Regime uncertainty and the cost of power

A blast from the past. Interesting in the context of the gigantic outlays that are about to be sunk into expensive and unreliable renewable energy to make up for a shortage of cheap coal-fired power. Sinc writing in 2012 on the reason for power price increases as far back as 2007. That was a prospective change, reflecting concerns in the coal-fired power industry about the future impact of emission controls which thanks to John Howard became bipartisan.

Concerns were triggered by the release of the Shergold report which advocated a carbon emission target, in clear sight of the cost.

Shergold said Australians should know a carbon emissions target would come at a cost to economic growth, business and households.

“What we are doing by seeking to prudently manage risk is bringing forward costs from the next generation, costs that we impose on ourselves,” he told reporters in Sydney.

Sinc wrote.

At that point climate change policy became bipartisan with the Howard government adopting ALP policy – always a mistake in the post Hawke-Keating era. So it looks like a combination of climate change policy and gold-plating (the desire to extract as much value from existing assets before the government expropriates their entire value) is responsible for the massive increases in electricity prices.

We can argue about why the Howard government lost its nerve on climate change in 2007 – it was a mistake and Howard did go on to lose government and his seat – but there can be little doubt that regime uncertainty associated with climate change policy is the cause of the price hikes we have experienced in the last 5 years.

To the extent that Gillard owns climate change, she owns those price increases.

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32 Responses to Regime uncertainty and the cost of power

  1. Leo G

    “What we are doing by seeking to prudently manage risk is bringing forward costs from the next generation, costs that we impose on ourselves”

    .. to invest in infrastructure changes which will in turn impose even greater new costs on the next generation.

  2. stackja

    Sydney lacked power in 1940s. Blackouts! RGR don’t face much criticism. JH got done over by science.

  3. Empire GTHO Phase III

    The Lying Slapper killed at least one thousand people in the Timor Sea and this winter who knows how many old people will freeze to death in their homes.

    What a legacy.

  4. Nerblnob

    They could have ignored the whole carbon “issue” and hardly lost a vote. But that was back when even smart people believed opinion polls.

  5. mareeS

    Every day here at the world’s biggest coal port we have ships coming in empty, going out full to the gunnels on the tide, day in, day out, friends who are port pilots onto one ship, off again and onto the next, tug crews turning around these ships day and night. It’s a 24hr industry from the mines to the harbour heads, and it employs tens of thousands of people up and down the coal chain.

    It keeps our port buzzing and our city alive, but the goat cheese sniffers at Ultimo really resent the fact that Newcastle pays for their lifestyle.

    We have a good attitude here: earn good money but keep quiet about it, and always fly out through Brisbane (secret tip, this, flying Newcastle/Brisbane/onwards takes an hour, whereas Newcastle/Sydney/onwards takes a minimum 5hrs or overnight, allowing for road and rail mishaps).

  6. Herodotus

    The Howard government’s loss in 2007 had many strands to it, but one was certainly that they were relentlessly painted as not fully onboard with “our greatest moral challenge” in climate change.

  7. Remember this: Most politicians have the financial resources to weather the hardships they foist upon the average citizen by their ill-advised legislation.
    It’s up to us to hold their feet to the fire.

  8. Yohan

    Understanding regime uncertainty requires discursive reasoning a few steps removed from immediate observation.

    i.e Government says they will shut down and tax into oblivion fossil fuel power > power generators do not invest in new power plants or upgrades > power shortages and price rises ensue

    Leftist are incapable of following the above steps. Best to just blame everything on privatization and the ‘free market’.

  9. john constantine

    The cost of electricity to those riding their Grim Reaper insider economy as our new transnational aristocracy remains insignificant.

    Nobody that is anybody ever sits down to dine with people that will have to go to bed at sunset this winter, fully clothed, so they can survive until morning.

    The right sort experience absolutely no impact from their Grim Reaper electricity decisions, they actually have to have ‘earth hour’ so they can pretend to be proles for sixty minutes a year.

  10. Fat Tony

    Yohan:Leftist are incapable of following the above steps. Best to just blame everything on privatization and the ‘free market’.”

    Ah….yes they do. It’s the “de-industrialisation” of Australia they have been calling for for years.

  11. Mark M

    Trump on Doomsday Global Warming:
    ““We’re not spending money on that anymore. We consider that to be a waste of your money””

    https://twitter.com/CNN/status/842464807064375296

  12. We keep voting them in. Look at the most recent election in WA FFS.
    We are a nation of wuckfits led by wuckfits. We deserve all we get.

  13. Roger

    Energy policy is quite possibly the greatest failure of our political class in our history.

