Monthly Archives: August 2012

As Isaac makes landfall, Gulf oil production stops

By Kirsten Korosec | August 29, 2012, 1:00 AM PDT

clip_image002 Photo: NASA

Hurricane Isaac has forced oil and gas operators to shut in more than 93 percent of production in the Gulf of Mexico and energy companies to close at least five refineries, developments that are fueling speculation the White House will release oil from the Strategic Petroleum Reserve.

Isaac made landfall in southeastern Louisiana late Tuesday as a Category 1 storm with maximum sustained winds of 80 miles per hour.

Press secretary Jay Carney told reporters earlier Tuesday that releasing oil from the SPR, which currently holds about 696 million barrels, is an option that remains on the table, according to a transcript of the gathering provided by the White House. Carney did not provide further detail.

Debate over whether the Obama Administration will release oil from the SPR has escalated as gasoline prices have risen and oil production in the Gulf has shut down due to the storm. Tight oil supplies have been compounded by an explosion at Venezuela’s largest refinery.

Some energy analysts have predicted the government will announce a release from the SPR by next week, Bloomberg reported. More than a few, including an editorial by Bloomberg, have speculated the oil release would be more of an election tactic, not because it’s a true emergency.

The Obama Administration has drawn down the reserve once before. During July and August 2011, about 30.64 million barrels were sold in response to sustained interruptions in global supplies due to civil unrest in Libya. President Obama authorized the sale as part of a larger coordinated release by the International Energy Agency countries.

The effect was minimal for consumers buying gasoline. The price at the pump declined about 2 percent. Prices rose again a week later.

Until now, operators have shut in production as a precautionary measure. Views over releasing oil from the SPR could change if oil and gas infrastructure sustains significant damage from the storm.

The infrastructure hasn’t fared well in other weather events. Katrina, the Category 3 hurricane that made landfall seven years ago, killed 1,800 people, caused billions of dollars in damage and devastated oil and gas installations taking out 4.5 million barrels a day of refining capacity.

Facebook meets Gehry: two top cultural influencers team up …

By Reena Jana | August 29, 2012, 3:15 AM PDT

Extract from:
Facebook’s Katigbak snapped and posted a photograph of Gehry and Zuckerberg, both smiling while and looking at a physical model of the new building. In the shot, the two look like peers in their t-shirts, despite their 55-year age difference. The image, to me, says a lot about the parallel powers of both architecture and social networking in today’s culture–er, should I say, the power of Frank Gehry and of Facebook, specifically. Across generations and across disciplines, they are hugely influential shapers of human experience, physical and virtual, and both are using design as a strategy to innovate.
Last Friday, social networking giant Facebook announced it has hired renowned architect Frank Gehry to expand its current headquarters in Menlo Park, California. The pairing reflects the two parties’ ongoing, respective pursuits of design as an innovation strategy.
From the first report on the project, by Bloomberg architecture critic James S. Russell, to the thorough analysis of Facebook’s possible marketing goals related to the Gehry announcement by The Atlantic’s Emily Chertoff, journalists are combing over the architect’s plans in great detail. It’s going to be one, gigantic room that will house 2,800 engineers. Conference rooms and other meeting areas, including “micro-kitchens,” will pepper the huge open space, which “somewhat resembles a warehouse,” as Facebook’s Everett Katigbak, the company’s Environmental Design Manager, described the design on a blog post.
The big room is meant to make it easy for staff to move around and work flexibly with teams as needed, rearranging their desks as need be. The epic workspace, which Bloomberg reports as 420,000 square feet, or 10 acres, in size, will be sandwiched in between a parking garage below and a garden up on the roof. A tunnel under a highway will connect Gehry’s structure with the current Facebook campus. The company plans to break ground on the Gehry building by early next year, with a fast construction period to follow.
The design is far more subdued than the sparkling, undulating buildings that Gehry has created for the Guggenheim Museum in Bilbao, Spain or the Walt Disney Concert Hall in Los Angeles. With its intentionally unfinished feel, and its planned quick building timeline, the new Gehry Facebook edifice seems to suggest a sense of nimble iteration. This concept reflects how Facebook designs its products and services: speedily, in a current state of “testing,” and always open to change (often after much, ahem, honest feedback from its users).
In the case of Gehry, in this situation, it’s to rethink how physical space can affect how a major, public company structures (or un-structures) its daily operations in an era of start-up worship. And as we’ve discussed here on SmartPlanet, Gehry has also been pushing in directions beyond building grand, showcase structures, having recently designed an eco-friendly duplex in New Orleans for Hurricane Katrina victims; he’s also expanded his business by creating software tools for designers, too. In the case of Facebook, more generally, the company is striving to establish how a clean-looking and yet ever-changing, often-debated social networking platform affects how we share and collect information about our lives in new ways. While some may say the pairing is a simply a meeting of big brands–which it is– it can also be seen as a meeting of ambitious and imaginative minds.
Image: Facebook. Photo by Everett Katigbak.


There was a typo in the message and attached handbill circulated last week for the free public lecture by Prof Richard Sommer – the date should have read TUESDAY 28th – not Wednesday 28th.  Apologies for any confusion this may have caused.


Prof Sommer’s address was given last night.

