Social responsibility cuts many ways

The Australian Financial Review is reporting that at a Greens-organised Senate hearing today into the potential closure of Australian coal-fired power stations, Energy Australia executive Mark Collette, whose company runs one of Victoria’s four brown coal generators, said that the company had “a social responsibility to keep the plant running”.

He also said that “Yallourn (the name of the power station) is a tricky situation. If you see the Victorian energy market as a car and Hazelwood is the spare tyre, the tyre is going. If Yallourn closes down, the car breaks down.”

This refreshingly honest statement – that a company has a social responsibility to do the job it is paid by its customers to do, should be put on the desk of the chief executives of Australia’s top 100 companies, too many of whom have been seduced over recent years to apologise for their business, in a futile effort to appease anti-business campaigners.

Energy Australia’s inquiry submission also helpfully noted that they would need to build 2 wind turbines a day for 30 years at a total cost of $150 billion to meet a 100% renewables target.

Last year, FreedomWatch noted a speech given 46 years ago by the influential American economist Milton Friedman “The Social Responsibility of Business is to Increase Profits.” It is as relevant today, as it was then.


I’m a Victorian. Can you please sell me some electricity?

Yesterday’s revelation that the closure of the Hazelwood power station in March 2017 means Victoria will need to import electricity from New South Wales and/or Tasmania during summer peaks shows the extent to which governments are mismanaging our energy future.

The Australian Energy Market Operator report issued after the Hazelwood announcement also noted that in 2015-16:

  • Victoria accounted for 27% of the electricity consumed in the National Energy Market, 86% of which came from brown coal;
  • Victorian exports provided 14% of South Australian consumption, 6% of New South Wales’ and 6% of Tasmania’s; and
  • Hazelwood alone produced 22% of Victoria’s electricity.

When a state that has an estimated 430 billion tonnes of brown coal – equal to hundreds of years of supply, and is the historic heart of the nation’s gas and oil industry, is unable to reliably provide its own electricity, you know you have a big problem.

The problem with Australia’s electricity system is too much government control, too many regulations and playing favourites with particular technologies. This is probably why over the last decade, Australia has slipped from having the lowest energy costs in the OECD to the 27th lowest as revealed  by the Minerals Council of Australia on Thursday.

This is why it was a pleasant surprise on Friday morning when the Australian Financial Review reported that the owner of ERM Power, Trevor St. Baker, has offered to buy Hazelwood, as well as the recently decommissioned Northern Power Station at Port Augusta in South Australia. Whether he is successful remains to be seen, but it is heartening that Australia has not yet lost all of its independent thinking entrepreneurs.

Good luck to him.


When green fantasies come true

The fact that French electricity multinational Engie would rather close its doors than continue to operate in Victoria tells you all you need to know about the impact of Green renewable energy policies.

Engie today confirmed that it would close Victoria’s Hazelwood power station in March 2017 and in a surprise move said it would also try to sell its Loy Yang B power station, also in the State’s Gippsland region. Together these power stations are responsible for around 35% of Victoria’s electricity.

Hazelwood alone is equal to over 2,000 wind turbines in terms of reliable electricity output. It is nonsense that it can be replaced by renewables any time soon, if at all, and the move will have serious consequences for Australian electricity prices and security.

Victoria is the low price anchor of the National Electricity Market, with its surplus electricity also patching the holes in renewables-rich South Australia and Tasmania. These three states will now be competing for the same, reduced power output. In any market, if you reduce suppliers, prices will rise, and electricity is no different. After South Australia’s last brown coal power station closed in May, two major electricity companies almost immediately announced retail price rises of up to seven times the rate of inflation.

Unfortunately this is the inevitable outcome of federal and state government policies that are destroying the investment environment for fossil fuel companies. In the case of Victoria, in just the last 6 months the Andrews government has tripled the tax on brown coal, announced a new 40% renewable energy target, and extended the current ban on exploration for new gas supplies. What company in their right mind would want to invest?

While predictably, the Federal and State Governments have announced assistance packages, in reality no temporary state or federal government employment schemes or taskforces can possibly replace viable private sector jobs delivering an important commercial product. Nor should they.

Sympathetic comments by environmentalists about the impact on local workers and communities are just crocodile tears, given that renewable energy policies are specifically designed to push coal and gas producers out of the market. They did the same thing in Port Augusta last year.

