether, renewable energy made up about 7 per cent of Australia’s total electricity generation last year. Much of that came from hydroelectricity in the Snowy Mountains Scheme, the federal government’s most recent Energy in Australia report shows.

MIRZA JAMAL’s COMMENTS ::
I am always thinking of PAKISTAN. Also I think Pakistan needs FREE ELECTRICITY like we in Australia Sydney ALREADY do by THOUSANDS. Pak Government should authorise electrician FIRMS to learn, KEEP STANDARDS, and install solar panels on Lahore and Karachi etc ROOF TOPS. Presently NO PAKISTANI knows HOW or WHAT this can be done ! Again MY SHOW that RUINED EDUCATION SYSTEM of TECHNICAL SCHOOLS has produced low and third class ELECTRICIANS who are USELESS without extra training so electricians can INSTAL PROPERLY FREE Solar SYSTEM. Its NOT mistry or CAR mechanic learning ! Its new TECHNOLOGY and again shows even WHEN LPG came to Pakistan ZIA ul HAQ’s GOVERNMENT totally ignore car LPG Technology as long as he the GENERAL lived LPG was nothing in Pakistan. Remember motorcycle Crash Helmet FRAUD ?

Stability, popularity poles apart when power bills soar

Stability, popularity poles apart when power bills soar

Michael West
Published: June 16, 2012 – 3:00AM

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AT ANY other point in history, a government presiding over economic growth at 4.2 per cent, a jobless rate at 5.2 per cent and inflation in the vicinity of 2 per cent would have been sitting pretty, even been lauded for its prowess.

Especially if the rest of the world was in far worse shape than us, as is the case.

Somehow, though, they have managed to make a meal of this exquisite set of numbers. Grumpiness is high. It is a miracle of unpopularity.

And governments, state and federal, may find popularity increasingly hard to come by in the next couple of years as rising power prices really start to bite.

”Bill shock” is a looming nightmare for low-income households. Electricity is a basic commodity. And rises of 15 per cent and more each year in a basic commodity are not merely a menace to the welfare of the household, but a threat to small business and economic growth, full stop.

It is no small irony that although the cost of electricity is rapidly rising, demand is falling. Economics 101 would suggest prices should fall when demand falls.

But when it comes to the supply of power there is a flaw in the regulatory framework that leads to a ”gold plating” of the grid, the poles and wires that make up the network.

In New South Wales, for instance, where consumers will be hit hardest, network upgrades will constitute 60 per cent of the total rise in electricity costs. The carbon tax is often painted as the villain in the piece, and that will hurt too, but network upgrades are the big offender.

Wholesale prices, meanwhile, are the same as they were 12 years ago.

The ”gold plating” arises because the network providers make a margin on the size of their asset base. The more they spend on their assets, the higher is the dividend they pay to government each year.

And they are proposing to spend big, Transgrid – owner, operator and manager of the transmission system for NSW’s high-voltage electricity – expects to expand its asset base by 24 per cent at a cost of $2.6 billion over the next five years.

There is nothing official yet, but it is reasonable to surmise that the NSW government may face a conflict of interests here.

In Victoria, the network was privatised under the Kennett government. In NSW, Barry O’Farrell’s brains trust must at least be contemplating further privatisation. They could do with the money.

And Transgrid must be high on the list of things to sell. It would also be a lot easier to sell with a prospectus that included rising revenue forecasts.

Demand for electricity has been falling since 2008 in Victoria, NSW and Queensland at roughly 1 per cent a year. That is in spite of forecast rises of 2.2 per cent a year. Demand is now 10 per cent below where the industry forecast it would be four years ago.

Mild weather, changing consumer behaviour and rising input costs have all been factors. The billions earmarked to upgrade the grid for the National Electricity Market have been based, erroneously, on assumptions of rising demand.

Now, even the utilities, Origin Energy, TRUenergy and AGL, argue there is no need for new baseload power before 2020, but the big capex plans remain afoot nevertheless.

Independent pricing regulator IPART and the Australian Energy Regulator have both expressed concern about the network costs. As yet to no avail.