It was an inspiring international perspective on the challenges of conceiveing and delivering ‘big picture’ plans in a liberal democratic environment where conventional planning and delivery tools can struggle to achieve alignment of diverse stakeholders and decision-makers across the public and private sectors.


The End of the Industrial Revolution …….

Aug 23, 2012

Reproduced with kind permission of Paul Gilding.


Paul is an independent writer, advisor and advocate for action on climate change and sustainability. An activist and social entrepreneur for 35 years, his personal mission and purpose is to lead, inspire and motivate action globally on the transition of society and the economy to sustainability. He pursues this purpose across all sectors, working around the world with individuals, businesses, NGOs, entrepreneurs, academia and government.

What a privilege it is to be alive in these times, in such a significant period in human history. It’s not always easy to see moments of great historical importance when you’re in the middle of them. Sometimes they’re dramatic, like the fall of the Berlin Wall or the landing on the moon. But more often the really big ones appear, from within them, to be unfolding in slow motion. Their actual drama and speed then only becomes clear in hindsight.

That’s how it will be with this. But in the end we’ll look back at this moment and say, yes, that’s when it was clear, that’s when the end game began. The end game of the industrial revolution.

Hang on, you’re thinking. The industrial revolution? With its belching smokestacks, dirty industry and steam engines? You thought we left that behind long ago, right? You look at your smart phone, robots on Mars, the rise of Facebook and Google and think ‘we’re well past all that’. Isn’t this the age of knowledge, when we’re all hyper-connected in a 24/7 information rich economy? Think again.

Hiding behind those entertaining devices, information overload and exciting new companies, the real bulk of the economy is still being driven by those dirty belching smokestacks and is still being shaped by those who inherited the economic momentum of 19th century England – the coal, oil and gas industries. Look at any list of the world’s 20 largest companies by turnover and you’ll see around three quarters are either producing fossil fuels, trading them or converting them into transport or energy. So I’m afraid the proverbial belching smokestacks still underpin our economy. But they are now in terminal decline. Yes, after 250 years, their time is coming to an end – and faster than you, or they, think.

For those of us focused on social change, it doesn’t get much more exciting than this. When I was writing my book The Great Disruption during 2010, and even when it was published just a year ago, the ideas in it were still fringe to the mainstream debate – a radical and provocative interpretation of what was happening. Most thought my argument – that a crisis driven economic transformation was inevitable – were, if correct, certainly not imminent and would not impact for decades. Just two years later, we only have to look around to see the disruption underway, as the old economy grinds to a halt, and the incredible opportunity for change that is now all around us.

It’s going to be a wild and exhilarating ride, with winners and losers, crises and breakthroughs. There’ll be a fair amount of chaos and we’ll teeter on the edge for a while, wondering if we’ll get through. But we will, and we’ll then look back to this time and say, yes, I was there.  I was there when the third great wave of human progress began. The first was the domestication of plants and animals, enabling what we today see as civilisation to form. The second was the industrial revolution with its great technological and human progress but inherent unsustainability because it depended on taking energy from the past and ecological capacity from the future.

Now we shift to the third great wave, the world post the industrial revolution. To an economy designed to last, that is built around the present and nurtures the future. This will be an era where we…… well, that’s the exciting bit. We get to decide what comes next. We get to decide what the third great phase of human progress looks like.

Like many, I feel a great impatience sitting here on the edge of it all. Waiting for it to be clear to everyone that it’s time to stop pretending the old models will somehow get back to normal. We lurch from crisis to crisis, but never seem to face up to the reality that old normal is gone, that step change is now our only option. I’m not alone in that impatience. The legendary investment manager Jeremy Grantham recently said “The economic environment seems to be stuck in a rather unpleasant perpetual loop. ……I, for one, wish that the world would get on with whatever is coming next.”

The world actually is getting on with it, at an incredible pace, but building the momentum of the new takes time. And perhaps of more immediate concern, the dismantling of the old economy and the decline of the fossil fuel industry is being fiercely resisted by those who own it. To be fair, you can’t really blame them. I can’t imagine I’d take kindly to everything I assumed about the world being proven wrong and all my success now being blamed for the potential collapse of civilization. Denial and delay would be quite appealing!

But none of that really matters because the end of their world is going to happen regardless of anything they do. You can buy your way to political influence but you can’t buy new laws of physics. So we will change, not because of any great moral battle between good and evil, but because people and economics will respond to physical limits – the limits of the climate’s capacity to absorb our waste, the limits of our food production to keep pace with our demand, the limits of living on one planet.

Thus the need to act is no longer just a moral imperative, it’s now a social and economic necessity.

I will over forthcoming Cockatoo Chronicles unpack this argument in more detail, explore how this is unfolding around us, and why we should be excited rather than fearful. I realise many people look at the world events and feel fear – I certainly have those days. After all, as was argued in a recent oped in the NYT by US scientists: “There can be little doubt that what was once thought to be a future threat is suddenly, catastrophically, upon us.”

But when we look at the current US drought, at what is looking like the third global food crunch in just 5 years, and the extraordinary increases in the melt rates of arctic sea ice, all happening along side debt overload and the endless, lurching economic crises that Jeremy Grantham refers to, you can respond in two ways.  Yes, these things are cause for great concern, reasons to worry about the suffering that is now and will keep unfolding around us.

