Privatisation, logic and fair dealing (haha)

 
  YM-Mundrabilla Minister for Railways

Location: Mundrabilla but I'd rather be in Narvik
How can we win????????


  1. Victorian electricity network to be sold (Kennett).

  2. Private enterprise (presumably) does its due diligence and offers a price.

  3. Kennett flogs the network to private enterprise.

  4. Private enterprise suddenly surprised to discover after the bushfires that the grid is deficient.

  5. Government gifts private enterprise $200 million as a gift to upgrade network as 'blackmail' payment in an attempt to avoid threatened politically unpopular electricity price increases.

  6. Successful or not (silly question).

  7. Federal government then taxes companies on the $200 million of taxpayers money that they have received.

  8. Electricity prices to taxpayers to rise to cover the tax on a gift of taxpayers money.



Heads they win tails we lose!

Don't vote it only encourages them.

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  don_dunstan Minister for Railways

Location: Adelaide proud
In fairness to Jeff, he actually sold the SEC for an enormous amount of money because he got in before any other state managed to in the early 1990's.

However I think it's also fair to say that had the organisation remained in public hands that we probably would have made back the same amount of money that we got up-front for privatisation in 1994 - or possibly more. As you rightly point out, the power companies continue to get taxpayer subsidies and all sorts of free-kicks - including SP Ausnet (a Singapore government company) getting taxpayer money for network upgrades to improve their bottom line.

That's the nub of the problem in my opinion - the loss of recurring revenues from profitable state enterprises (approx. $2-4 billion a year from SECV) means that we can't afford to pay for things like urgently needed infrastructure or recurrent expenditure without huge lifts in taxation. No money for urgently needed infrastructure outside of those things the Commonwealth has offered to chip in for (East-West) despite record population growth and the urgent need for social and transport infrastructure.
  RTT_Rules Dr Beeching

Location: Dubai UAE
Take NSW for example, early 1980's, recurring blackouts. Why because the govt had forced the state run power generators to had over money designed for expansion and upgrades to use to prop up the govt budget.

Qld late 1990's, rolling black outs because while there had been some very limited privatisation, ie Gladstone power station. The now state owned Corporatised power companies couldn't run a chook raffle and did major maintenance at the same time coupled major breakdowns and delays in expansion of generation capacity and lack of sufficient long distance transmission lines. ie CQ power stations could not supply sufficient power to Brisbane where the blackouts mostly occurred. The Qld govt, short of cash and no slush fund for expansion immediately went to the private sector to aid the expansion of generation capacity. Hence Millermium power station was built along with govt owned expansion of Swanbank and Callide.

the problem with govts owning things like power stations which generate huge amounts of cash is that the govts have a very bad history of taking the cash meant for upgrades and using to prop up poorly managed budgets. Financial corruption? Kennent inherited an almost bankrupt state and was required to sell of assets to get the books back in the black. How do we not know that that $200m was actually taken out of the system in the first place? Power networks and stations are a 20-30 cycle.

Its difficult to I think fully privatise a monopoly and the transmission network is in effect mostly a monopoly and its difficult to break it up for competition, however some private HV transmission lines do exist in Australia. I think one goes fro Qld to mid NSW, I think. Likewise local distribution. There is only one set of lines along the street. and hence should always owned by state.

But for generation, I do believe the govt should invite and support private generation as if anything it forces the govt run stations to clean up their act. When the aging Gladstone Power station was sold, the weekend car park looked like the mid week. Come the 5 year buffer against redundancies and all of a sudden you can count them on one hand. 10 years later the lights have yet to go off. Its also difficult to encourage large scale power station construction for expansion by the private sector if there is no guarantees. The East coast network/gird is now big enough and connected enough to expand the private operation.

For HV and local distribution, govt owned, but not exclusive and contract out maintenance, construction and some operations. Example of difference between govt and private. Bell Bay Aluminium smelter was capped on power usage because the govt owned Hydro said the HV feeders were at max. Come privatisation, all of a sudden a few more MW could be sent, thus allowing plant production to increase and improving the plants economics.

Moral of the story, govt's should not be directly involved in day to day operations of big business/heavy industry. The have a very long and established history of not doing this well.
  Bogong Chief Commissioner

Location: Essendon Aerodrome circa 1980
Excellent post RRT.

I've done some work on generation and it seems the old SECV was an arthritic giant, a huge monopoly unwilling to move or change the approaches they'd had for 70 years.

