If you need a PhD to read your power bill, buying wisely is all but impossible



File 20180622 26567 u4uu4e.jpg?ixlib=rb 1.1
Energy bills are becoming to complex to understand.
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Bruce Mountain, Victoria University

A recent survey found that Australia’s power companies are less trusted than media companies, banks and telcos. Customers hate electricity bills – not least because they are so complicated. But we can learn much by analysing them closely.

One feature that deserves close scrutiny is the all-pervasive discount. In electricity retailing, all but 3 of the 28 active retailers use discounts in their retail offers.

In any kind of retailing, discounts give customers the impression that they are making a smart buy. This is often true, particularly in cases where it is easy to see and compare the discounted prices. But if it’s not easy to compare, customers may not realise if they’ve been duped.




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With electricity bills, it is all but impossible for customers to know whether their discounted price really represents a good deal. This is because the discounts are ludicrously complicated – as are the base prices themselves.

Large businesses do not complain about retail electricity markets. This is because they have the capacity, either in-house or through consultants, to evaluate complex retail price structures. Advances in data science may yet make such expertise available to everyone.

Eye-wateringly complex

To fairly compare your bill, you must be able to adjust for the discount in your current bill, and also in all the alternative competing offers. Having worked with thousands of bills, I know the myriad ways discounts are calculated make this terribly difficult.




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Let us count the ways a discount may be applied:

  • some discounts are worked out as a percentage of usage charges while others are on the total bill

  • some discounts are before the receipt of concessions, others after

  • some discounts are before solar feed-in receipts, others after

  • few bills actually clearly state the discount rate, and some don’t state the rate at all

  • some discounts are only received on subsequent bills (so that if the customer leaves, the retailer avoids discounting their last bill)

  • some retailers offer several discounts in the bill but sometimes some apply after other discounts are taken off first

  • some will discount controlled load consumption, others not

  • some discounts are payable as rebates when the customer transfers to the retailer; other rebates are paid out over months and even years

  • some offer discounted amounts which are contingent on advance purchases of electricity, but the discount is not achieved unless purchases exceed the contingent amounts

  • some discounts in bills are not actually calculated in customers’ bills as the retailers say they are calculated

  • some retailers take up-front payments from customers and then feed those payments back to customers on each subsequent bill as if they are discounts

  • most discounts are conditional on customers doing something (usually paying the bill on time) but some are unconditional. Some bills have both conditional and unconditional discounts; others just one or the other.




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If that isn’t enough, electricity tariffs in Australia are stunningly complex commercial arrangements. They have daily charges and a wide range of methods for charging for consumption: flat rates; daily, monthly or quarterly block rates; time-of-use rates with two or three bands; combinations of time-of-use and block rates; one or more separate rates for controlled loads of different types; consumption rates that are seasonal; and now some bills with peak demand charges.

Solar feed-in rates offered by retailers often (but not always) vary depending on the receipt of subsidies. Most recently, some retailers have offered block rates for solar feed-in, or different prices for the first tranche of solar power feed-in.

What can you do?

It is no surprise that few customers have the time or skill needed to choose wisely. While this is not a peculiarly Australian phenomenon – evidence from abroad shows that lots of money is left on the table even when customers try to buy well – we think it is worse here. Our research is working to quantify this in Australia.




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Government price comparison sites, like Energy Made Easy, are often advanced as solutions. But a 2017 competition review found that these have had limited success in Australia and elsewhere.

Complexity trips up governments too, and retailers work hard to persuade the regulators and policy makers to their point of view.

Regulating complexity away through standardisation is also suggested. Tight regulation can work well; think of the excellent market for bread and patisserie in France. But standardising the sale of electricity often comes at the expense of incentives for retailers to discover customers’ needs, and may increase rather than reduce average prices.

Policymakers want both customer protection and incentives to innovation. But the desire to have one’s cake and eat it can lead to half-baked solutions that make matters worse.

The solution may be to master the complexity rather than trying to regulate it away. Many existing price comparison websites offer limited coverage of the market of competing offers, or look at only the energy consumption portion of a customer’s existing bill.

However advances in data science now make it cost effective to provide small customers with on-going analysis of their usage and their retailer’s charges in order to ensure that they are always on the best deal for them. Businesses using this approach overseas are well established, and the scope for further innovation is very large.

The ConversationOvercoming the complexity of the retail market will take away the wool that retailers have a powerful incentive to pull over their customers’ eyes.

Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

This article was originally published on The Conversation. Read the original article.

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Grattan on Friday: Peter Dutton’s bid for more crime-fighting power has bought him a fight


Michelle Grattan, University of Canberra

No one should be surprised that the Home Affairs department, with its ambitious minister Peter Dutton and his activist secretary, Mike Pezzullo, is feeling its oats. When Malcolm Turnbull granted Dutton his wish for a mega department, it was obvious how things would go.

Now we are seeing a power play which has set Dutton and Foreign Minister Julie Bishop at odds, and raised questions about striking the right balances in a cyber age that brings new threats but also new invasive technology to counter them.

The issue immediately at hand is whether Home Affairs can drag the Australian Signals Directorate – a defence-aligned organisation which spies electronically on foreign targets – into the fight against a broad range of crime in Australia.

As the head of ASD, Mike Burgess, succinctly put it in a draft note for Defence Minister Marise Payne, Home Affairs wants legislative change “to enable ASD to better support a range of Home Affairs priorities”.