And while the NSW government ignores the issue, we have the bizarre spectre of Canberra compensating the biggest polluters as part of its carbon tax package.

Incidentally, the question remains: if the Coalition wins office and cans the carbon tax, do the beneficiaries of the Gillard government’s compo package – mostly foreign multinationals – have to pay back that $1 billion cash gift?

This story was found at: http://www.smh.com.au/business/stability-popularity-poles-apart-when-power-bills-soar-20120615-20flo.html

The real culprits behind surging power bills

The real culprits behind surging power bills

Michael West
Published: June 20, 2012 – 3:56PM

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Care for an insight into the real impetus behind spiralling in electricity prices?

Look no further than what the independent regulatory agencies are saying.

The Australian Energy Regulator (AER), the Australian Energy Markets Commission (AEMC) and the Independent Pricing and Regulatory Tribunal (IPART) have all suggested that rising prices are due to overspending on the part of the network providers.

It is also likely that the government will exploit this surging capital expenditure, or “gold-plating” of the networks, as it fattens up its electricity cash-cow Transgrid for privatisation.

Responding to questions over the prospects for a privatisation of the state’s electricity assets, NSW Treasurer Mike Baird declined to rule out a sale of the transmission network although he indicated that the government would only sell its distribution assets after the next election.

“The Premier (Barry O’Farrell) has stated he would seek a mandate prior to any revision to Government ownership of the distribution businesses (the ‘poles and wires’),” said the Treasurer.

The distribution assets are Essential Energy, Ausgrid and Endeavour Energy. The really big poles and wires – the giant coathangers, that is – belong to the transmission provider Transgrid. And that seems to be up for auction.

Fine line

Baird and O’Farrell need to tread a fine line. On the one side they are struggling to restore the state’s finances after a decade of lost government under the previous regime. And they have to do so without the blistering revenues of the boom years.

On the other hand, power prices are escalating so rapidly, and to such levels, that they will soon come under pressure from an increasingly angry electorate. “Bill shock” will be a big political issue in the next few months – although the state, paradoxically will make a nice return from the pain of consumers.

A line item in last week’s NSW budget showed an increase of $250 million in dividends from the state’s electricity transmission and distribution businesses.

This hefty 41 per cent increase in payments to Macquarie Street – up from $639 million to $901 million in only a year – comes at a time when electricity prices for consumers are spiralling, and ironically, when consumer demand is actually falling.

This is a massive impost on households and on business, and will even act as a drag on the whole economy.

Prices in NSW have risen 70 per cent over the past five years and are forecast to jump another 18 per cent in the new financial; from Sunday week that is. The carbon price will contribute to just 8 per cent of that, according to IPART.

So we have a situation where the more the network spends – it makes a regulated return – the higher its budget and the more revenue flows to government.

For its part, Transgrid bats off claims of “gold-plating” by saying that pricing is determined by independent parties and the network needs to be constantly upgraded. Both claims are true.

But it seems there is also truth to claims of “gold-plating”.

This is what the AER had to say in a review of the state electricity market:

“Energy network investment in the current five-year regulatory cycle is running at historically high levels – over $7 billion in electricity transmission, $35 billion in electricity distribution and $3 billion in gas distribution.

These forecasts represent an increase on investment in the previous regulatory periods of around 82 per cent in electricity transmission, 62 per cent in electricity distribution and 74 per cent in gas distribution (in real terms).”

Then the review goes to say the regulatory environment is flawed (the bold text is ours).

But the regulatory framework – the national energy rules that set out how the Australian Energy Regulator (AER) must regulate electricity and gas networks – has led to some price increases that are difficult to justify.”

“… While this approach has successfully increased network investment, it restricts the regulator from making holistic assessments of how much of that investment is efficient or necessary. This restriction has led to consumers paying more than necessary for a safe and reliable energy supply.

Unconvincing

Further evidence of gold-plating came from John Pierce, chairman of the Australian Energy Markets Commission (AEMC), who told the SMH earlier this month that the industry’s explanations for price hikes were unconvincing:

“We don’t find particularly convincing the explanations for the price increases that have been provided by either the regulator or by the industry,” said Pierce

Then there is the independent pricing regulator, IPART.