But they also say, with clarity and finality, the old economic model is dead. This is not a crisis, there will be no “return to normal”. This is the old world, the world that started in 1750 with the industrial revolution and the assumption that more stuff was all we needed for progress, steadily grinding to a halt.  The great economic expansion that drove us through the 19th and 20th centuries, is all but over. Over because it’s physically impossible for it to keep going. This is not philosophy. When things are unsustainable, they stop.

This process is going to be very messy. The climate is becoming highly unstable. The fossil fuel industry is going to fight a ferocious rear guard battle to hold on to the old ways. There is an incredible consolidation of wealth and power by the rich. And the economy is facing intolerable debt and financial pressures.

With the earth full, we are now trapped between debt and growth. If we grow, then spiking prices of oil, food and other commodities, along with ecological constraints will bring down the economy as they did in 2007/8. Yet our impossible levels of debt can only be paid off if we grow. Given we can’t, the financial system will soon break again and this time even more dramatically.

But we can no longer prevent any of those things – they are todays’ reality.  What we can do, and what will have the most impact on that situation, is to accelerate the process of dismantling the old and building the new. It is true that all the changes we need to make happen, would occur by themselves over time. But because ecosystem breakdown is driven by lagging causes – the impact keeps happening long after the pollution that caused it – we don’t have time. This makes acceleration the key challenge.  Within that context there is much we can do

For a start, we can slow down the last gasp expansion of the coal, oil and gas industries. This is a significant question because the carbon budget is nearly all spent. As Bill McKibben recently argued, the science is now very clear that we have a choice – we either face an out of control climate that will decimate society and the economy or we can rapidly remove those industries from the economy. There is no middle path. And the later we start, the more pain there will be.

We can also drive even harder, the incredibly exciting growth in solar. We can encourage investors to shift from the old to the new. We can implore governments to tax stuff more and people less. We can build a new economy that is focused on creating jobs and good lives for people, rather than bonuses for investment bankers and profits for oil companies. We can drive down inequality, a cancer that is now eating away at democracy and social stability.

Just a decade ago, the call to invest in this new economy was driven by the moral imperative or long-term economic benefit. Today it’s up and running, and is looking more like a sprint than a marathon – a sprint any investors who don’t see it underway will lose.

Solar is perhaps the most immediate and exciting example, with enormous investment now flowing. As Giles Parkinson explains in a recent article at it’s hardly a surprise. In many countries, you can now get solar on your rooftop with payments 20% less than your current electricity bill, while still leaving enough for strong profits by those installing and financing the systems. It’s an easy business proposition to understand and as a result, investors are piling in to the space. They look at the risks in fossil fuels with the inevitability of tightening regulation on carbon, then compare it to solar and see annual growth rates there of around 40% and dramatic and ongoing cost reductions. (The total cost of a rooftop solar system has fallen over 20% in the last year and the cost of solar panels fell around 50%!) So it’s no surprise that last year we saw another new record for the amount invested in renewables – over $250 billion. It’s now up over 90% since the start of the financial crisis in 2007. (How much proof do we need that there’s a new world coming?)

There are many other examples of such progress – too many to cover here. So this longer piece is the first in a series of Cockatoo Chronicles that will explore the great economic transformation now underway. I’ll be discussing more about the solar boom, along with the inevitable crash of the carbon bubble – with its potentially dramatic consequences for fossil companies’ share prices and some national economies. Another area of focus will be the food supply crunch and its implications for conflict and national security but also the economic opportunity for sustainable food production. I’ll also write about the emerging battle between the fossil fuel industry on one side and scientists, environmentalists and the renewables industry on the other. Clear battle lines have been drawn in recent months suggesting a heavily ramped up and economically sophisticated conflict is now emerging.

Sure, there’s plenty to worry about in what’s coming and we should do all we can to smooth the way for 7 billion people to get through this transition. But we must remember, we’re now over the top of the mountain. It’s a long way down and it will certainly be a wild and bumpy ride, but history is on our side and the momentum will take us through. So let’s celebrate and remember – we are privileged to be here now, to be the ones who shape the future. And amidst the chaos and crises, let’s keep our eye on the prize – the third great wave of human progress.



The energy-water nexus, 2012 edition … a must read

By Chris Nelder | August 22, 2012, 1:46 AM PDT

For full story:


A blistering summer this year has brought the energy-water nexus into sharp focus: how much power generation depends on water, and how much our water systems depend on power.

We’ve had the hottest July on record in the continental United States, and so far 2012 ranks as the tenth-warmest year on record globally, according to the National Oceanic and Atmospheric Administration.

The heat forced the shutdown of the Millstone Unit 2 reactor at the Dominion Nuclear Connecticut plant in Waterford, Connecticut last Monday, when the water temperature in Long Island Sound reached a toasty 76.7 degrees, over the 75 degree limit for the plant’s cooling water. (As of this writing more than a week later, the reactor is still offline.) I suspect that heat may have played a role in forcing other nuclear plants to shut down in July, by causing electrical component failures. These shutdowns, along with others forced by faulty equipment, have taken U.S. nuclear generation to its lowest level in a decade, according to New Scientist.