The latest move, as documented in bureaucratic correspondence leaked last weekend – everyone assumes in order to blow up the proposal – came from Pezzullo. But Pezzullo was formalising a plan foreshadowed by Dutton as soon as he was sworn into the Home Affairs portfolio.

In December Fairfax reported Dutton saying that ASD would be used more in Australian investigations into terrorism, drug-smuggling, child exploitation and other cross-border crimes.

Put in the simplest terms, under the plan the Australian Federal Police, ASIO and similar agencies would collect the data, as they do now, while an empowered ASD could supply the technical capability to disrupt or prevent the crime online.

After publication of the leaked correspondence in the Sunday Telegraph, headlined “Secret plan to spy on Aussies”, Pezzullo, Defence Department secretary Greg Moriarty, and Burgess issued an opaque statement that, when you cut through the bureaucratise, indicated the option for a wider use of ASD was on the table.

Meanwhile Bishop told reporters “there is no plan for the government to extend the powers of the Australian Signals Directorate so that it could collect intelligence against Australians or covertly access private data”.

That would appear to be true, but it is also true Dutton had already flagged publicly a proposal to expand ASD’s remit, and the Burgess draft note clearly stated that the Home Affairs department had advised it was briefing its minister to write to the Defence Minister.

The fine distinction between expanding ASD powers but it not collecting intelligence on Australians is where the confusion lies, and that will need to be carefully laid out.

Bishop and Dutton have a record as sparring partners. The two ministers contrast in style but both are tough operators who don’t take a backward step. This is the second matter on which they’ve recently clashed – the other was Dutton’s desire to bring in white South African farmers on the basis they were subject to “persecution”.

Dutton, announcing this week AFP deputy commissioner Karl Kent as the first Transnational Serious and Organised Crime Coordinator within Home Affairs, told a news conference that the capacities of various agencies had to be looked at “including obviously … the capacity of ASD”.

Dutton stressed any change would have safeguards. “As for some claim that there’s going to be some spying taking place on Australian citizens, it’s complete nonsense,” he said.

“If there was to be any look at ways in which we could try and address the cyber threat more effectively, it would be accompanied by the usual protections, including warrant powers”, ticked off by the attorney-general or the justice system.

Defending his position on Thursday, Dutton talked about child exploitation, a guaranteed hot button, pointing out that people were conveying “images of sexual acts against children in live-streaming on the internet.

“We’ve got to deal with that threat. We have the ability, potentially, to disrupt some of those servers. At the moment the ASD … could disrupt that server if it was in operation offshore, but not if it was operating out of Sydney or Melbourne,” he said.

It is believed that Defence is unimpressed with the move on ASD, from July 1 a statutory agency but traditionally in its bailiwick. But it is Bishop who is most obviously taking the issue on, even though her portfolio is not directly involved.

For Bishop, the exercise has flouted the manner in which such a major bid for change should be handled, leaving most ministers blindsided.

Home Affairs’ case receives some support from a recent submission to the parliamentary joint committee on law enforcement by David Irvine, former head of ASIO and now chairman of the Cyber Security Research Centre, a body set up to promote industry investment in cyber security research.

Irvine writes: “Both national security threats and criminal activity exploit the internet in similar ways. Both need to be countered or managed using similar investigative tools and techniques.”

“Australia’s national capacity to counter threats and criminal activity using cyber investigative tools is relatively under-developed, uncoordinated and fragmented”, making it “difficult for agencies to cope with the pace of technical change,” he says.

Irvine argues for a new body to provide “expert technical cyber investigative services in support of law enforcement and national security investigations”, done by Commonwealth and state agencies.

He says such a body might fall within Home Affairs “but it would depend extensively upon the offensive and defensive cyber operational skills of the Australian Signals Directorate, and its offshoot the Australian Cyber Security Centre”.

The tug of war over ASD may have some way to run but with cyber risks becoming an increasing preoccupation, at this stage Dutton and Pezzullo appear to have a head start. It is now a question of where Malcolm Turnbull will come down. It is hard to see him saying no to Dutton.

But the implications of any extension of ASD’s remit should be fully debated sooner rather than later. As the Inspector-General of Intelligence and Security Margaret Stone wrote earlier this year, a change to ASD’s “focus for its covert or intrusive intelligence related activities to people and organisations inside Australia would be a profound one”.

The ConversationThe pros and cons of the Dutton bid need a lot of public airing before the government reaches a conclusion, rather than that conclusion being presented as a fait accompli.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

The pro-coal ‘Monash Forum’ may do little but blacken the name of a revered Australian


Marc Hudson, University of Manchester

The coal industry has a new voice in parliament, in the form of the so-called Monash Forum – an informal government faction featuring former prime minister Tony Abbott and backbench energy committee chair Craig Kelly.

The group, which also reportedly contains former deputy prime minister Barnaby Joyce alongside as many as 11 of his Nationals colleagues, is agitating for the government to go beyond its current energy policy and build a taxpayer-funded coal power station.

As several commentators have pointed out, the move is a calculated push by the usual backbench suspects to put pressure on Prime Minister Malcolm Turnbull, two weeks ahead of crucial talks with state and territory leaders over the design of the National Energy Guarantee (NEG).




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Perversely, the Monash Forum’s members want the NEG to prove its “technology neutral” credentials by including coal as well as renewables. And let’s not forget that the NEG policy was cooked up when it became clear that Chief Scientist Alan Finkel’s Clean Energy Target was unpalatable to Coalition MPs (but not economists).

What’s in a name?

In choosing to form a group like this, opponents of action on climate change are trying to give themselves gravitas, in three possible ways.