In a letter to the AEMC’s John Pierce last December, IPART chief executive James Cox said the current regulatory arrangements were putting upward pressure on network prices.

“(These arrangements) constrain the AER’s ability to apply what it considers to be the best estimate of the efficient operating and capital costs,

“(They) provide strong incentives for network business to invest capital in the network because the prescriptive requirements of the Rules may lead to excessive returns,”

Gold-plating that is. Cox went on to say that the rules allowed the network businesses to earn a return on all capital invested “regardless of efficiency and prudency, by requiring the AER to roll all capital expenditure into the asset base”.

Tickler

This is a real tickler for the government. It would dearly love to ignore this chink in the regulatory framework, and its effect on prices, until it had fetched a handsome price for the state’s electricity silverware.

It would seem, though, that fulminating voters might disrupt that process first.

To its credit, the government is doing something about the network industry structure on the cost front. From July, common Chairman, Board and CEO will replace the three Chairs,

Boards and CEOs of Ausgrid, Endeavour Energy and Essential Energy.

There is $400 million in savings there. Further, the Treasurer told the SMH yesterday that there would be no increase in dividends “above currently budgeted levels” in its first term of government.

“The NSW Government recognises the burden increasing power bills are placing on families and will continue to take action to put downward pressure on electricity prices including targeted measures such as the increase to the Low Income Household Rebate,” said the Treasurer Mike Baird in a statement.

There was a sign of things to come though this week in federal parliament when independent MP Rob Oakeshott lambasted the state government for failing to cap prices as it had said it would.

The National Electricity Market, said Oakeshott, was the greatest market failure in Australia today, sending cost of living pressures through the roof.

He has a point.

TransGrid responds

Separately, click here to see TransGrid’s detailed response to transmission questions.

This story was found at: http://www.smh.com.au/business/the-real-culprits-behind-surging-power-bills-20120620-20njs.html

How dodgy forecasts inflate your energy bill

How dodgy forecasts inflate your energy bill

Michael West
Published: July 27, 2012 – 3:07PM

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If any further evidence were needed to demonstrate how the power companies, both state-owned and private, have been foisting unnecessary price hikes on their customers, it can be found in the industry’s own energy forecasts.

Forecasts of demand for electricity have a significant impact on the price of electricity. The higher the forecasts, the more money earmarked by industry for network upgrades in order to cater for this supposed increase in demand. In turn, the higher the financial returns for the industry players.

Ironically, as the transmission and distribution companies earn a regulated return on their assets, they have a perverse incentive to spend for the sake of spending.

Yet the great conundrum of the radical rise in Australian electricity prices – up 70 per cent in six years and poised to ratchet another 30 per cent higher this year and the next – is that consumer demand has actually been falling, and falling for years.

Actual consumption in the National Electricity Network has been way out of whack with forecasts. For the past three years, the industry has had to downgrade its forecasts, and by a considerable margin. Still, they persist with forecasting large rises in energy consumption, even in the face of a clear downtrend in actual demand – and huge price rises at the retail level to boot.

Not only has the electricity industry failed to recognise a change of trend in total demand, but in peak summer demand and peak winter demand too.

These changes have been driven by one over-riding factor: price. Power bills are too high. Consumers are more mindful these days. They switch off their lights and their appliances to save energy. Climate change and green-mindedness play a part – as indeed the carbon tax has played a minor role in the price rises – but the blunt instrument of price has done the real work of inhibiting demand.

Forecasts are determined by three things: supply, demand and price.

Price is the key determinant. It is the one variable which is quickly and easily identified and cannot be argued about. It shapes consumer behavior.

The importance of energy prices, to the individual, to business and to general economic growth cannot be overestimated. For the low income consumer, we have reached the point of “energy starvation”, to heat or to heat. The following graph from the Energy Users Association of Australia shows we are leaving the rest of the developed world for dead.

If the graphic above shows starkly just how prices in NSW have escalated over the past three years – and other states mirror this trend – the graphic below is the perfect counterpoint. It shows actual demand, and just how wildly wrong the forecasts are.