The interdependencies of water, power generation, food, and climate are not news. We’ve had shutdowns of power plants due to summertime heat for the past decade or more. But the problem does seem to be getting worse every year.

Water for electricity generation

With the exception of hydroelectric and solar photovoltaic power plants, the core of a utility-scale power plant is essentially the same steam engine technology that was first used to generate electricity by Charles Parsons 125 years ago (which in turn was based on the perfection of the steam engine in 1769 by James Watt, after whom the power unit is named). Heat on one side of the engine causes gas to expand, then the heat is dumped on the cold side of the engine, causing the gas to condense again. The expanding and contracting gas makes the engine spin, turning an array of magnets and electromagnetic coils, which then converts the mechanical energy into electricity.

Water is most commonly used to remove the heat on the cold side. Some power plants are air-cooled, but they are less efficient (particularly in hot weather) because they’re less cold.

This makes the thermoelectric power sector — which generates 91 percent of the electricity in the U.S. — one of the nation’s largest water consumers. It accounts for 41 percent of freshwater withdrawals and about three percent of freshwater consumption, where 99 percent of the water used is surface water. According to the Sandia report, thermoelectric power generation in the U.S. consumes 3.3 billion gallons of water per day in total.

When water supply is insufficient (or insufficiently cold), it forces power plants to scale back or shut down altogether. That’s also when power demand for air conditioning is likely to be highest, stressing power transmission lines and creating ideal conditions for brown-outs or grid failures.

Water for energy production

The water needed for electrical power generation is vast. But the water demand for producing oil, coal and gas is enormous too, and even less elastic.

Fracking – the process that has brought a fresh boost of oil and gas production to the U.S. in recent years – consumes between 70 and 140 billion gallons of fresh water per year, according to a 2011 report from the EPA. At a typical consumption of 100 gallons of water per person per day in the U.S., that’s equivalent to the needs of two to four million people.

Trying to find reliable data for on the water demand of U.S. corn ethanol production is a short path to utter insanity, with a ridiculously large range of estimates offered. After reviewing a dozen or so academic papers and other sources, I concluded that a 2010 study by the Argonne National Laboratory was in the right ballpark. It estimated that it takes 82 gallons of water on average to produce 1 gallon of ethanol in the regions responsible for 88 percent of U.S. corn production, where the vast majority of that water is used for irrigation.

Petroleum refining also consumes a great deal of water: one to two billion gallons per day, according to the aforementioned Sandia study. Perhaps more usefully, the Argonne study puts water consumption for petroleum (which presumably includes water for petroleum extraction using enhanced oil recovery methods) in terms of water consumed per mile by passenger cars. Against 2,025,396 million vehicle-miles traveled by passenger cars in 2010, according to the Federal Highway Administration, the Argonne estimate works out to between 203 and 608 billion gallons of water per year consumed for petroleum.

In sum, the freshwater demand of our current production and refining of fossil fuels might be around two trillion gallons per year at the high end.

Energy for water production

The flip side of the energy-water nexus is also challenging. Webber estimates about 10 percent of U.S. electricity is used for waste and wastewater management. But in agricultural areas, it’s much higher. A 2005 study by the California Energy Commission found that one-fifth of the state’s electrical power is used to pump, treat, transport, heat, cool, and recycle water.

Water desalination also requires an enormous amount of energy: over 9,800 kWh per million gallons, according to Webber. As energy costs rise, so will the cost of turning saltwater into freshwater.

Water for energy transport

For a final perspective on the energy-water nexus, consider the Mighty Mississippi, which isn’t so mighty this year. Water levels on the country’s inland water transport backbone have reached near-historic lows, forcing barge operators to cut their loads by as much as 25 percent to avoid hitting bottom. In turn, this has increased shipping prices along the river.

A pair of images posted by NASA show how dramatically the river has changed since last year, with huge sandbars now exposed.


Mississippi River, August 14, 2011.          Mississippi River, August 8, 2012.                      Source: NASA

According to data from American Waterways Operators cited in a recent post at Climate Progress, the Mississippi carries 22 percent of the oil and gas and 20 percent of the coal transported in the U.S.

It is feared that the low-water condition could persist through the fall season. If that is the case, it could add a non-trivial cost to the fuels that traverse the river, and slow deliveries to power plants both foreign and domestic, further increasing the pressure on power generators.

Final thoughts

As mentioned earlier, wind power and solar photovoltaics are exceptions to the energy-water nexus. No water is needed to produce power from those sources, and insignificant amounts of water are involved in the production of the equipment. Marine energy, although being fundamentally a water-based technology, does not consume fresh water; it just moves around in salt water. In a warming world, these power sources will have a clear advantage. Conversely, hydroelectric power, being intrinsically dependent on rainfall, makes it an uncertain option in a future of changing climate.

Traditional geothermal plants need water for the cooling cycle, consuming about 1,400 gals/MWh per the Sandia study, as do traditional solar thermal plants, which consume 750 to 920 gals/MWh

A final thought: Updating the energy-water nexus story came with the disturbing realization that the data quality on this extremely important subject is poor. Apart from the Sandia report and one or two others, there seems to be a dearth of good, recent studies. Models of how climate change may affect energy and water in the future appear to be virtually non-existent. The available estimates of water demand and their deltas are much too large to be really useful to policymakers or investors, and the time vector is missing altogether. Compared to our data on energy markets, the energy-water data are pathetic.