First and foremost, they are aiming for the “halo effect” of taking a known public figure and claiming some of his (and it’s usually a he) intellectual cachet. First and foremost here are groups named after scientific figures.

In 2000, a group of climate deniers, including the late Ray Evans and former Labor finance minister Peter Walsh, set up the grandly named Lavoisier Group to undermine progress towards Australian ratification of the Kyoto Protocol and a domestic emissions trading scheme. Economist John Quiggin probably said it best when he wrote that the group was “devoted to the proposition that basic principles of physics discovered by, among others, the famous French scientist Antoine Lavoisier, cease to apply when they come into conflict with the interests of the Australian coal industry”.

Then in 2011, opponents of Julia Gillard’s carbon pricing scheme created the Galileo Movement – casting themselves, like their Renaissance namesake, as heroic dissidents to an unthinking orthodoxy.

The second aim is to create a name that implies a stolid, no-nonsense approach to policy. One example is the now defunct Tasman Institute, which was an influential voice against climate action and in favour of electricity privatisation in the 1990s.

The third tactic takes this approach a step further, by creating a name that sounds impartial or even pro-environmental, thus obfuscating the group’s true intent, which is to stymie climate policy. Previous examples include the Australian Industry Greenhouse Network, the Global Climate Coalition, the Australian Climate Science Coalition, and the Australian Environment Foundation, launched in 2005 to the chagrin of the existing Australian Conservation Foundation.

The Monash Forum – with its implied connotations of nation-building and high-minded political debate – is perhaps trying to achieve all three of these goals, this time from within parliament itself rather than the surrounding policy development bubble.

Monash on the march

For the younger readers among us, John Monash was arguably Australia’s most revered soldier, described by British war historian AJP Taylor as “the only general of creative originality produced by the First World War”.

The Monash Forum’s founders also hark back to his role in helping kick-start the exploitation of Victoria’s enormous brown coal reserves in the 1920s.

But the Returned and Services League is not impressed that this former serviceman has been pressed into political service, declaring that “Monash’s name is sacrosanct and should be above this form of political posturing”.

What’s more, the name is bound to create confusion over whether it is affiliated in some way with Monash University (it isn’t), and there will doubtless be some unhappy faces at the Economic Society of Australia’s ESA Monash Forum (which is).

Will coal really make a comeback?

In seeking to deliver new coal-fired power stations, the new Monash Forum is attempting to mine a seam that has already been extensively excavated.

The Minerals Council of Australia, which [merged with the Australian Coal Association in 2013], has been trying for years to kickstart public support for coal. Who could forget the “Australians for Coal” and “Little Black Rock” campaigns, or last year’s “Coal: Making the future possible”?

But the council’s latest energy and climate policy statement refers to coal only once, prompting headlines that it has gone cold on coal. BHP has considered quitting the council over its pugnacious stance, while Rio Tinto is selling off Australian coal assets. The mining lobby may soon have to recalibrate its priorities – lithium, anyone?

The problem for coal’s proponents is that most Australians are keen to see the back of it. The promised global wave of “High Efficiency, Low Emission” coal plants has failed to materialise. And stunts such as Treasurer Scott Morrison waving a lump of coal in parliament are derided by a public who are far more energised by the prospect of renewables.




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When he was prime minister, Abbott tried to sabotage investment in large-scale renewables so as to keep the way clear for fossil fuels. But tellingly, he left subsidies for rooftop solar panels largely untouched, presumably realising that voters saw renewable energy as sensible and viable, on a small scale at least.

The problem for advocates of renewables, and climate action more broadly, is that winning slowly on climate change is the same as losing, as Bill McKibben noted last year.

The ConversationPerhaps that is the ultimate aim of the Monash Forum and those who share its goals. Renewable energy may win in the end, but it will win slowly enough that coal can earn one last payday.

Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of Manchester

This article was originally published on The Conversation. Read the original article.

Barnaby Joyce criticises lack of results on power prices as winter approaches


Michelle Grattan, University of Canberra

Former deputy prime minister Barnaby Joyce says he would be “100%” behind the government constructing coal-fired power stations if that would lower the price of electricity.

“My exasperation is that we have been talking about cheaper power and nothing is happening. No government has dealt with the power issue in a form that has brought down the price over the medium-to-longer term,” he told The Conversation on Tuesday. “The carbon tax’s removal brought it down only briefly.”

One of the signatories of the Coalition backbench Monash Forum’s call for the government to build “Hazelwood 2.0”, Joyce described his support for the group’s manifesto as “like signing a birthday card”, adding: “It would have been more surprising if I didn’t sign it”.

“I want cheaper power prices in country areas for the poor people who can’t afford it. Winter is coming,” he said.

He said the government building a coal-fired power station would be consistent with its planned investment in Snowy 2.0 and its regulatory support for renewable energy.

The public push on coal by the backbench group is being made in the run up to the Coalition’s expected 30th consecutive Newspoll loss.

It is being seen as another hit at Malcolm Turnbull’s leadership. Among those prominent in the group are Tony Abbott and his close allies Kevin Andrews and Eric Abetz. But Joyce stressed that “for me, it’s not about Malcolm’s leadership. It’s about power prices.”

The manifesto has been signed by several Nationals. While signatories may have different motives, some backbenchers have reportedly refused to put their names to it because of the implications and timing for Turnbull.