(Source: IPART)

There are two possible conclusions as to how industry has got it so wrong: one, gross incompetence and, two, wilful blindness. Given the fundamental flaw in the industry structure, that is, the paradox of the regulated returns inducing excess spending, the latter explanation seems more plausible.

There has been some oblique acceptance of this forecasting failure by industry, but hardly enough in light of the billions in excess capital spent as a consequence. The Australian Energy Market Operator (AEMO) gets around to mentioning it on page 23 of an information paper on National Electricity Forecasting:

Energy price forecasts have also under-forecast rises in electricity retail prices across the NEM, leading to a compounding effect, with economic forecasts being too high, leading to electricity forecasts being much higher than actual demand.

It would have been far more precise to have kicked off the booklet with the heading “National Forecasts Totally Hopeless”.

According to corporate analyst turned farmer, Bruce Robertson, the power companies have been continually downgrading their forecasts and haven’t come close to getting them right even 12 months out, let alone for the 10-year view required to efficiently allocate capital for network upgrades and expansion.

Transgrid is the NSW transmission operator with whom Robertson and a group of locals on the mid-north coast of NSW have been having a stoush. As the network provider, it builds the enormous coat-hangers and has been adding to its asset base big-time amid speculation it could now be fattened up for sale by the state government.

It is also proposing to build power lines through the Manning Valley, a development plan Bruce Robertson says is completely unnecessary as demand for power in the area is falling.

He points to the 2011 Electricity Statement of Opportunities (ESOO) where Transgrid had to pull back its forecasts substantially.

“The real picture is that annual energy consumption for 2011–12 is 4.1 per cent lower than 2010–11, and 5.6 per cent lower than was forecast in this 2011 Electricity Statement of Opportunities (ESOO),” says Robinson.

“It got the trend wrong one year out. Further forecast annual energy demand for 2012–13 is expected to fall by 2 per cent, which is 9.7 per cent lower than the 2011 ESOO estimates.”

Indeed average growth in annual energy demand for the ten-year outlook period is now tipped to be 1.2 per cent, down from the 1.6 per cent forecast in the 2011 paper.

That is a big deal, a 25 per cent reduction in the long-term growth rate in annual energy for NSW in just one forecasting period. In only two years Transgrid and the AEMO forecasts for 2020 have been revised down by 16 per cent.

Robertson further points out that maximum demand forecasts are also highly flawed. Taking NSW again, key differences between the 2012 forecasts and the Transgrid 2011 summer maximum demand forecasts are:

  • The 2011–12 actual summer maximum demand was 1,690 MW or 12 per cent below Transgrid’s forecast
  • The 2012–13 forecast summer maximum demand is 2,060 MW or 13 per cent lower than the 2011 forecast
  • Average growth in summer maximum demand for the 10-year outlook period is now forecast to be 1.2 per cent, down from the 2 per cent forecast in the 2011 ESOO
  • The 2020-21 forecast for peak summer demand has been lowered by 18 per cent in 12 months

Neither is peak demand any longer the thorny issue it used to be.

Much has been said about peak summer demand being the problem as the system cannot cope with the spikes in demand when everybody switches their air-conditioning on during those blazing hot days.

It is peak demand which has been cited time and time again to justify over investment in the grid.

“This assertion has proven to be false as the industry now has the same ten year growth rate in NSW for both peak and overall energy demand,” says Robertson.

“The 10 year growth rate for peak summer demand in NSW is now 1.2 per cent per annum – the same as total energy demand.”

Transgrid no longer does the forecasts for NSW in the Electricity Statement of Opportunities. The Australian Energy Market Operator (AEMO) now does them in a similar document called the National Electricity Forecasting Report.

AEMO is funded 40 per cent by the electricity industry and its critics charge that, as the industry “planner” it is vulnerable to regulatory “gaming” by the power companies keen to enhance their regulated returns.

AEMO has failed to take account of price and the consequential accelerating downtrend in demand, says Robertson. “They are still forecasting a radical reversal of the trend.”

He argues the AEMO model does not fully take account of the dramatic and sustained rises in the price of electricity.

“The inputs to the model assume a fixed component to all consumers regardless of price,” he said.

