Green energy economics

Do you live in Queensland?

Do you suffer from high power bills?

Never fear, The Greens are here!

Like a knight in shining green armour they’re riding over the energy landscape on a policy steed to save you ‘up to’ $370 per year. This is great, because viewing my power bill every quarter the first thing I think to myself is, ‘what would The Greens do about this’? Yes indeed, when it comes to economic management The Greens are the first people society looks to for answers.

In April they launched their energy retailing policy for Queensland called Power for the People. For those interested in seeing the videos promoting the policy you can see them here. Michael Berkman, the candidate for Maiwar and Amy MacMahon the candidate for South Brisbane, feature in the videos which give a basic outline of the ‘problem’ with energy retailers and their ‘solution’ to the ‘problem’.

The Pravda summary is as follows: You’re being ripped off on your power bill by greedy companies which are making large profits. The Grattan Institute agrees with them as well so it must be true. Some of this terrible profit goes to evil CEO’s pay packets. While those evil CEO’s were making money, some people had their power disconnected because they were unable to pay their bills. Their solution to this is to place energy retailing under state control, which will reduce costs. This will work because it’ll be run for people, not profits. Simple. It’s so simple I wonder why no one’s ever thought of running a state controlled economic system purely for the benefit of the people and completely removing the personal reward incentive before?

The policy presentation is framed in Marxist terms of evil capitalists exploiting the defenceless proletariat, all the while aided and abetted by the main political parties who are donation slaves to large corporations. However, there are courageous outsiders (The Greens) who are brave enough to take on the establishment and fight for you little people. In marketing terms the ad is a soft sell with comforting guitar music in the background and kind faces who love you. This is opposed to hard sell political ads which use distorted black and white imagery with red lettering and scary deep voices warning you of the dangers ahead.

In one presentation they show their true Marxist intentions by claiming that ‘Our entire political system is addicted to privatisation’ and goes on to state that private markets have failed us in the areas of energy, housing and healthcare. These three areas are essential parts of life and if you control them, you have unprecedented control of the population. If private markets have failed then there can only be one solution, more government to ‘protect’ you. In short, government equals good, private equals bad.

Question. Who is better at providing consumer goods and services? Private enterprise or government?

When a supplier of goods or services fails in a particular area, the market is swift to correct with consumer spending. This is the true power you possess in an open and free market and you can use it to demolish businesses. To borrow from The Greens terminology, this is true ‘Power for the People’ and will be removed under their proposals. If someone isn’t measuring up you can go to the competition which is why you rarely see long queues at restaurants but often see them at Australia Post. With the one you have a choice, with the other you have none. All markets fail in some way at some point in time, the key is market correction and who does this best? When private markets fail, you pass judgement with your private dollar allocation. When government fails they cover up with your public dollar allocation. Inefficiencies in business are sorted by the market as long as true and open competition exists. Inefficiencies in government run operations are dispersed to all citizens through taxations levels and no one is hurt more by that than the poor.What would you prefer, direct control with your spendingor trust a government to direct your spending?

The Greens say that they want power to be ‘as cheap as possible’. Really? That’s a surprising claim because everything about The Greens energy policywill drive up power prices. The Greens like lower power prices the same way John McCain likes less war. Well, now that they’re all for lower prices no doubt the next part of their policy will recommend the removal of the environmental component of the power bill which is 15%. With this one move they can go a large way to achieving their goal. Another way to reduce costs is to introduce privatization to the generator market which was so successful in Victoria in the 90’s.

The retailing component is actually one of the smallest parts of the overall power bill with generation, distribution and environmental requirements all being larger. The most sure-fire way of reducing costs is competition in power generation and removal of the unnecessary components. If the goal of this policy is to provide power as cheaply as possible, why focus on the only part that actually has competition in it?