The name “Monash Forum” refers to first world war general John Monash, who subsequently headed the State Electricity Commission of Victoria, spearheading the development of the Latrobe Valley coal reserves and power industry. Some signatories would have preferred a plainer name.

The manifesto says: “If the government can intervene to build Snowy 2.0, why not intervene to build Hazelwood 2.0 on the site of the coal-fired power station in Victoria that is now being dismantled?

“All the transmission infrastructure already exists; all the environmental permits have already been obtained; and a new, low-emissions coal-fired power station can certainly be built for no more than A$4 billion.”

Turnbull has trumpeted the expansion of the Snowy scheme as one of his big policy initiatives.

Backing coal-fired power has been among the issues Abbott has strongly promoted from the backbench. He said last August: “If we are prepared to go ahead with pumped hydro, and we are neutral on technology, we should certainly be prepared to go ahead with a new coal-fired power station”.

Last week, launching Pauline Hanson’s book, he was highlighting that “we should build new coal-fired power stations”.

The backbench push coincides with the government working to bed down with the states and territories its National Energy Guarantee. This effort has been helped by the recent win by the Liberals in South Australia. The policy is described as “a technology-neutral approach that does not provide direct subsidies to renewables or any other particular technology, creating a level playing field for all energy sources”.

Turnbull said on Tuesday the guarantee “provides every incentive for the energy sector to invest in dispatchable power”.

“[For] those who are concerned that there should be more investment in coal -fired power stations, the [guarantee] puts a premium on dispatchability, 24/7 power. Now coal can obviously provide that, so can gas, so can hydro, so can other technologies.”

Asked whether it was a slight to his leadership that the Monash Forum was formed rather than the normal policy channels followed, Turnbull said the National Energy Guarantee had been endorsed by “the whole Coalition partyroom”.

Tony Wood, energy program director at the Grattan Institute, said it seemed like an extraordinary approach for members of a Coalition government that had championed markets and the private sector to be advocating going back to a nationalised system.

It also seemed highly unlikely that a coal-fired power station would be a commercial investment for the government. “The longer-term prospect of the investment providing a return to taxpayers would be remote. So it would be writing off a relatively new asset in a relatively short time. It would be a highly questionable use of public funds.”

Private investors were not going into new coal-fired power stations because they did not see a prospect of them making money, Wood said.

“It may very well be that keeping existing stations going longer would be justified but that would be relatively modest expenditure,” he said.

Wood said that to lower prices to consumers it would be more cost-effective to give them refunds – although he wasn’t advocating that.

The Conversation“A well-designed NEG, or an equivalent, that provides clear policy on emissions reduction and values reliability will provide the best policy framework to deliver efficient new investment in affordable energy,” Wood said.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Explainer: power station ‘trips’ are normal, but blackouts are not


Hugh Saddler, Australian National University

Tens of thousands of Victorians were left without power over the long weekend as the distribution network struggled with blistering temperatures, reigniting fears about the stability of our energy system.

It comes on the heels of a summer of “trips”, when power stations temporarily shut down for a variety of reasons. This variability has also been used to attack renewable energy such as wind and solar, which naturally fluctuate depending on weather conditions.

The reality is that blackouts, trips and intermittency are three very different issues, which should not be conflated. As most of Australia returns to school and work in February, and summer temperatures continue to rise, the risk of further blackouts make it essential to understand the cause of the blackouts, what a power station “trip” really is, and how intermittent renewable energy can be integrated into a national system.




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Blackouts

Initial reports indicate recent blackouts in Victoria were caused by multiple small failures in the electricity distribution system across the state, affecting all but one of the five separately owned and managed systems that supply Victorians.

Across the whole of mainland Australia, very hot weather causes peak levels of electricity consumption. Unfortunately, for reasons of basic physics, electricity distribution systems do not work well when it is very hot, so the combination of extreme heat and high demand is very challenging. It appears that significant parts of the Victorian electricity distribution system were unable to meet the challenge, leading to uncontrolled blackouts.

Parenthetically, electricity distribution systems are vulnerable to other types of uncontrollable extreme environmental events, including high winds, lightning, and bushfires. Sometimes blackouts last only a few seconds, sometimes for days, depending on the nature and extent of the damage to the system.




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These blackouts are very different from those caused by power station “trips”, although they have the same effect on consumers. When electricity is insufficient to meet demand, certain sections of the grid have to be startegically blacked out to restore the balance (this is known as “load shedding”).

It is the possibility of blackouts of this second type which has excited so much commentary in recent months, and has been linked to power station “trips”.

What is a ‘trip’ and how significant is it?

“Trip” simply means disconnect; it is used to describe the ultra-fast operation of the circuit breakers used as switching devices in high-voltage electricity transmission systems. When a generator trips, it means that it is suddenly, and usually unexpectedly, disconnected from the transmission network, and thus stops supplying electricity to consumers.

The key words here are suddenly and unexpectedly. Consider what happened in Victoria on January 18 this year. It was a very hot day and all three brown coal power stations in the state were generating at near full capacity, supplying in total about 4,200 megawatts towards the end of the afternoon, as total state demand climbed rapidly past 8,000MW (excluding rooftop solar generation).

Suddenly, at 4:35pm, one of the two 500MW units at Loy Yang B, Victoria’s newest (or, more precisely, least old) coal-fired power station tripped. At the time this unit was supplying 490MW, equal to about 6% of total state demand.

The system, under the operational control of the Australia Energy Market Operator (AEMO), responded just as it was meant to. There was considerable spare gas generation capacity, some of which was immediately made available, as was some of the more limited spare hydro capacity. There was also a large increase in imports from New South Wales, and a smaller reduction in net exports to South Australia.