  14. val majkus

    what’s happening in the USA:

    President Donald Trump will find the job of reining in spending on climate initiatives made harder by an Obama-era policy of dispersing billions of dollars in programs across dozens of agencies — in part so they couldn’t easily be cut.

    There is no single list of those programs or their cost, because President Barack Obama sought to integrate climate programs into everything the federal government did. The goal was to get all agencies to take climate into account, and also make those programs hard to disentangle, according to former members of the administration. In some cases, the idea was to make climate programs hard for Republicans in Congress to even find.

    “Much of the effort in the Obama administration was to mainstream climate change,” said Jesse Keenan, who worked on climate issues with the Department of Housing and Urban Development and now teaches at Harvard University. He said all federal agencies were required to incorporate climate-change plans into their operations.

    The Obama administration’s approach will be tested by Trump’s first budget request to Congress, an outline of which is due to be released Thursday. Trump has called climate change a hoax; last November he promised to save $100 billion over eight years by cutting all federal climate spending. His budget will offer an early indication of the seriousness of that pledge — and whether his administration is able to identify programs that may have intentionally been called anything but climate-related.

    Read more: Trump Said to Drop Climate Change From Environmental Reviews

    The last time the Congressional Research Service estimated total federal spending on climate was in 2013. It concluded 18 agencies had climate-related activities, and calculated $77 billion in spending from fiscal 2008 through 2013 alone.

    But that figure could well be too low. The Obama administration didn’t always include “climate” in program names, said Alice Hill,

  15. Mark M

    O/T.
    Steven Kates gets a post on instapundit:

    READER BOOK PLUG: From Steven Kates, The Art of the Impossible: A Blog History of the Election of Donald J. Trump as President.

    https://pjmedia.com/instapundit/259955/#respond

  16. H B Bear

    Energy policy is quite possibly the greatest failure of our political class in our history.

    For an Australian pure play government policy failure it is hard to go pass KRudd’s windback of illegal immigration to satisfy the moral vanity of the Left. At least 1,200 people dead, 50,000 illegal immigrants – mainly muzzies inimical to Western values and way of life and upwards of $10bn in direct costs. All reversed within 4 weeks of a change of government.

    Internationally global warming dwarfs this of course.

  17. herodotus

    Has anyone seen figures on deaths caused by power outages in South Australia? Seems highly unlikely that it was zero. You don’t get the usual media pile-on that happens every time there’s a nuclear power station mishap. Can’t be seen to be embarrassing their Labor mates.

  18. Dr Fred Lenin

    The grate malcolm ruddbulls hydroplan is more or less perpetual motion ,the water flows naturally downhill and creates electricity ,you pump it back uphill using the electricity created when it flowed downhill again ,it then flows downhill again to create electricity to pump it uphill again , got that? This is definitely agile innovative thinking ,solving the perpetual motion problem a classic case of seeming not doing ,lucky it has a two billion dollar budget , it will inevitably end up like NBN ,” This great project will create employment for eight million workers and cost between two and five hundred and sixty three billion dollars, seasonally adjusted ” . As that criminal keating used to say when he was lying to the punters .This man is a gold medalist Idiot ,really ! A top barrister? A merchant banker? A representative in parliament ? A bloody prime minister ? Really it’s all a mighty fraud the whole bloody thing ,a la guillotine Les elites !

  19. If Boko Haram-aligned tribesmen were hijacking and trashing our energy supply the way Big Green is doing, we would…we would…

    Actually, we’d probably let them do it.

  20. Rafe Champion

    Dr Fred, he has taken a leaf from Bastiat’s book where he advanced the idea of creating employment by increasing the number of stations on the train line where the goods had to be taken off one train and put on another for the next leg of the journey to Paris.

  21. Combine Dave

    So just to clarify, Sinc’ positions on this important issue:

    Moves to establish a carbon tax under Howard – bad.
    Carbon tax under Gillard – bad.
    Carbon tax repeal/direct Action under Abbott – bad.
    Direct action, cranked up RET and carbon tax via stealth under Turnbull – good?

  22. Yohan

    Dr Fred, he has taken a leaf from Bastiat’s book where he advanced the idea of creating employment by increasing the number of stations on the train line where the goods had to be taken off one train and put on another for the next leg of the journey to Paris.

    The Negative Railroad !!

    Bastiat’s other great idea was to make every man tie one hand behind his back. Thus twice the amount of labor is required to complete the same tasks. By this method more work and jobs are created, and France shall be enriched.

  23. Dr Fred Lenin

    Reminded me of a cartoon in Punch years ago,when some government promised more jobs .
    It was a crossection of a housefour rooms two up two down ,bottom right room guy put bricks on conveyor belt they go through the wall second guy takes them off belt puts them in a hopper which takes them to top floor left ,guy there puts them on conveyor belt to top right ,he puts them in hopper going down to guy one ,perpetual motion plus solving unemployment . Malcolm ruddbulls idea has been done before doubt if he saw the cartoon. You needed a sense of humour to read Punch , lefties don’t have any sense let alone one of humour.