I don’t know why that is. Perhaps we’re just beginning to discover the hard limits of our energy and water resources and it’s simply a new subject. Perhaps we’re still struggling to get our arms around its complexity. But given our enormous vulnerability and dependency on these systems, we must do better. Government agencies, NGOs, academia, scientific organizations and investors really need to get on the ball to better quantify the challenges in the energy-water nexus, and find ways to produce more energy with less water and more water with less energy.

Photo: The Millstone Power Station Unit 2 (Nuclear Regulatory Commission/Flickr)

It’s board spilling season …….strike two and you’re out

21 August 2012, 6.11am AEST

Extract from: 


Julie Walker Associate Professor in Accounting at University of Queensland

Stacey Beaumont  Lecturer at University of Queensland

Disclosure Statement
Stacey Beaumont does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.
Julie Walker does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.
The Conversation provides independent analysis and commentary from academics and researchers.
We are funded by CSIRO, Melbourne, Monash, RMIT, UTS, UWA, Deakin, Flinders, Griffith, La Trobe, Murdoch, QUT, Swinburne, UniSA, UTAS, UWS and VU.


Blue Scope Steel’s Paul O’Malley has sought to sidestep shareholder anger with his decision to forgo a performance bonus. AAP

It’s reporting season and the interest in executive pay is heating up again. Alan Joyce is the latest CEO to forgo a bonus, joining a growing number of high profile business leaders including Rio Tinto’s Tom Albanese, BHP’s Marius Kloppers and BlueScope Steel’s Paul O’Malley.

Joyce has said it is “appropriate” that when company returns go down, that executive pay should also. O’Malley’s move pre-empted a $1 billion annual loss announced yesterday.

This is the second reporting year of the two-strikes legislation on executive pay. The law gives teeth to shareholder dissatisfaction about remuneration matters by providing that where there is a 25% or greater “no” vote on the remuneration report at any two consecutive annual general meetings, a resolution must be put to shareholders to spill the board.

Last year saw a number of corporate boards – including BlueScope – received their first “strike”, which if repeated could result in a costly and destabilising spill and subsequent re-election of a new board.

The trend for CEOs to decline their bonus this year is an effective response to a first strike or more generally, to forestall concerns about remuneration. The adverse media attention given to CEOs facing shareholder unrest about pay can have significant negative reputation effects for both the company and the executive. Pay issues can also dominate the AGM, at the expense of other important business.

Voluntarily declining the cash bonus effectively defuses the pay issue in the AGM without the adverse implications of a board imposed cut in bonus because of poor corporate performance.

It also sends a powerful message about the commitment of the CEO in these austere times – as Paul O’Malley said, it was “the right thing to do". And it seems that some Australian CEOs agree.

It seems too that the two-strikes rule is achieving greater accountability from company boards about executive pay. Australia has had a non-binding shareholder vote on remuneration since 2005.

Research indicates that the average “no” vote from 2005-2009 trended steadily upwards, with some companies receiving “no” votes well in excess of the 25% needed to invoke the two-strikes legislation. However, there is no evidence of similar “voluntary” pa cuts over the study period.

There is also the question of the sustainability of this strategy. Is it just a one-off to take the heat away from remuneration when corporate performance is poor and shareholders have previously dissented on the remuneration report?

Certainly in the longer term it won’t divert from a poorly designed incentive plan or poor governance more generally. Better disclosure around remuneration processes is more likely to reduce shareholder concern and minimise the probability of a no vote.

In the meantime, it will be interesting to see how many Australian executives decide that knocking back their bonus is “the right thing to do” this year. And how those corporate boards will deal with the longer term issues of fairness and disclosure of executive pay in the years to come.