By the time Loy Yang B Unit 1 was fully back on line, three hours later, Victoria had passed its highest daily peak demand for nearly two years. There was no load shedding: all electricity consumers were supplied with as much electricity as they required. However, spot wholesale prices for electricity reached very high levels during the three hours, and it appears that some large consumers, whose supply contracts exposed them to wholesale prices, made short-term reductions in discretionary demand.




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This (relatively) happy outcome on January 18 was made possible by the application of the system reliability rules and procedures, specified in the National Electricity Rules.

These require AEMO to ensure that at all times, in each of the five state regions of the NEM, available spare generation capacity exceeds the combined capacity of the two largest units operating at any time.

In other words, spare capacity must be sufficient to allow demand to continue to be reliably supplied if both of the two largest units generating should suddenly disconnect.

Forecasting

AEMO forecasts energy demand, and issues market notices alerting generators about reliability, demand and potential supply issues. On a busy day, like January 18, market notices may be issued at a rate of several per hour.

These forecasts allowed generators to respond to the loss of Loy Yang B without causing regional blackouts.

What is not publicly known, and may never be known, is why Loy Yang Unit B1 tripped. AEMO examines and reports in detail on what are called “unusual power system events”, which in practice means major disruptions, such as blackouts. There are usually only a few of these each year, whereas generator trips that don’t cause blackouts are much more frequent (as are similar transmission line trips).

It has been widely speculated that, as Australia’s coal fired generators age, they are becoming less reliable, but that could only be confirmed by a systematic and detailed examination of all such events.

Managing variable generation

Finally, and most importantly, the events described above bear almost no relationship to the challenges to reliable system operation presented by the growth of wind and solar generation.

With traditional thermal generation, the problems are caused by unpredictability of sudden failures, and the large unit size, especially of coal generators, which means that a single failure can challenge total system reliability. Individual wind generators may fail unpredictably, but each machine is so small that the loss of one or two has a negligible effect on reliability.

The challenge with wind and solar is not reliability but the variability of their output, caused by variations in weather. This challenge is being addressed by continuous improvement of short term wind forecasting. As day-ahead and hour-ahead forecasts get better, the market advice AEMO provides will give a more accurate estimate of how much other generation will be needed to meet demand at all times.




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Of course, AEMO, and the generation industry, do still get caught out by sudden and unexpected drops in wind speed, but even the fastest drop in wind speed takes much longer than the milliseconds needed for a circuit breaker in a power station switchyard to trip out.

The ConversationAt the same time, as the share of variable renewable generation grows, the complementary need for a greater share of fast response generators and energy storage technologies will also grow, while the value to the system of large, inflexible coal-fired generators will shrink.

Hugh Saddler, Honorary Associate Professor, Centre for Climate Economics and Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

Trust Me I’m An Expert: Why February is the real danger month for power blackouts


Sunanda Creagh, The Conversation

It’s been hot – and it’s going to get hotter. Australia has experienced some record hot days in recent weeks and scientists say Sydney and Melbourne need to prepare for 50℃ days by the end of the century, or sooner.

In today’s episode of Trust Me I’m An Expert, we’re unpacking the research on why some of the most disadvantaged parts of our cities cop the worst of a heatwave.

And Chris Dunstan, an expert on energy policy, explains why February is the month when energy ministers and energy operators really get worried there won’t be enough electricity to go around – and how you can do your bit to curb blackout risk.

Join us as we ask academic experts to explain the issues making news in Australia.

Trust Me, I’m An Expert is out at the start of every month. Find us and subscribe in Apple Podcasts, Pocket Casts or wherever you get your podcasts.


Further reading

Beyond Coal: Alternatives to extending the life of Liddell power station, by the Institute for Sustainable Futures, UTS.

Explainer: power station ‘trips’ are normal, but blackouts are not

Additional music and audio

Kindergarten by Unkle Ho, from Elefant Traks

Ella Fitzgerald and Louis Armstrong, Summertime.

YACHT: Summer Song (Instrumental) from Free Music Archive

Broke For Free: Summer Spliffs from Free Music Archive

Unheard Music Concepts: Hot Summer Day from Free Music Archive

Ketsa: Summer from Free Music Archive

RT: Sizzling Up: Australian policeman fries egg on car hood in 46°C weather via YouTube

Lateline: Cities need adapt to deadly heatwaves from ABC News

ABC news report

ABC news

The ConversationSeven News, January 8, 2018

Sunanda Creagh, Head of Digital Storytelling, The Conversation

This article was originally published on The Conversation. Read the original article.

In the economic power struggle for Asia, Trump and Xi Jinping are switching policies


Giovanni Di Lieto, Monash University

Donald Trump is flexing the United States’ economic muscle in East Asia by introducing a web of new-generation bilateral trade deals to contain China’s challenge. But Beijing is fighting back by political means.

A closer look at the US president’s 2017 trade policy agenda and its ensuing initiatives reveals a pattern. Obama’s trade policy favoured multilateral, comprehensive and ultra-regional deals such as the failed Trans-Pacific Partnership (TPP) agreement, and the frozen Trade in Services Agreement (TiSA). Whereas Trump pushes for bilateral and more targeted deals.

Obama used trade deals, such as one with South Korea, to confront China on the regional status quo. But Trump is reshuffling the cards.

Under Trump, the US Trade Representative (USTR) office prioritises the strict enforcement of US trade laws to counter foreign government subsidies – even if that means undermining the World Trade Organisation and risking trade retaliations.