“We contest that this has not been the case since 2008 and has led to forecasts being consistently too high. Forecasts also assume a low elasticity of demand. This has compounded the error.”

A spokesman for AEMO spokesman said it used real prices in its forecasts as opposed to nominal prices which factored in the CPI.

“Rising electricity prices and low economic growth can significantly affect electricity demand. This was the specific context for including electricity prices in AEMO’s inaugural National Electricity Forecasting Report published in June,” said a statement.

“AEMO does assume a consumer response to price in the National Electricity Forecasting Report published in June 2012. The NEFR includes price elasticity information by state with each state based on a particular model.”

As to its public/private structure, AEMO said it was “an independent organisation working in the long-term interests of Australian energy consumers by developing markets that offer affordable, safe and reliable energy supplies.”

This story was found at: http://www.smh.com.au/business/how-dodgy-forecasts-inflate-your-energy-bill-20120727-22xxf.html

NSW’s power generators to be sold

NSW’s power generators to be sold

Published: May 30, 2012 – 1:55PM

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NSW’s electricity generators will be sold off after the state government got the support of the crossbenchers.

NSW Premier Barry O’Farrell said the move would go ahead after getting support from the Shooters and Fishers Party.

Mr O’Farrell said the sale would unlock $3 billion for critical infrastructure.

However, he has agreed to allow shooting in national parks, in a deal to gain the Shooters’ support.

The government in November announced plans to privatise the state’s generators, but keep the poles and wires in public hands.

The bill has languished in the upper house since March, with the government unable to get the support of the two Shooters and Fishers Party MPs.

Mr O’Farrell today defended his backdown on the Shooters Party’s push to allow shooting in national parks.

Under the Shooters Party’s plan, the Game and Feral Animal Act will be amended to allow shooting of feral animals in 79 of the state’s 799 national parks, including Kosciuszko and Dorrigo parks.

“Understand that what we’re simply doing is allowing licensed shooters to do what is currently undertaken by professional shooters and in some case National Parks and Wildlife staff in a limited number of national parks and reserves across the state,” Mr O’Farrell said.

“What I’ve said in the past is we wouldn’t allow our national parks to be turned into hunting reserves, and this decision respects that.”

The Premier acknowledged the government would not have backed shooting in national parks if it was not for the need to get the power privatisation through the upper house.

But he said the government had to “live with the Parliament that the people of NSW have given us”.

“Our bigger public interest test here is to unlock the asset value of the generators to assist us in rebuilding the economy by delivering the infrastructure needed to get this state going,” Mr O’Farrell said.

“It’s about unlocking the proceeds of our generation assets in order to invest in the infrastructure that is critical to get the state’s economy back on track, back booming, to create those jobs, to create those revenues in which to provide services.”

The power privatisation, which will be debated in the upper house today, would also save NSW $850 million in ongoing operational and maintenance costs for the generators, Mr O’Farrell said.

Potential costs of $6 billion for meeting future generation capacity would also be avoided, he said.

Opposition Leader John Robertson said the privatisation would push up electricity prices, arguing a power sell-off in South Australia had pushed up bills by 30 per cent.

He also accused Mr O’Farrell of breaking an election promise, citing a comment to a Lithgow newspaper in January 2011, when the then opposition leader said there were no plans to privatise the poles and wires.

“Barry O’Farrell’s shown today that he’s prepared to break every promise that he’s made to get a deal up to get this through,” Mr Robertson told reporters.

Mr Robertson added that safety in national parks would be at risk.

“A premier who promises not to allow hunting in national parks is about to allow a shooting spree to open up in some of the most pristine parts of the state,” he said.

Labor’s environment spokesman Luke Foley said Environment Minister Robyn Parker could not be trusted to keep anybody safe in national parks.

“[There will be] shooters rampaging through our world-class national parks,” he told reporters.

“Nobody will have any confidence in the safety of our native animals or indeed of members of the public in our national park estate with Robyn Parker in charge – she is the least competent minister in the NSW government.”