When competition was legalised, a number of smaller, more nimble companies entered and they all had different ways of doing things. Two of them surveyed water supply dams and installed small hydro generators on some of them, useful extra capacity for not much money.

Others looked at the the problem of peak demand, the SECV approach had been to build another expensive coal power station that might only be needed for a few hundred hours a year. Instead they built the relatively cheap gas powered peak loaders at Laverton and Somerton.

Later Southern Hydro / AGL realised that while the Kiewa hydro scheme had power stations 1, 3 and 4 operational, much of the infrastructure for No. 2 had been built and abandoned by the SECV 40 years earlier, so they finished it off.

Origin was producing a lot of gas from their offshore facilities at Port Campbell and noted that the Portland aluminium smelter was powered by coal generators in Traralgon. Even with very high voltage transmission, the power losses over the huge distance between Traralgon and Portland were significant, so they built the big base load gas generator at Mortlake, so now the electrons only travel 20% of the distance with much lower transmission losses.

Then there's the explosion of wind turbines. Does anyone honestly think that would have happened under the ultra conservative SECV?

There are plenty more stories like this for Victorian generation, things changed radically after the old, inefficient, conservative SECV was gone and the diversity of new approaches meant we developed a much more efficient generation system.
  Valvegear Dr Beeching

Location: Norda Fittazroy
Then there's the explosion of wind turbines. Does anyone honestly think that would have happened under the ultra conservative SECV?
Bogong

There's no explosion of wind turbines in Victoria, mate. The present government is putting every conceivable obstacle in the way, for God-only-knows what reason.
  Bogong Chief Commissioner

Location: Essendon Aerodrome circa 1980
There's no explosion of wind turbines in Victoria, mate. The present government is putting every conceivable obstacle in the way, for God-only-knows what reason.
Valvegear

Actually there is well over 1 gigawatt of wind capacity already operating in Victoria with approx 850 towers. Add wind turbines under construction or with planning approval and the total jumps to 3 GW (or 3,000 megawatts). To me that is a VAST amount of power.

Now the problem with this is that they only have (at best) a 30% capacity factor, or in plain English, "They don't produce nuthin if the wind don't blow". So there is a need for back up power that can be turned on quickly when the wind drops.

The best compliment to wind power is hydro, as a hydro generator can go from producing nothing to full power in about 2 minutes (compared to coal which takes about 22 hours). So if you have vast amounts of hydro power (like Tasmania), wind farms are an excellent way to add generation capacity to the state grid.

Unfortunately Victoria doesn't have much spare hydro power and what we do have is mostly used to produce peak load power a few hours a day when demand is highest. This can be supplemented with extra power via the cable from Tassie, but that has a limited capacity that is pretty much fully utilised already. Likewise the Vic Govt still owns a chunk of Snowy Hydro, but this doesn't provide enough extra peak load capacity either.

So if we build more wind generation, we need another source of speedy back up power. The only alternative to hydro is the least efficient form of gas turbine generation, (they are a bit like jet engines). These are useful for short bursts during times of peak demand, but they are very inefficient, so it makes no sense to run them 70% of the time, only producing base load electricity.

Other mainland states face a similar dilemma. That's the real reason that govt assistance to construct wind turbines and subsidies (direct and indirect) is being scaled back.

Sadly, in these times of aggressive, adversarial politics, some opportunist people have ignored these facts and have run with political sound bites saying that "the such and such party hates wind power" when realistically, which ever mob was in government, would have to scale back the assistance, because (except for Tassie) we just don't have sufficient alternative generation that can be turned on quickly when the wind drops.

Further reading.
http://en.wikipedia.org/wiki/List_of_power_stations_in_Victoria_(Australia)
http://en.wikipedia.org/wiki/List_of_wind_farms_in_Victoria
  speedemon08 Mary

Location: I think by now you should have figured it out
Now the problem with this is that they only have (at best) a 30% capacity factor, or in plain English, "They don't produce nuthin if the wind don't blow". So there is a need for back up power that can be turned on quickly when the wind drops.
Bogong

That is the single largest thing I hate about the nuffies saying wind turbines are the be the all and end all of power generation.

My dad said something briefly a while ago, that SECV was horrendously overstaffed for no good reason.
  Donald Chief Commissioner

Location: Donald. Duck country.
That is the single largest thing I hate about the nuffies saying wind turbines are the be the all and end all of power generation.