Trump’s deals in Asia

Beside the deal with Australia, the US has only two bilateral free trade agreements (FTA) in force with Asian countries, namely South Korea and Singapore. In comparison, China has nine FTAs in force in Asia, another four under negotiation, and five more under consideration.

The US boasts it has more than ten Trade and Investment Framework Agreements (TIFAs) with Asian economies. Essentially, these agreements may form the basis for future FTAs or Bilateral Investment Treaties.

This isn’t a trade policy U-turn in Asia but actually a strategic convergence between security and trade.

Previous US administrations have often sacrificed domestic industrial manufacturing to prop up international trade, using it as a bargaining tool to exert security influence over geopolitical partners and rivals. Before Trump, the US openly accepted trade deficits and the rorting of international trade laws as the price paid for advancing its defence policy agenda globally.

Imagine it as a strategic pyramid, with defence on top, trade in the middle and industry at the bottom.

Now with Trump we have a strategic triangle. Industry is the top point, with trade and defence interlinked, on the same level, at the bottom. This evolution is nowhere clearer than in the Asia Pacific region.

Curbing China’s power

China’s goal is to use the Regional Comprehensive Economic Partnership (RCEP) negotiations to accelerate its major Asian infrastructure projects. The most notable of these is the Belt and Road Initiative and the Asian Infrastructure Investment Bank. This initiative promises to compete with the Western-centric World Bank and Japan-led Asian Development Bank.

It’s not an arms race, but infrastructure projects, investments and even humanitarian aid are fuelling Xi’s “major-power diplomacy with Chinese characteristics”. This means clusters of Asian countries are becoming more and more embedded in China’s economic and strategic policy.




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Strangely, Trump’s strategic triangle is making US policy look like China’s, after it opened to the global economy in the 1980s. Conversely, Xi Jinping’s more assertive regional politics is moving China where the US was before Trump – with defence on top of trade and industry.

The US’ bilateral trade moves are also targeting new commercial routes. The US is looking at a free trade agreement with India. This would be a great win for the US, as it would further push India away from the China-led RCEP deal.

Indeed, after a promising start, the RCEP negotiations have stalled mainly because of India’s resistance to eliminating tariffs on imported goods from China. India’s trade deficit with China is on the rise and already exceeds US$50 billion.

A balanced US-India FTA would be a win-win solution for both countries in their quest to muscle out China commercially and politically, especially if it precluded finalising the RCEP.

Adding to this is a recent US trade report which urged allied economies to coordinate an anti-dumping action on China’s industries. This is designed to protect trade secrets and intellectual property rights.
The report pointed out that China systematically:

…imposes requirements that US firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market.

In exchange for all of this, the US offers maritime security for a close range of key partners such as Australia, Japan, Singapore, South Korea and Taiwan. This explains why the US administration is wooing India to join Japan and Australia in a revived trade-security alliance against China, the so called Quadrilateral Security Forum.

This recent Trump policy is a remake of Nicholas J Spykman’s “Rimland Theory” that framed the US understanding of Eurasian power politics during the Cold War years. Spykman memorably wrote:

Who controls the rimland rules Eurasia; who rules Eurasia controls the destinies of the world.

The ConversationFor one thing, Trump’s restoration of bilateral trade shows a clear direction for the US strategy in Asia. Beyond that, the convergence of trade and security policies has the potential to effectively reshape the US as an indispensable Asian power.

Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

China’s economic power is actually a lot smaller than you think


Peter Robertson, University of Western Australia

China’s economic presence on world markets is actually much smaller than that of the United States of America and smaller than our key three asia-pacific allies combined.

In recent years, reports by financial institutions like the World Bank have claimed China is the world’s largest economy. China’s annual gross domestic product (GDP), when converted to United States dollars using purchasing power parity exchange rates is estimated to be worth around US$19 trillion, surpassing the USA’s GDP of US$17 trillion.


Read More: As China flexes its muscles in Antarctica, science is the best diplomatic tool on the frozen continent


China’s size is a good indicator of potential economic opportunities for Australia. But China’s rise is also creating a growing discomfort in how China will use its economic power. In both Washington and Canberra questions are being asked about how to our balance economic interests with these growing political and security concerns.

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As a large country China may insist on a greater acceptance of its own ideals and priorities as a condition of economic engagement. As a dictatorship, however, its ambitions are unclear and may not align well with Australia and other democratic countries in the region.

Likewise China’s assertiveness in the South China Sea has rekindled interest in security cooperation between the region’s largest democracies, Japan, India and Australia, as well as the United States through the Quadrilateral Security Dialogue.

The concerns raised are real, but are in some ways exaggerated. Specifically, the figure of US$19 trillion is an estimate based on a purchasing power parity exchange rate, which overstates China’s impact on world markets.

This is because the purchasing power parity exchange rate tells us how much money you need in China to be as well off as you are in the US. It is a measure of how big China’s GDP would be if costs of living were the same as the US.

This can be useful, but it is not an indicator of China’s footprint in the world economy.


Read more: Australia is hedging its bets on China with the latest Foreign Policy White Paper


A reasonable measure of a country’s economic footprint on the world economy is how much it could potentially change demand or supply on world markets.

When countries export they have to accept payment based on market exchange rates. Likewise when countries import they must pay in foreign currency based on market exchange rates. This means that to compare China’s market size with the US, we need to convert China’s GDP, measured through China’s currency renminbi, to US dollars, using market exchange rates.