The intriguing mystery of Solar PV policy in Australia

By Nigel Morris on 16 August 2012

Reproduced with kind permission:  Nigel Morris /
Many years ago, I recall a debate at a Clean Energy Council conference where we all agreed that a consumer guide to solar PV was an essential and much needed tool.
After many years, this has evolved into a very comprehensive booklet that is freely available to consumers and industry alike and to some degree, sets the benchmark for what consumers should look for and expect when buying solar PV.
As our industry and market evolves however, the complexity of seemingly minuscule details contained within this guide requires ever increasing research and effort to get right.
We have been fortunate to contribute in a small way to this guide over the years and have just completed a new analysis and table which will be released in the latest edition.
Page eleven of the guide contains a seemingly innocuous guide to what consumers can expect in terms of daily and annual revenue’s from a “typical solar system in average conditions, based on current FIT’s”
Let me tell you, in today’s policy climate, updating this table turned into nothing short of  an “intriguing, investigative mystery case.” Hyerbole you say? No way, this took all my connections, a lot of work and raised some fascinating issues about the state of play in Australia.
My primary analytical tool starts with Australian Energy Market Commission  data from late 2011. This crucial document is one of the few places you can find well researched facts on the forecast retail price of electricity, what it’s made up of and includes vital statistics on average energy consumption and such.
However, we know things have changed so I set out to create a comparison of these rates to current rates. This is where it started to get difficult because as we all know, the number of retail offers and market complexity out there beggars belief.  However, we used regulated rates where available and where they weren’t, we researched the typical rates that we could get until we got  a good sense of what was a reasonable balance between the two.
Ultimately, it’s impossible to cover every combination and permutation of offers and rates and the implications for consumers with PV, but we did arrive with an average variation of 10% (under) what the AEMC had forecast – pretty close. Most States were under but a couple were above, interestingly.
Armed with this and aware that in a highly volatile and competitive market lower than average offers are inevitable,  we proceeded to do some calculations about what that meant for solar consumers under different export scenario’s.
We modelled 5 per cent, 25 per cent, 50 per cent and 75 per cent export ratio’s ( which correlate roughly with what industry and IPART have said over the years) to establish the amount of offset and exported energy could be expected based on average household consumption levels.
This is an increasingly vital statistic owing to the fact that with the proliferation of NET FIT’s (or indeed a lack of them), calculating financial returns relies on combining the savings (offset) and the exports.
Then we triple checked the FIT’s and some of the terms and conditions around them and the plot thickened even more. Anyone who operates Nationally kind of knows this stuff, but its always good to get a refresher and dig a little deeper. Firstly, just finding out what solar rates are available is not easy because they vary depending on the retailer, the tariff structure, the terms and conditions of  the offer, your location and so on. FWIW, the National average flat rate is hovering around $0.226 c/kWh, with a high of $0.253c/kWh and a low of $0.170 c/kWh (excluding gst and fixed charges).
As an example, I had a conversation with a broker about swapping just this week who was adamant he could offer me a great deal if I switched and locked in, and assured me that they could retain my $0.60c Gross FIT and add in an $0.08c bonus, which my current retailer recently took away. My mother in law recently switched to this deal so I know its real and is presumably a customer acquisition incentive.
However, when I pushed him on the terms and conditions around it (eg “these rates may increase with regulated rate changes blah blah blah”) I stopped him and highlighted that my understanding is that the regulated rate in NSW is now actually $0.52c plus a mandatory $0.077c contribution from retailers which reflects the windfall profits they were making from my exported solar energy – “so which rate are you referring to,” I asked?
My fear of course was that they would sign me up, then in a few months say “oh no, the government reduced their rate to $0.52c so now the total is $0.60c.” This sent him into a confused panic and he promised to call me back, which he hasn’t done so far.
Co-incident to this issue is the fact that, as Solar Choice and Giles Parkinson’s RenewEconomy noted this week, IPART have mysteriously deleted any (voluntary) rates from their “myenergyoffers” web site recently, removing the much touted “openness and transparency” that was much needed for consumers, and committed to by the NSW Energy Minister. Perhaps it should be renamed “mycompletelackofenergyoffers” .
All of this research also highlighted an apparent trend in trying to utterly confuse customers about what they are really paying for electricity. Take the innocuous little “daily fixed charges” part, for example. This is universally quoted  in addition to the energy rate and is on average $0.58c a day with a low of $0.29c a day and a high of $0.99c a day. Small change? Appears so at a quick glance but when this is added to average daily energy costs, your effective cost of energy goes up by 16% on average, to $0.261 c/kWh. The lowest (standard) effective offer including these charges was $0.211 and the highest was $0.29c.
Given all of this, I decided to take a close look at the primary offers available around Australia for the table in question, because we can only provide indicative advice in such a negotiated energy market. (South Australia, for example, has an estimated 70 per cent of electricity customers on negotiated tariffs rather than regulated rates).
Of the 15 primary solar rates on offer around Australia,  I discovered that 53 per cent are either voluntary, or a combination of small mandatory rates plus additional voluntary contributions.
This leaves us in a fascinating position. On the one hand, it’s bad because it means we are at the mercy of electricity retailers (who could change policy at the stroke of a pen). On the other hand, it also demonstrates that incentives for solar PV owners are now a legitimate and widely used customer acquisition tool and/or, there are network benefits from PV that are worth paying out for. And that is good.
So, the table is done and, at a minimum, we now understand a little more about how things are changing, have the major offerings described for consumers for another year and there are some positive signals about retailer responses to solar PV.
Unfortunately for consumers, things are getting less transparent and offers ever harder to decipher. I suspect the electricity retailers may have engaged mobile phone billing companies to help enable their plans for market domination.
A concise, comparable and transparent electricity rate plan, anyone?
Nigel Morris is director of Solar Business Services

World at tipping point for new era of clean energy

By Tim Flannery on 14 August 2012

Extract from:

This article was drawn from speaking notes prepared by Chief Commissioner Professor Tim Flannery for an address to leading businesses and organisations at the Committee for Economic Development of Australia in Melbourne on Tuesday.

1. Taking the long view it is clear that we have come an enormous way in 10 years in tackling climate change.

– When I wrote the Weather Makers there was very little public awareness of climate change. However, since 2006 climate change has dominated Australian media and political debate.

– A decade ago there was little business and government activity. Today the Federal government has introduced the Clean Energy Legislation, polluters are now paying for their pollution, a new industry coalition of 330 companies has been created to hasten action, and more people than ever are shifting to clean energy.