Meanwhile the CFMEU is pursuing industrial action at a third Victorian brown coal power plant, proving that the union movement has learned nothing after taking Toyota to court in 2013 to prevent it from restructuring to avoid going out of business.

In the last year, South Australia and Tasmania have shown the world what happens when you have an ideological obsession with renewable electricity. Germany also spent €1 billion in 2015 on electricity grid stabilisation alone because of too much wind power and a think tank recently estimating the total cost of its so-called Energy Transformation at 525 billion Euros by 2025.

Given that the Greens have made it clear that they want to close all Australian coal-fired power stations, starting with all four of Victoria’s, the question for the Green movement and its sympathisers in the major parties has to be “Where will our future electricity and gas supplies come from?”


Ministerial confusion a symptom of big government


Ministers Marise Payne, Christopher Pyne and Dan Tehan

Today’s revelation by the ABC that 100 days after the federal election, Australia’s three defence ministers still don’t actually know what their responsibilities are, is a classic example of what happens when government is too big.

A fortnight after the July election, FreedomWatch highlighted the Turnbull Government’s 42 executive officeholders and 53 portfolios, and how this compared unfavourably with the first Barton ministry and the first post-war Menzies ministry.

According to the ABC, a ministerial turf war over who controls what, is responsible for this extraordinary delay. Taxpayers may well ask if they still don’t actually have a job description after three months can we please have a refund of their ministerial salaries!

In the real world the job comes before the person – i.e. something needs to be done so you find someone to do it, and if you can’t afford it, you either prioritise, work longer hours or just forget about it. But in the world of government they give as many people as many jobs and titles as they can, paid for by the long-suffering taxpayer, and worry about what they actually have to do later.

Labor is no better, and now has a whopping 48 shadow ministers. There are so many people on the gravy train that one of Labor’s few non-ex-union-official MPs, former economist Andrew Leigh, had to take a pay cut to stay on board.

With federal government spending forecast to pass $500 billion per year in 2019-20 and gross federal debt to pass $500 billion in the next twelve months, it is clear that the size of government and the red tape it creates and administers is out of control.


No end in sight to big government

The new Turnbull Ministry, announced this afternoon, includes 42 executive officeholders with a total of 53 portfolios.

With the possible exception of the onward march of Federal Government spending which has gone from $140 billion in 1997-98 to $445 billion in 2016-17, or gross debt which will pass $500 billion sometime in the next twelve months, there is little else that better demonstrates how the size of government and the red tape it creates and administers is out of control.

These numbers, while broadly in line with the first Turnbull Ministry of 2015, compare particularly unfavourably with the first Barton ministry and the first post-war Menzies ministry.

The Prime Minister’s own department now has nine different Ministers, “Assistant Ministers” and “Ministers Assisting” across ten portfolios, including Indigenous Affairs, Women, Cyber Security and Counter-Terrorism.

The Whitlam-era federal involvement in the design of cities, which was resurrected last year, now appears to have two Ministers, with Angus Taylor the Assistant Minister for Cities and Digital Transformation (reporting to the PM) and Paul Fletcher the Minister for Urban Infrastructure (reporting to the Minister for Infrastructure and Transport).

Social Security has four ministers, there is a still a Minister for Sport and for the Arts and there is a Minister for Rural Communications separate to the Minister for Communications.

Even in Defence, where there was once a single Minister, there are now three defence officeholders with five portfolios – Defence, Defence Industry, Veterans’ Affairs, Defence Personnel and the Minister Assisting the Prime Minister for the Centenary of ANZAC.

While Josh Frydenberg’s appointment as Minister for the Environment and Energy is a welcome portfolio consolidation, it looks like that is it.

The more people that are appointed to office, the more legislation and regulations they try to pass, so they look like they are doing something. Small government is not coming to Australia any time soon.


McDonald’s expose shows the system is broken – but not in the way you think

Last week’s McDonald’s expose in The Age neatly demonstrates the extent to which Australia’s workplace relations system has been compromised by vested interests

But the problems at the heart of the system may not be the ones that first occur to many readers.

Firstly, it is not actually clear that McDonald’s has done anything wrong. According to the Fair Work Commission website, the minimum wage for 16 year olds in Australia is $8.17 per hour, cascading upwards each year with age until a worker turns 21, when the adult minimum wage of $17.29 per hour applies.