China’s GDP measured at market exchange rates, however, is only US$9 trillion – almost half that of the US.

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This means that the impact China’s economy can potentially have on the world economy is really only about half as much as the US.

The difference in values arises for the same reason that tourists find that their money often goes much further in developing countries. That is if you convert your US dollars to renminbi, you will find that you can purchase a lot more in China than the US, especially in non traded goods and services such as haircuts or street food.

The purchasing power parity exchange rate is the rate that tells you how much you need in China to be just as well off – for example to buy the same basket of goods. It’s very useful rate for tourists and is great way to compare standards of living across countries.


Read More: China’s growing footprint on the globe threatens to trample the natural world


But it’s not a measure of how much you can actually buy. In order to measure the potential influence of China’s economy, it is buying and selling power that matters.

The same line of reasoning also effects how we should think about the asia-pacific partnership of regional democracies. The combined GDP of India, Japan and Australia, measured at purchasing power parity rates is smaller than China.

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But at market exchange rates their combined market size exceeds that of China. This is because just as purchasing power parity exchange rates make China seem too big, they make Japan seem small relative to its real buying and selling power on world markets.

The collective GDP of Japan, Australia, India and the United States represents a market that is around three times larger than China.

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These differences are quite significant and they are important because they affect the way we think about the value of economic opportunities and our security alliances. When interpreted appropriately China is a large country. But it still has a long way to go before it can match the sheer economic weight of the US.

The ConversationSo while China is very important, the market size of regional democracies should not be underestimated.

Peter Robertson, Professor, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Foreign Policy White Paper finally acknowledges world power is shifting



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China’s rise in power has changed Australia’s foreign policy outlook.
Reuters/pool

Tony Walker, La Trobe University

Australia’s Foreign Policy White Paper released today cannot be accused of understatement.

Navigating the decade ahead will be hard, because as China’s power grows, our region is changing in ways without precedent in Australia’s modern history.

That’s the point. What we are witnessing is “without precedent” in Australian post-second world war history, during the various tremors that have unsettled the region from Korea to Vietnam and beyond.

Despite all of that, there has been nothing in our experience like China’s rise in all its dimensions.

The changing of the guard?

The much-used word “disruption” hardly does justice to the impact a modern China is having on age-old assumptions about a regional power balance in which US military superiority would prevail, come what may.

Starting with the above declaration, the white paper – a year in the making and more than a decade since the last such effort – does a reasonable job in laying out Australia’s choices in a new and challenging environment.

In this regard, we are spared an impression that policymakers are seeking to cling to the old order in which the US was paramount and suggestions to the contrary smacked of agnosticism about American power and influence – even an incipient anti-Americanism.

Those days – described in a 2003 white paper that underestimated the velocity of China’s rise and sought to adhere to age-old certainties about US paramountcy – are over.

Here’s the 2017 white paper on the end of the age of certainty for Australian foreign policy:

Powerful drivers are converging in a way that is reshaping the international order and challenging Australia’s interests. The United States has been the dominant power in our region throughout Australia’s post-World War II history. Today, China is challenging America’s position.

There is nothing profound in the above observation. It’s simply a statement of fact.

What is clear is that policymakers in Canberra are hedging their bets. They cannot be sure the US will remain invested in a wider security role in the Indo-Pacific, and one that will be long-lasting.

This prompts observations like the following:

The government recognises there is great debate and uncertainty in the United States about the costs and benefits of its leadership of the international system.

US alliance remains strong

However, for the foreseeable future the US will remain the “bedrock” of Australia’s security.

Interestingly, Labor’s foreign affairs spokesperson, Penny Wong, addressed alliance issues on the eve of the white paper’s release.

In an important speech, at a moment when Labor itself is debating how to frame its adherence to the alliance, Wong was at pains to encourage a sense of realism about what America might – or might not – be prepared to do in the event that Australia’s security was challenged.

She spoke at length about mutual obligations under the ANZUS Treaty that are misinterpreted as a blanket requirement for the US to come to Australia’s assistance in extremis. Put simply, what is required under Articles III and IV of the ANZUS Treaty is a commitment to consult.

In the final analysis, the 2017 white paper cannot be read separately from the 2016 Defence White Paper. This laid down a reinvigorated commitment to Australia’s ability to assert power in the Indo-Pacific via a significant investment in its maritime capabilities.

Leaving aside whether you agree with spending upwards of A$50 billion on 12 new French-sourced submarines rather than less expensive alternatives that could have been bought off the shelf, the defence paper foreshadowed an Australian foreign policy that recognised a more challenging environment, and thus the need for a more robust approach.

In this regard, the foreign policy paper speaks of “shifting power balances” in an era of “greater rivalry”, and calls on the US to remain “strongly engaged in the economic and security affairs of the region to help shape its institutions and norms”.

The paper also acknowledges challenges inherent in Australia’s policy of maintaining a balance between its alliance relationship and its management of relations with China if both the US and China cannot be persuaded their own interests would be served by preserving regional harmony. The paper adds that “this is not assured”.

In the decades ahead we expect further contestation over ideas and influence, directly affecting Australia. It is imperative that Australia prepare for the long term.“

Our place in the region

The white paper’s emphasis on the need to bolster regional friendships and alliances is a clear reference to moves by the Turnbull government to resuscitate a quadrilateral security dialogue with the US, Japan and India. The Rudd government shelved this on the grounds that it would appear to be a grouping whose aim was to contain China.