– We are taking early steps on a multi-decade pathway to transform our economy and society. There is an analogy to be drawn with the process of building Europe’s cathedrals. Those stunning buildings required long-term thinking, vision and leadership. Similarly we are building a new energy economy and it will take decades. But it will provide our children and grandchildren with a better future.

2. There is still more to be done, but it’s heartening to know that wherever the Climate Commission has visited there has been a real thirst for action.

– Wherever the Climate Commission has travelled around Australia we have heard that Australians have a passion for renewable energy. We have also heard that there is a real desire from Australians to contribute and do their bit.

– What we’ve noticed is that Australians are quietly getting on with it. They are using energy smarter in their businesses and homes and they are installing solar panels and more efficient appliances amongst other things. We’ve been impressed with the capacity of Australians to come together, at school, at work and in the community to use their ingenuity to find solutions that are good for the environment and reduce costs.

3. This year may well come to be seen as a tipping point, the beginning of the clean energy era.

– My optimism comes from four factors: 1) enormous advances in many clean technologies; 2) widespread public support for clean energy; 3) increasing global investment in renewable energy; 4) the dramatic drop in the price of wind and particularly solar technology.

– Just last week it was announced that Snowtown, set to become South Australia’s largest wind farm, will introduce world-leading gearless drive wind turbine technology.

– Globally, big changes are afoot. Global investment in renewable power and fuels has increased 6- fold since 2004, standing at $257 billion in 2011. According to Bloomberg New Energy Finance, $US187 billion ($176bn) was invested across the globe in new plants generating electricity from the wind, sun, waves and biomass, while $US157bn was invested for natural gas, oil and coal. We are starting to see a shift from investment in the old polluting sources to new cleaner sources of energy.

A number of countries are leading the way:

– Germany will have renewable energy as its energy centerpiece. It’s already a leader in renewables, having 50 gigawatts of installed wind and solar power, and its new energy plan will provide invaluable experience about how industrialised nations can transition from the traditional fossil-fuel fed power grid, to a clean-energy based distributed, intelligent power grid. The German experience could prove transformative and be highly influential on other countries.

– Countries like China and South Korea are making strides to position themselves as world leaders in the production of renewable energy technology. South Korea has ambitions to become the world’s seventh largest green economic power by 2020 and the fifth largest by 2050. China had more installed renewable energy generation capacity than any other country in the world by 2011 and aims to increase the proportion of non-fossil fuels in energy consumption to 11.4 per cent by 2015. China now represents 50% of the global market for renewable energy.

– Meanwhile, the United States has made major contributions to research, development and implementation of renewable energy. Wind energy in the US hit a new benchmark, reaching 50 gigawatts of electric capacity in the second quarter of 2012.

– The uptake of renewable energy is happening fast and costs are dropping more quickly than expected. The cost of producing solar photovoltaic cells has dropped 75 per cent in the past four years and 45 per cent in the past 12 months.

– With so much global momentum building when historians look back in years to come they may well come to see this year as a tipping point towards a clean energy era.

4. The Earth’s climate is changing faster than expected. 2012 already has been a year of important milestones.

– The amount of carbon dioxide, the main global warming pollutant, in our atmosphere broke a new record this year, hitting higher levels than at any time in the last 800,000 years. Monitoring stations across the Arctic have now measured carbon dioxide levels at 400parts per million, and the rest of the world is expected to follow. The milestone represents a more than 40% increase in carbon dioxide since the industrial revolution.

– In mid-2012 we saw unprecedented melting of the Greenland ice cap. 97% melted in just 4 days, a faster rate than at any other time in recorded history

– The US has experienced deepening drought, record heatwaves, and unusual extreme weather. June broke or tied 3,215 high-temperature records across the United States. July 2012 was the hottest July on record in the US, breaking a record set in the infamous Dust Bowl years of the 1930s. 63% of the US is now in drought.

– The global temperature and sea-levels are rising to near the highest levels scientists expect.

– Recent analysis by NASA scientist James Hansen and his team found that there is no other explanation than climate change for the increasing frequency and intensity of world-wide extreme weather over the last 60 years.

– The changes are deeply concerning and reflect the fact that although progress is being made we must accelerate action.

5. Australia has great capacity for renewable energy but we are not using our most abundant natural resources.

– Australia has enormous clean energy potential and action on climate change will help unlock those resources. With its sun, wind, wave and geothermal resources Australia has some of the best renewable resources in the world. Yet we are a late starter. Our worst solar resources are equivalent to some of Germany’s best. However, Germany is a world leader in installed solar (photo voltaic) while Australia is lagging behind.

– The world is changing and Australia needs to be prepared if our economy, society and environment are to prosper in future. The global pressure to reduce emissions is only likely to increase as the climate shifts and global action accelerates.

– We need national leadership to prepare us for the clean energy era. Costs will only increase and the opportunities will slip through our hands if we do not

6. The future energy system will not look the same as the past.

– The world is moving to using energy smarter and using energy from cleaner sources. We will see intelligent grids using more distributed sources of energy – rather than just the traditional large power plants. We will see more pro-sumers – people that are both consuming and producing energy. We will see renewable energy playing a greater role.

