Alfred Deakin Research Institute

ADRI-TERI Symposium

Markets, Regulations and Renewables

Michael Porter outlines a scheme that he and colleagues applied in the State of Victoria.

Solutions are gathered through pervasive think-tank networks (i.e. TERI, ADRI). There is no hope for smart environmental products without increasing energy production, which requires private sector involvement.

  • Restructuring the energy sector to make it competitive is essential. This means stopping corruption ("'State Socialism'; trade unions; pay-days; inefficiency - people paid to pretend to work').
  • Generators should compete with one another to increase efficiency. From personal experience of selling off distributors, ports and then the generators in Victoria, we reduced State debt. We reduced jobs by 50,000 and incomes from good jobs increased.
  • Making companies competitive, as recommended by P.K. Das, creates a variety of retailers who provide services to the consumer. This is only possible through private financiers.
  • The majority of Australians own shares in power companies (through Super, insurance and pension funds). Instead of aid without follow-up maintenance, the government sets the rules, while private sector contracts (PPPs - Public Private Partnerships) define liabilities and responsibility. While investment in our assets comes from the private sector, including overseas investors, the public sector appoints the regulators.
  • The regulator has no contact with the private sector and sets the terms. (In this scheme) environmental liability is contracted to investors.

Discussion

AM: The Indian government is considering large scale PPPs in highway and airport infrastructure.
MP: It is too difficult for national government. State governments have windows open.
AM: PPPs facilitate empowerment in coastal port creation and dedicated freight corridors.
LH: There are critical perspectives of PPPs including:

  • Lack of investor spending on airports they own
  • Blocking roads to encourage privately owned toll-road use, increasing cost while reducing demand
  • Users bear costs for that which they have no responsibility
  • Lack of transparency and information on consumer benefits
  • Increasing competition encourages a ruthless cultural code.

HS: A good business model in the network lowers cost on the demand side while varying costs on the supply side.
MP: If the Government borrows at a lower rate and offers commissions, investors commit at the rate of risk measured in the interest rate for a project.
RD: With this interest rate how can we ensure the borrower can repay the loan?
MP: Small government.
RB: 10 corporations have a monopoly over energy production in Japan. It is a private oligarchy.
PH: Markets and municipalities combining to produce renewables could offer resilience in disasters.
AK: As yet a systemic disaster plan has not been carried out by the Indian Government.
PH: There have been recent reductions of costs of renewables. In Germany they have reduced from $7/kWh to $3/kWh!
AK: The cost of not having electricity should be measured both economically and socially.

Deakin University acknowledges the traditional land owners of present campus sites.

18th December 2012