In its latest incarnation, the “Quad”, as it is known, clearly has a hedging purpose. But whether it develops past an agreement to consult and perhaps conduct joint military-to-military exchanges will depend on circumstance.

In other words, China’s regional assertiveness will dictate the extent to which Australia and its like-minded partners collaborate in seeking to balance China’s inexorable rise.

The Quad’s critics regard it as an unhelpful diversion, unnecessarily antagonistic to China. Its supporters see it as a prudent step to bring together functioning democracies intent on preserving regional security.

What would seem to be more productive would be a consensus involving the US, China, Russia, the ASEAN countries, Australia and New Zealand in an East Asia Summit agreement on regional security arrangements, much like the Helsinki Accords.

An encouraging aspect of the unclassified version of the white paper (a classified version will use starker language) is that within the constraints of bureaucratic language it provides a fairly direct challenge to China to live up to its commitment to a rules-based order.

So it encourages China to “exercise its power in a way that enhances stability, reinforces international law and respects the interests of smaller countries”.

This implies that China’s recent behaviour does not meet this standard.

Finally, it is hard to escape the conclusion that Australia’s policymakers have more or less come to the view – reluctantly – that US leadership in Asia is on a downward trajectory, and there is little point in pretending otherwise. The question is how fast, and to what extent will China continue to assert itself.

In his introduction, Prime Minister Malcolm Turnbull sets the tone for the next phase of Australian policy in a way that recognises these realities. “Australia,” he writes, “must be sovereign not reliant.”

The ConversationIf that’s not an acknowledgement of a disrupted security environment in which power relationships are shifting, I’m not sure what is. The 2017 Foreign Policy White Paper makes progress in coming to terms with that reality.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. Read the original article.

Power bills can fall – but the main attention must be on affordability: ACCC


Michelle Grattan, University of Canberra

The chairman of the Australian Competition and Consumer Commission (ACCC), Rod Sims, holds out the prospect of an absolute fall in electricity bills over coming years – but says this will require focusing centrally on affordability, not just reliability and sustainability.

In its Retail Electricity Pricing Inquiry preliminary report into the electricity market, released on Monday, the ACCC says residential electricity prices have increased by 63% on top of inflation in the last decade, with network costs being the major contributor.

Household bills rose by nearly 44%, from an average of A$,1177 in 2007-08 to $1,691 in 2016-17.

Household bills have risen less than electricity prices because usage has fallen, mainly due to self-supply by solar panels.

The report comes as cabinet is set to consider on Monday the government’s energy policy, which it hopes to take to the Coalition partyroom on Tuesday. Energy Minister Josh Frydenberg last week signalled the government had moved away from the Finkel inquiry’s recommendation for a clean energy target.

Facing the prospect of a shortage of power in the period ahead, the government is particularly focused on the need to increase dispatchable power.

The clean energy target, even in modified form, is also unpopular in Coalition ranks.

The ACCC report indicates that supporting renewable energy has been a relatively minor driver of the spiking of prices.

Sims – who flagged the ACCC findings when he addressed the National Press Club recently – says affordability should be the “dominant” objective in policy but in recent years it has come after several other objectives – including reliability, dividends and sustainability.

He said different approaches were needed to pursue each of the objectives of affordability, reliability and sustainability. As reliability and sustainability were pursued, it was important to do it in “the least-cost way and to let people know the costs”.

“What’s clear from our report is that price increases over the past ten years are putting Australian businesses and consumers under unacceptable pressure,” he said.

The ACCC found that on average across the national electricity market (which does not include Western Australia or the Northern Territory), a 2015-16 residential bill was $1,524, excluding GST. This was made up of network costs (48%), wholesale costs (22%), environmental costs (7%), retail and other costs (16%) and retail margins (8%).

Sims said the primacy of network costs in rising bills was not widely recognised.

Since July 2016, retail price rises were likely to be driven by higher wholesale prices.

“We estimate that higher wholesale costs during 2016-17 contributed to a $167 increase in bills. The wholesale (generation) market is highly concentrated and this is likely to be contributing to higher wholesale electricity prices.”

The ACCC estimates that in 2016-17 South Australia had the highest residential electricity prices, followed by Queensland, then Victoria and New South Wales. SA prices were roughly double those in Europe.

Sims said measures the government had already taken – notably telling companies to make customers aware of better deals, and its plan to scrap the process allowing companies to appeal against decisions of the Australian Energy Regulator – would help lower prices.

The ACCC is now looking in detail at further measures, ahead of making a final report. In the meantime, its preliminary report puts forward some suggestions. These include the states reviewing concessions policy to ensure consumers know their entitlements and concessions are well targeted to the needy, and a tougher stand against market breaches.

It says increased generation capacity (particularly from non-vertically integrated generators), preventing further consolidation of existing generation assets, and lowering gas prices could help reduce the pressure on bills.

The ACCC will also look at how to mitigate the effect of past investment decisions – but it notes that many are “locked in” and will continue to burden users for many years.

It will as well consider what more can be done to make it easier for consumers to switch suppliers.

The report says that “an increasing number of consumers are reporting difficulties meeting their electricity costs, and some consumers have been forced to minimise their spending on other essential services, including food and health services, to afford electricity bills.

“Businesses across all sectors have faced even higher increases over the past 12 months, following renegotiation of long term contracts. Many of these businesses cannot pass the increased costs on and are considering reducing staff or relocating overseas. Some businesses have even been forced to close.”

The ConversationThe ACCC’s final report will be released in June next year.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.