AAP

This story was found at: http://www.smh.com.au/nsw/nsws-power-generators-to-be-sold-20120530-1zinr.html

Power sector primed for overload

Power sector primed for overload

Michael West
Published: May 31, 2012 – 12:43PM

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It was just before Christmas when Bruce and Belinda Robertson got the news.

The letter from Transgrid arrived just as they were about to take the kids to the beach for the holidays. In it was a proposal to build power lines – the gigantic coat-hanger variety – across the Manning Valley in the mid-north coast region of New South Wales.

The Robertson family had only four days to nominate themselves for a Community Working group “which will assist in the assessment of a series of corridor options for a proposed high voltage power-line between Stroud road and Lansdowne”.

They were in shock. Ironically, they had left the city to avoid the likes of big power lines. They heated their own water, even pumped their stock water, with solar power.

“At this stage I had no idea that one of the options was next to our farm,” says Robertson who gave up life as a company analyst in Sydney to raise cattle in the bucolic region.

The second letter came in February. Their own valley is one of Transgrid’s development options and now the Robertsons are fighting for their livelihood. They find out next month where the power lines go.

“Imposing 45 metre high steel structures towering above us, just 30 metres from our house,” says Belinda. “Transmission lines of 330,000 volts crackling in the night.”

Although there was no “conclusive” evidence, she says, of there being a greater incidence of leukaemia in children, the leukaemia foundation did not recommend living near power lines.

“Schools are avoided. (There is) no compensation. The easement is on the neighbour’s land. (We) won’t live here any more. (We) won’t raise the children so close to the lines.”

Action stations

When they got the news, the locals got together to form an action group, the Manning Alliance, and Bruce Robertson was forced to resort to his former skills as a corporate analyst.

He found that Transgrid had a vested interest in erecting power lines, even if they were hardly required. And as the rate of demand for electricity, particularly on the mid-north coast of NSW, was actually declining, rather than rising, there was no need to spend almost $1 billion building this latest bit of grid.

Robertson’s findings are clearly motivated by a desire to save his farm and his livelihood. There is a strong element of ‘he would say that, wouldn’t he?’

Nonetheless, he is onto something, something vital for all power consumers.

Rising power prices are an enormous issue, in NSW and elsewhere in Australia. They are critical, moreover, to business and consumer demand, and the fate of the entire economy.

And while politicians and media focus on the carbon tax as the culprit in the debate over rising power prices, transmission costs – a more significant factor – are overlooked.

“Network costs were the largest part of last year’s 18 per cent rise in electricity prices for households in this region and similar rises throughout the state,” says Robertson. “Network costs will continue to be a big contributor to price rises in future.”

Gold-plating

The question is: will consumers suffer higher power bills due to over-spending by the network providers?

“Their incentive is to build more lines and gold-plate their network,” says Robertson. He is referring to the way Transgrid makes its money, via regulated returns on its asset base.

And it plans to spend big, expanding its asset base by 24 per cent for a cost of $2.6 billion over the next five years, a cost which will flow straight into consumers’ electricity bills.

The paradox, however, is that prices are soaring in the eastern states while demand for electricity is falling.

Poles apart

The transmission provider makes a regulated return on its business based on the capital invested. Perversely then, it has an incentive to build more power lines.

Transgrid rejects Bruce Robertson’s claims of “gold-plating”. It responded to a range of questions for this story and expressly denied that its infrastructure investments were driven by revenue.

Rather, its mandate was to ensure an effective national electricity market, it said in a statement, and pricing was determined by the independent Australian Energy Regulator (AER).

But if Robertson is right, the Manning project spend, earmarked at a cost of $126 million not only feeds through to higher prices, but is also unnecessary.

“This project represents a 125 per cent increase in capacity,” he said. “We consider this to be a gross over capitalisation of the network infrastructure and will lead to unnecessary rises in the price of electricity for all residents of New South Wales.”

“The Tamberlin Report, which arose from a special commission of inquiry into the privatisations, found the “regulatory environment effectively encourages over-investment in capital because if the network business can persuade the AER that the capital investment is necessary for reasons of reliability and capital growth, the increased costs associated with it will be reflected in the charges that the business is permitted to levy.”