7. The future will be very different world to what we know now.

– When we try to look forward a decade, with the last decade as our yardstick, what do we imagine our country will be like? It’s hard to avoid the idea that solar and wind will be commonplace, and that this will drive a transformation in how we move and use electricity.

– Globally it’s clear that an irreversible trend has set in. Neither India nor Africa will follow the traditional model of economic development, but are likely to base their energy systems on renewables, driving down price and pioneering new ways of using clean power.

– This is now the critical decade. It is clear that energy systems and the world’s climate are changing more rapidly than we thought. The case is stronger than ever for strong action in Australia.


Subsidies are standing in the way of corporate tax reform.

14 August 2012, 6.40am AEST

Extract from:


John Freebairn / Professor, Department of Economics at University of Melbourne

Disclosure Statement

John Freebairn is a member of the Business Tax Working Group (BTWG). The arguments expressed here are my personal ones, and they are not necessarily consistent with all the arguments agreed by the BTWG.

The Conversation provides independent analysis and commentary from academics and researchers.

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Yesterday, the government’s business tax working group released its discussion paper on possibilities for tax reform. The paper makes a case for a broader base and lower tax rate (the corporate tax is currently a flat rate of 30%), and notes that any cut could be funded by a variety of options: by reducing debt deductions for multinational companies; cutting depreciation write-offs for oil, gas, transport and agriculture; ending up-front deductions for mining exploration; and cutting back on the tax offset for R&D investment.

Special exemptions and deductions from taxation for some but not other businesses expenses are a form of subsidy. Removal of the special exemptions leads to a more neutral tax treatment of alternative investment options, resulting in a more productive mix of alternative investment options. An exception is if the special tax deduction or exemption provides offsetting compensation for external benefits to other firms of particular investments. In an approximate aggregate revenue neutral tax reform package, the revenue gain from a larger and more comprehensive business tax base can be used to fund a lower tax rate.

In the context of Australia as a small open economy, a lower tax rate will encourage a higher level of aggregate investment, less distortions to the mix of debt and equity financing of investment, and a reduced incentive for multinational companies to shift their taxable income from Australia to countries with lower statutory tax rates. In time, most of the benefits of a larger and more productive capital stock will be passed on into higher market wages and real take-home pay for Australian workers.

The Treasury Tax Expenditure Statement lists 112 special exemptions or deductions for selected businesses expenses relative to the norm of a comprehensive business income tax base. One set of items are accelerated depreciation for selected equipment, including statutory life caps less than the economic life for much transport equipment, and some investments in oil and gas (item B95), concessional depreciation deductions for buildings (B97), immediate write-off for small business investments less than $6000 (B108), and accelerated depreciation for some but far from all expenditures by primary producers on water, horticulture and utility connections (B82, B85, B86).

Accelerated depreciation brings forward the time at which investment expenses are claimed. In effect, the concession is a subsidy to the favoured investments not available to alternative investment options. For example, investment by a mining company is subsidised if it is placed in oil or gas rather than in coal and iron ore; investment by a small business is favoured if the item is valued at less than $6000 relative to a larger and more expensive piece of machinery. There is no logical reason to subsidise these forms of investment relative to alternative uses of limited investment funds. From the perspective of society wellbeing and national productivity, accelerated depreciation as a form of subsidy shifts investment from more valuable to less valuable projects.

The provision of special tax exemptions and deductions for investment options where a market failure can be argued is a different story. This case is illustrated by the 40% extra allowance for expenditure on R&D (items B105 and B106). Much R&D by the investing firm provides spillover benefits to other firms, but other firms do not pay the investing firm for these benefits.

The tax concession or subsidy is a crude way of providing compensation for the spillover benefits, and it encourages firms to increase investment in R&D to a level consistent with the best use of national resources. But one might argue whether other policy interventions such as direct subsidies – or a different tax concession rate – are more appropriate.

A more comprehensive tax base with less special exemptions and deductions provides a second set of benefits through the lower tax rate that it will fund. In the context of Australia as a net importer of international capital in a small open economy, a lower tax rate on business investment in Australia initially increases the after-tax return to overseas investors. Seeking the best after-tax return across the globe, international investors shift more funds to Australia until the extra investment drives down the pre-tax return to restore the initial after-tax return. The increase in capital means more and better machines, buildings and technology per Australian worker, and higher labour productivity.

But the reality is that multinational companies have opportunities to shift their taxable revenues to lower tax rate countries and to shift many of their debt, overhead and intellectual property expenses to higher tax rate countries. Further, tax authorities are always playing a catch-up game to minimise these profit-shifting strategies. A lower Australian business tax rate increases the incentive of multinationals to record their profits in Australia, and to shift their tax payments from overseas to Australia.

A lower Australian business tax rate has additional gains for the Australian economy. The lower rate reduces the current tax favoured treatment of debt investment over equity investment by international investors. In turn, the lower gearing ratio would increase the ability of firms to ride cyclical, seasonal and other business shocks.

Ultimately, as argued by Australia’s Future Tax System report of 2010 and the Mirrlees Report of 2010 in the UK, with supporting econometric evidence, most of the benefits of a lower Australian business tax rate are passed on to employees as higher wages. But this will take some years of decision changes and adjustment.