According to the articles, most employees had a base rate of pay of $20 per hour. In America, where the adult minimum wage is US$7.25 per hour, or Germany where the minimum wage is 8.5 Euros per hour, this would not be considered a bad deal.

It is also almost triple the hourly rate of $6.94 that unemployed Australians have to live on when receiving the Newstart Allowance.

Given that the employer is happy, the union is happy, the Fair Work Commission is happy and over 95 per cent of employees are reportedly happy, a legitimate question should be asked as to whose business it is to intervene?

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Renewable energy subsidy addiction revealed

Interesting article recently for The American Interest on how a proposed reduction in solar power subsidies in the cool, cloudy, north eastern US state of Maine, next to Canada, is causing angst in the solar industry:

… the original justification for these subsidies was that by stimulating greater consumer demand, there would be a massive increase in production leading to dramatic falls in production costs. Eventually the subsidy regime…could die away.

… that subsidized solar is growing in foggy, cold, sun-challenged Maine, while without huge subsidies it is in trouble in sunny Nevada, tells us everything we need to know.

… it’s an example of how poorly-designed government subsidies divert resources and slow the march of progress. The technology just isn’t there yet—the current generation of commercial solar panels don’t work well enough for people to install them unless they get fat subsidies and tax write-offs.

The public interest—and the climate—would be much better served by shifting resources from subsidies for substandard and inefficient green tech to research into next generation alternative energy sources that can compete on the merits.

Couldn’t have said it better ourselves.


Tasmanian energy crisis inevitable after decades of green policies

Yesterday’s Inquirer piece (“Fighting to keep Tasmania’s lights on in energy crisis“, The Australian) overlooked the fact that the current Tasmanian energy crisis is the inevitable outcome of 30 years of green policies.

It is also the height of hypocrisy for people who have opposed investment in new coal, gas, hydro or nuclear power to now criticise electricity shortages.

For too long now, policymakers throughout the western world have used electricity networks to pursue political and environmental goals rather than simply supply affordable, reliable and safe power. In Australia, Europe and North America, investment in fossil fuel or nuclear generation has been discouraged, with preference given to wind, solar, or more interconnectors. The result has been the destruction of market price signals, higher costs, and decreased reliability. South Australia and Tasmania are now paying the price.

Instead of lobbying for another interconnector, the Tasmanian government should back self-reliance, bite the bullet, build a new power station, and send the bill to the Greens.


When businesses need government to tell government what businesses think


Kate Carnell

The federal government has announced the appointment of ACCI CEO Kate Carnell as the inaugural Small Business and Family Enterprise Ombudsman, a decision welcomed by business organisation stakeholders including even ACCI’s competitor organisation COSBOA.

However, while the motives behind the creation of the new position may be noble, it is another example of the uncontrollable growth of government.

Many States already have small businesses commissioners, following the lead of Victoria in 2003, who started largely as statutory officials that oversee a low cost dispute resolution service for that state’s small businesses.

But when in 2012 the Gillard government decided to create a new national Small Business Commissioner, it led with an advocacy and information role. This was something further built on by the Abbott government’s small business minister Bruce Billson in 2014, who wanted a more powerful Small Business and Family Enterprise Ombudsman. This is now backed by legislation, to enable the Ombudsman to act as an advocate for small and family businesses, provide feedback on Commonwealth small business laws and regulations, and provide assistance on dispute resolution.

So what started in Victoria is 2003 as a voluntary mediation service for small businesses has become another government bureaucrat, but one that dangerously mixes regulatory, advocacy and quasi-judicial powers and further confuses the distinction between the public and private sectors.

It is the responsibility of the private sector to tell a government what the private sector wants. In turn, if a government wants to consult with businesses, then it should go and talk to them, rather than just take a lift downstairs.

Co-opting whole sectors to be part of the organs of state blurs the line between public and private interests. Why should taxpayers pay for what businesses should pay for themselves?


Germany “renewables revolution” a lesson in what not to do


Thursday’s Australian ran an article which included a number of my quotes countering Greens leader Richard Di Natale’s claim that Germany was a positive example of renewable energy policy:

[Hogan] says Germany’s renewables revolution will cost at least 1 trillion by 2030 (after subsidies to solar and wind), but its electricity system is becoming more expensive and less reliable.

“Germany’s major energy companies are now losing billions of dollars each year as subsidised wind and solar power destroys returns on capital and the incentive to invest in more modern, less emissions- intensive generators.”

Read on here ($). Two additional points worth adding:

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