Why this blog is anonymous
Something Something Overton window
My very few subscribers will note it’s been a very long time since I sat down to write.
The barrier is finding the time (and mental space) to write something good. But maybe random anonymous blogs don’t need to be good? It brings me to the question of why this blog is anonymous.
How many people could suggest that Victoria jack the brown coal royalty by 10x?
Almost anyone with enough industry knowledge to realise that Victoria had the power to unilaterally impose a carbon price also has stakeholders. Those stakeholders might ask for a bit more careful thought before rocking the boat like that. But if everyone is being careful about what they say, how do we have a policy conversation about what it would really take to solve climate change and where the best policy levers are?
So maybe this isn’t the place for careful thought and reasoned argument, but a bit more shooting from the hip, to see if anything sparks an idea that someone with a relevant day job might actually be able to devote some salaried thinking time towards.
In that spirit, I’m going to rattle off a few policy ideas, that I think sit outside the Overton window, but that a lot of industry insiders might agree on over a beer rather than under a corporate letterhead.
Retailers. Why do we have them? Most of the cost a retailer faces is in customer acquisition and retention, and the data systems in transferring customers to and from. Retailers overwhelmingly follow DNSP pricing structures. Just give the customer back to the DNSP. You’ll avoid all the marketing and customer transfer costs. The one thing the retailer does do is supply cost risk management. But DNSPs could auction off their load shape hedges the same way AEMO auctions off spot supply ever y 5 minutes or SRAs every quarter.
Generators in the RAB. Hinted at in my post that showed capital costs were 20x operating costs in the energy transition. Risk makes capital expensive. Over a 20-30 year investment, most risk is regulatory and policy risk. Get the regulator to take the risk! Put the renewables and firming in Regulated Asset Base, with a low rate of return. The private market can still invest if they think there’s a supply parameter the regulator is missing.
Individualised blackouts. An alternative to just building enough stuff such that blackouts aren’t a problem is linking individual retailers to customer reliability in a concrete way. If your retailer hasn’t bought enough capacity your smartmeter might turn off in a heatwave. Imagine if AGL’s customers were tripped in a heatwave but not Origin’s. It would place a much stronger value on brand, and on capacity investment, than currently exists and we might actually see retail competition on something other than vibes.
Carbon Price. Just do it. It’s wild how the biggest tool in the economists toolkit is left sitting on the sidelines. I’m a long way from thinking 2012-2014 style carbon price is sufficient, but it’s definitely necessary as you approach high decarb levels. With carbon in the NEO, the AEMC now has the power to make this change.
Government forward buyers. The weakness of schemes like the 2012 Carbon price, or the current LGC market is that policy uncertainty and future competition pushes the forward curve into backwardation. i.e. an LGC for deliver in 2028 is worth almost half that of an LGC for delivery in 2025. But the climate does not care that much about timing. Early carbon reduction does matter more than later carbon reduction, but not by a factor of 2x over a few years. A government entity should buy forward LGCs and sell(create) spot LGCs. The same principle applies to many green schemes, the government should forward-purchase the carbon abatement as that is what best enables investment.
Well, that’s probably enough crazy thoughts in one hit.
I’d love it if one of my few readers had questions or challenges on any one of those ideas that they’d like to explore further.