My dad said something briefly a while ago, that SECV was horrendously overstaffed for no good reason.
speedemon08

That is the problem with "renewable" energy, it never shines or blows all the time.   You have to have back up base load power (coal or similar), and it has to be going all the time.
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
My dad said something briefly a while ago, that SECV was horrendously overstaffed for no good reason.
speedemon08

Just after WW2 the SECV, along with the Country Roads Board, Melbourne Metropolitan Tramways Board, Melbourne Metropolitan Board of Works and Victorian Railways were used to provide jobs to returning soldiers - this necessitated adding lots of staff that weren't entirely needed. Also, the 'Commish' didn't exactly pursue aggressive staff cuts as technological advances allowed for manning reductions in many areas.

Most of the job losses themselves happened when Jeff Kennett & Alan Stockdale corporatised the SECV by structurally separating its assets and spinning off the individual large power stations (plus grouping the hydro assets as Southern Hydro) into independent state-owned companies. This was basically QLD and NSW's current situation - a step towards privatisation just short of selling the assets themselves. Stockdale rushed a lot of the process in order to get the best price for the assets as quickly as possible, which meant lots of deferred maintenance and accelerated staff reductions. However, it must be noted that the Kirner Labor government had begun the large-scale redundancy payout scheme at least 2-3 years earlier.

On the power station sales themselves, there has been plenty of speculation about the Hazelwood sale in particular - by the SECV's own reckoning it had only 10 or so years of useful life left in it by the time Kennett and Stockdale came along. In the early 80s in fact, they reckoned the first couple of units would be retired by 1995/96! The sale went ahead anyway - suspected motivations have ranged from the desire to squeeze as much 'value' out of SECV assets as possible (otherwise known as base greed) all the way to removing as much potential asbestos liability from the State Government's balance sheets as quickly as possible.

A final note on the topic: ex-PM Paul Keating most certainly egged on the Kennett government to sell off the SECV during his tenure, so you can definitely blame 'both sides' in this instance.

Others looked at the the problem of peak demand, the SECV approach had been to build another expensive coal power station that might only be needed for a few hundred hours a year. Instead they built the relatively cheap gas powered peak loaders at Laverton and Somerton.
Bogong

You're almost correct with that. The SECV planning method in the 1980s seemed to be more about pursuing large industrial loads (aluminium smelters mainly), building the Latrobe Valley power stations to supply the load and then using the spare capacity that they inevitably had to do as much of the intermediate and peaking load supply as they could.

Also, note that the SECV built some of the first big gas turbines in Australia at Jeeralang to supply peaking power - they didn't completely ignore the utility of gas turbines for peaking power. It just happened that the reality of the 1990s (and onward) was that there weren't going to be any new really large industrial customers coming along, so gas turbines were a good way to build up peaking capacity.

Then there's the explosion of wind turbines. Does anyone honestly think that would have happened under the ultra conservative SECV?
Bogong

In the SECV's later days their idea of 'reducing CO2 emissions' was to plant a whole bunch of trees next to Loy Yang B power station Laughing
  TheBlacksmith Chief Commissioner

Location: Ankh Morpork
You just wait until I gets my bank of Ford Falcon alternator turbines on the roof going, then we'll see who the new force in wind energy is. It only needs one of the horses around here to fart and my TV will run off it for half a day.
  Valvegear Dr Beeching

Location: Norda Fittazroy
For the benefit of Bogong and any others; here is an excerpt of what the wind turbine industry has in front of it.

THE clean energy industry has warned it will invest away from Victoria, potentially costing the state $3 billion, after the Baillieu government announced Australia's most restrictive planning laws for wind farms.

In a victory for wind farm opponents, the government will amend planning laws to give households power to veto wind turbines within two kilometres of their homes.

Turbines will also be banned in the Macedon and McHarg ranges, in the Yarra Valley, on the Mornington and Bellarine peninsulas, and within five kilometres of the Great Ocean Road and the Bass Coast.

And in changes that go further than the Coalition flagged in the policy it took to last year's state election, turbines will also be prohibited within five kilometres of 21 Victorian regional centres.

Planning Minister Matthew Guy said the changes restored "certainty and fairness" to local communities while leaving the vast majority of the state open to wind farm development. "It is important that while wind energy develops, it does not do so [to] the detriment of rural and regional Victorians," he said.

But opponents of the change said Mr Guy's claim that most of the state would stay open to wind farm development was valid only if all rural households agreed to farms being built in "no-go zones" around their homes. If they opposed, most of the state was blacked out.

The Clean Energy Council said the change would cost hundreds of new jobs in regional areas and billions of dollars in investment.

An analysis for the council by consultants Carbon Market Economics before last year's election estimated that between 50 and 70 per cent of proposed wind farms, worth up to $3.6 billion, would not be developed under Coalition policy.