  24. Same here in CQ MareeS, “It keeps our port buzzing and our city alive, but the goat cheese sniffers at Ultimo really resent the fact that Newcastle pays for their lifestyle.” Just substitute Gladstone for Newcastle.

    Everyone loves the easy and convenient lifestyle with abundant welfare handouts for all (except for many who really need a hand up), everyone loves that the lights come on at the flick of a switch, or they can recharge their phone/camera/car, run their air-conditioner and big TV or whatever whenever they want to.

    But they also want to kill off the industries and mining that actually make all of their conveniences possible…….. I’d really like them to tell me how that is supposed to work.

  25. “Yohan
    #2328863, posted on March 17, 2017 at 7:50 am
    Understanding regime uncertainty requires discursive reasoning a few steps removed from immediate observation.

    i.e Government says they will shut down and tax into oblivion fossil fuel power > power generators do not invest in new power plants or upgrades > power shortages and price rises ensue

    Leftist are incapable of following the above steps. Best to just blame everything on privatization and the ‘free market’.”

    True. It beats me how any ordinarily sensible person has been able to see this from the outset, many have tried to make this understood from the outset, yet all our recent “glorious leaders” have been either utterly oblivious to it – or have known it full well and done it anyway, completely intentionally.

    Nobody should be so stupid as to not understand this, not even politicians, so I’m left with the only possible conclusion being that it’s totally deliberate, i.e., that our “leaders” have actually deliberately and callously sabotaged our economy and national and individual wellbeing.

  26. “Trump on Doomsday Global Warming:
    ““We’re not spending money on that anymore. We consider that to be a waste of
    your money”””

    And that’s the whole point, it’s an unconscionable waste of the people’s money, and Trump wants to stop that. Trumble/Tremble/Tumbrill/Malcontent/Maladroit etc., kindly take careful note – It’s OUR money, so stop bloody wasting it!

  27. egg_

    “Trump on Doomsday Global Warming:
    ““We’re not spending money on that anymore. We consider that to be a waste of your money”””

    What’s Chief Inquisitor, Telephone Sanitiser Richard Glover, from their ABC have to say on the matter?

  28. Boambee John

    Wasn’t it that Canadian crook Maurice Strong who asked whether it was “our duty to destroy Western industrial civilisation”?

    Then he fled various investigations of his time with the UN (even they noticed that he wasn’t really honest) to live out the remainder of his life in rapidly industrialising China.

  29. Defender of the faith

    Sinclair quite correctly adopts the longer view and that’s the key to some of the drivers in today’s power market. Large units of power built in east coast states under special borrowing approved by the Feds in the late 1970s was designed to capture displaced industry in the wake of the first big oil price hikes. State governments bid in competition with the result that we got some very large power users, especially in smelting. Sadly the pricing of new capital was not factored in and our base load power accretions came with heavily subsidised consumers. Public evidence of that emerged when Victoria privatised and the billions of public dollars underpinning Portland were revealed in stockdales audit. He failed in an attempt to renegotiate.
    Right now those turbines are approaching retirement. The base load demand has shrunk and aluminium smelting globally has found easier power deals in Russia. In short the business case for large base load generators is not strong. Gas, on the other hand, is a case of really poor management of the grid, which has clearly required intermediate load additions as well as peak power investment for some time.
    In general it would be better if all subsidy was removed. That’s the renewable subsidy, fuel preferences, industry handouts, etc. This would rebalance a very messy collision of historical errors and open the way for new investment based on realistic market requirements.

  30. egg_

    The base load demand has shrunk and aluminium smelting globally has found easier power deals in Russia. In short the business case for large base load generators is not strong.

    Bullshit.
    Consumer demand must be rising with ever increasing MacMansions (A/C, etc.) in suburbia, even if Industry may be shrinking.
    This post reeks of the work of a renewballs rentseeker, period.

  31. Defender of the faith

    Egg: household demand tends to characterise peaks in load rather than base load. You are right and the peaks have been rising. Peaks are what gas and hydro and batteries are used for because you can switch them in and off fairly easily. Base load on the other hand is typically very large scale and continuous: the sort that smelters and glass factories and 24:7 businesses use. Base load in Australia has typically been served in recent times by very large generator units fired by coal. It is not efficient at all to interrupt 660mw coal plant at frequent intervals. As our manufacturing shrank our base load tended to contract or at least not grow. So today the load profile has higher peaks and a relatively lower base.

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