Extract from an article by John Quiggin
The public debate over the problems of electricity supply displays a curious disconnect. On the one hand, there is virtually universal agreement that the system is in crisis. After 25 years, the promised outcomes of reform – cheaper and more reliable electricity, competitive markets and rational investment decisions – are further away than ever.
On the other hand, proposals to change the situation range from marginal tweaks to politically motivated mischief-making. The preliminary report of the Independent Reviewinto the Future Security of the National Electricity Market, released last year, canvasses such options as the introduction of capacity markets for reserve power, which have done little to resolve problems overseas.
Meanwhile, the Turnbull government has used recent failures to score points against renewable energy (hated, for obscure historical-cultural reasons, by its right-wing base) and to promote the absurd idea of new coal-fired power stations.
A sorry state
This debate might make sense if the system had worked well in the past. In reality, however, the National Electricity Market (NEM) never produced lower prices or more reliable power for households.
In the early years of the NEM, reductions in maintenance spending concealed this failure. When new investment became necessary in the early 2000s, the result was a dramatic upsurge in prices. This was primarily because the NEM regulatory system allowed rates of return on capital far higher than those needed to finance the system under public ownership.
Until the 1990s state governments owned and controlled Australia’s electricity grids from power stations to poles and wires. The expansion of interconnections between state networks created the possibility of a truly national network. The Commonwealth and the states could have jointly owned such a network, following the highly successful model of Snowy Hydro…(continues)
SOURCE: John Quiggin, “The case for renationalising Australia’s electricity grid”, The Conversation, 06 March 2017
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