Clean Energy Council chief executive Matthew Warren said the policy meant landholders could in effect hold developers to ransom. "If Victoria is prepared to impose mandatory setbacks on technology as quiet, safe and clean as wind turbines . . . what will they do to more imposing infrastructure like roads, fossil fuel power stations, factories or mines?"

The new rules affect future wind farm proposals, not those already approved. A total of 1107 turbines, with 2629 megawatts of generating capacity, have been approved for Victoria, but not yet built.


Read more: [color=#003399]http://www.theage.com.au/victoria/baillieus-wind-farm-crackdown-20110829-1jig4.html#ixzz3CQqqNKIy[/color]
  RTT_Rules Dr Beeching

Location: Dubai UAE
That is the problem with "renewable" energy, it never shines or blows all the time. You have to have back up base load power (coal or similar), and it has to be going all the time.
Donald

Large scale Wind and Solar is relative new technology and still needs a decade or more of development, but this won't happen, or happen much slower without govt subsidy to develop/encourage the industry.

Wind and Solar work reasonably well together as they two rarely happen co-currently at full or zero capacity. But yes cloudy windless days are also common. Vic is connected to the Snowy scheme which is effectively a battery and while Tas doesn't have pump back there is +/- 300-400MW of surge capacity through their hydro system and basslink. So there is some flexible capacity, currently 20-25% is considered the practical limit for wind on a grid (see wiki), after which more wind becomes less efficient and more costly to manage. This however is not constant and will increase over time as the wind turbine manufacturers improve the turbines.

In the 70's and 80's, the technology for grid management was less efficient than today and the standard practice was to get large base load capacity, such as aluminium smelters as then your peak-off-peak turn turn was in percentage terms much less and easier to manage. ie think your peak load is 2000MW and off peak is 1000MW without large base load demand. Then add 5000MW of base load demand and the difference in % terms is much smaller.

Vic is a prime location for wind energy and there needed to be more controls. Some of the above quoted limits are more than fair.
  Bogong Chief Commissioner

Location: Essendon Aerodrome circa 1980
Valvegear, my earlier post referred to political opportunists ignoring the fact that wind only has a 30% capacity factor and we don't enough hydro to provide power for many more wind farms the other 70% of the time.

Let's face it, the Clean Energy Council aren't exactly neutral or objective, the big wind farm companies pay them to do their spin and publicity.

I guess that's the difference between Policy (where the wonks employed by think tanks and both political parties discreetly agree) and Politics which has increasingly become a game of "whatever it takes" and facts fall under the bandwagon of spin and sound bites. Sad
  RTT_Rules Dr Beeching

Location: Dubai UAE
Valvegear, my earlier post referred to political opportunists ignoring the fact that wind only has a 30% capacity factor and we don't enough hydro to provide power for many more wind farms the other 70% of the time.

Let's face it, the Clean Energy Council aren't exactly neutral or objective, the big wind farm companies pay them to do their spin and publicity.

I guess that's the difference between Policy (where the wonks employed by think tanks and both political parties discreetly agree) and Politics which has increasingly become a game of "whatever it takes" and facts fall under the bandwagon of spin and sound bites. Sad
Bogong

Tasmanian wind farms average +35% of nameplate, don't' know Vic. The loading factor for wind and PV solar energy is improving, but of course will never get to 100% and probably ever exceed 50%. The will always be push power systems. The timing of wind farm output does tend to follow afternoon peaks.

The timing for power to bulk hot water, heating, pool filters etc can also be adjusted to make the most use of intermittent power generation like wind/PV solar. I suspect in future fridges may follow suit. Large scale pumping and other like systems for both infrastructure and private industry can also vary to match peak generation. Most council water pumping systems already run on Offpeak.
  gippslander Chief Commissioner

Location: Central Gippsland, Vic

Then there's the explosion of wind turbines. Does anyone honestly think that would have happened under the ultra conservative SECV?