Garnaut view

Then there is the Garnaut Report on climate change, the updated version from late last year, which found that network costs in the national electricity market (NEM – transmission and distribution costs) have risen dramatically since 2006 and that the high cost of capital investment required in electricity networks is the largest single cause of recent electricity price rises.

The Stroud to Lansdowne project, contends Robertson, has been consistently justified by Transgrid as being for demand growth on the lower mid-north coast driven by population growth.

“Their inconsistent forecasts are for peak summer demand to grow at 25 per cent or 35 per cent over the next ten years depending on which Transgrid information brochure you care to read.”

Transgrid’s own figures show that peak summer and winter maximum demands are flat for the period 2005 to 2011.

Indeed the lower mid-north coast of NSW used less electricity in 2011 than it did in 2005 for both summer and winter maximum demands.

“It would appear that Transgrid has arrived at its 3.3 per cent per annum growth rate in electricity demand without back-testing its growth model,” claims Robertson. “This lack of rigor in a $126 million project is alarming.”

He reckons that peak summer and winter demand in the region will fall significantly over the next three years.

Demand sags

This falling demand is not contained to the mid-north coast of NSW. It seems consumer behaviour has changed since the global financial crisis. People switch off their lights more diligently and are far more conscious of their usage.

(And it might be reasonably supposed that demand from aluminium plants such as Norsk Hydro’s Kurri Kurri will shrink as they shed jobs if not close down entirely.)

Yet the trend is more marked in some areas than others.

On the mid north coast electricity bills went up by 18.1 per cent in 2011 (an increase of around $316 on an annual bill of $1,747). Continued large price rises are likely in 2012 as network costs and the carbon tax are transferred onto the consumer.

IPART, the pricing regulator, is now considering another round of rises of up to 20 per cent. This could add a further $412 to the average bill. So the era of low electricity prices is over. Further price rises will only make consumers and business more aware and lead to even lower demand, says Robertson.

Then there is slower population growth.

“ The latest figures for the lower mid north coast show population growth has slowed to one per cent in 2011 from 1.3 per cent in the 2001-2008 period. Transgrid’s forecasts do not appear to have been updated for the slower growth in this region since the GFC,” he says.

Another factor is lower industrial demand. “Some businesses are closing while others such as Wingham Beef Exports have cut shifts and laid off workers.”

Downward shift

Lower demand is also the trend among retailers thanks to a tough retail environment and the structural shift to internet retailing.

Other mitigating factors in what Robertson describes as the “permanent shift in demand to lower levels” are uptake of alternative energy sources.

“Solar hot water uptake has been significant, insulation schemes mitigate peak summer and winter demand, grid connected solar mitigates peak summer demand, over 1600 houses in the Taree area alone are now totally off the grid.”

Delaying unnecessary projects means costs savings for all consumers, argues Robertson and his Manning Alliance.

“At a project cost of over $120 million and a financing cost of 6.8 per cent, the saving amounts to over $8 million a year”.

Peak provision

Indeed the Australian Energy Market Commission, the agency that advises the government on energy rules, has said that about $11 billion of electricity infrastructure is only used for 100 hours or fewer each year.

“The Stroud to Lansdowne project will merely add to this inefficient, under utilised network”.

If Robertson is right, and he seems to have a fair argument, the government should be investigating other power solutions before shelling out another $120 million. Indeed, the entire infrastructure spend should be re-evaluated in light of falling demand.

The National Electricity Market has now been in operation for 13 years and with electricity prices going through the roof it is not looking like much of a success. It should be said, though, that a large factor in spiralling energy bills is down to coal supply rolling off old contracts at higher prices.

Still, the regulatory response is far worse for some than for others:

“We came (to rural NSW) for the pristine environment,” says Belinda Robertson. “We farmed without chemicals, fenced 2.5 kilometres of river to protect its banks from grazing cattle.

“We planted hundreds of trees, contributed 1kw solar power to our power requirements, insulated every wall in the house. We have no air conditioner, no heater, no microwave, and if the power lines go up, no compensation”.

This story was found at: http://www.smh.com.au/business/power-sector-primed-for-overload-20120530-1zitp.html