The SECV designed the Toora Wind Farm and let a contract to build it, but the project lapsed at privatisation. It was eventually built by a private operator. SECV also scoped a nuclear power station on French Island, so they clearly weren't wedded to brown coal.
  gippslander Chief Commissioner

Location: Central Gippsland, Vic

So if we build more wind generation, we need another source of speedy back up power. The only alternative to hydro is the least efficient form of gas turbine generation, (they are a bit like jet engines). These are useful for short bursts during times of peak demand, but they are very inefficient, so it makes no sense to run them 70% of the time, only producing base load electricity.
Bogong

With the price of natural gas projected to rapidly increase in coming years, the long term benefits enjoyed by Victoria"s manufacturing industry dining out on cheap brown coal power are going to be dramatic. Think of companies like Murray-Goulburn, who have switched to what they thought was cheap gas energy. Its all going to change in coming years.
  Bogong Chief Commissioner

Location: Essendon Aerodrome circa 1980
The SECV designed the Toora Wind Farm and let a contract to build it, but the project lapsed at privatisation. It was eventually built by a private operator. SECV also scoped a nuclear power station on French Island, so they clearly weren't wedded to brown coal.
gippslander

Fair point Gippslander, but my point is that while the SECV thought about those alternatives... and a few others, they didn't build them. In other words they briefly flirted with other power sources but remained married to coal.

Indeed, on at least one non coal project they spent squillions and walked away when it was half finished. They quit building Kiewa hydro with only 3 out of 5 power stations built and other projects such the biggest dam and aqueducts to divert more water into the system incomplete.

Like all monopolies, they got big, fat and lazy. The SECV had no desperate need to innovate or try different things, so they didn't. It was only after competition was introduced that we got different companies trying different things, leading to the wonderful diversity of power generation we have today.
  LancedDendrite Chief Commissioner

Location: North Haverbrook; where the monorail is king!
Indeed, on at least one non coal project they spent squillions and walked away when it was half finished. They quit building Kiewa hydro with only 3 out of 5 power stations built and other projects such the biggest dam and aqueducts to divert more water into the system incomplete.

Like all monopolies, they got big, fat and lazy. The SECV had no desperate need to innovate or try different things, so they didn't. It was only after competition was introduced that we got different companies trying different things, leading to the wonderful diversity of power generation we have today.
Bogong

If memory serves me right, they quit building the Kiewa scheme because the Federal Govt. who was co-funding the project wanted to put money into the Snowy scheme instead. Then they got part of the cost of Dartmouth covered by other parts of the Victorian govt. in the 70s, so no funding for the Kiewa scheme then. By the 80s, the SECV was all about finishing their mammoth brown coal plants in the Latrobe Valley, so again no funding was released for much to do with Kiewa at all.
Had the SECV not been broken up like it was in the 90s, we may very well have had the Kiewa scheme completed under their auspices during the late 90s as work on Loy Yang B finished up. I believe you've studied the scheme in detail, so I'd love to get some more insight from your work.

They had a certain objective: provide cheap and reliable electricity to the state of Victoria. This didn't really include generation diversity or anything of the ilk - if brown coal was cheaper (and it still is when you ignore the environmental costs), then they would build out brown coal capacity.
  Bogong Chief Commissioner

Location: Essendon Aerodrome circa 1980
Lance, briefly the Kiewa hydro scheme was started in 1938 and slowed down during the war. Due to the shortage of electricity, construction was allowed to continue with civilian conscripts (mostly men aged 45 - 55 who were too old to serve in the armed forces). They had the first power station ready to go in the 1943/44 summer but the ship bringing the first turbine to Australia was torpedoed by a U-boat. One turbine operational by late 1944, the second in early 1945.

The scheme was massively increased in scale after the war in 1947, doubling the projected power output. Then came the wild inflation of the Korean War followed by a huge credit crunch in c.1953. At the time states had to get loans approved by the Commonwealth and the loan allocation to Victoria was massively cut back. A few Vic government projects were cancelled outright, others like Kiewa got their funds massively cut back. About 2,000 people working on the Kiewa were sacked.

By the late 1950's the economy was back to boom conditions, but the SECV never reinstated the full Kiewa plan, they just continued to build a shrunken version of it using a small workforce until Power Station No. 1 (McKay Creek) was finished in c.1961.

My argument comes down to this. The SECV had a third of a century after the credit crunch to finish off the Kiewa by building No. 2 and No.5 power stations, building the big dam in Pretty Valley and finishing off aqueducts to divert extra water into the scheme, but they never even planned to resume work. By the late 1950's their "coal fetish" had worsened to a full blown obsession and nothing could divert them from that obsession for the rest of their life. However within a few years of the death of the SECV, Southern Hydro was planning to build No. 2 (Bogong) power station and it was quickly built soon after AGL bought Southern Hydro from the super funds that owned it.

That's all from my memories of a 100,000 word document I wrote 12 years ago. One day I may pull it out of the boxes it's stored in, rewrite it and publish it as a book on the history of hydro electricity in Victoria.

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