On May 9, 2007 NSW Premier Morris Iemma announced that he had appointed Anthony Owen, Australia's first professor of energy economics, to report on NSW's future needs in electricity generation capacity.
Owens' terms of reference included the feasibility and timing of new technologies and measures to reduce greenhouse gas emissions, and "the conditions needed to insure investment in emerging generation, consistent with maintaining NSW's triple A credit rating".
The word "privatisation" didn't appear in the government release announcing the inquiry. However, no-one familiar with the Bob Carr's failed electricity privatisation attempt in 1997 and Owens' own work was in any doubt that his inquiry would "find" that the only way to achieve the needed increased investment in electricity generation would be to privatise NSW's electricity generation network as well as its retail arms.
And so it did. Owen's report, released in September 2007, proposed the privatisation of the state's power stations, either as a final sale or through long-term leasing, and the sell-off of the distribution network.
Owen told the NSW government that it should follow Victoria and South Australia's lead and get out of electricity generation and distribution.
Shonky report
Owen's report is shonky not just because it assumes that private corporations will always be the most efficient producers of electricity. It's shonky because it also leaves the impression that any falls in electricity prices are automatically due to privatisation (that is, it provides no serious analysis of what drives electricity price movements). Owen's report doesn't locate the question of ownership of electricity generation capacity in the most important context of all — the need for a serious struggle against global warming (which will require much more than carbon trading schemes).
Owen's case for the privatisation of NSW electricity is constructed on using projections in likely growth of electricity demand and supply, in the speed of uptake of new and more sustainable technologies and in the rate of growth of NSW state sector debt which can most bolster the case for privatisation.
Data suggesting different conclusions or potential results, whether in the Owen inquiry or in the submissions the inquiry received, are disregarded.
For example, Owen "notes" that "the joint submission to the inquiry from the Total Environment Centre, the Nature Conservation Council of NSW and Greenpeace said that 'NSW can easily and cheaply meet all its future energy needs with low or no emissions energy technologies — demand management, energy efficiency, renewable energy and gas-fired power'". But he doesn't engage with the arguments supporting this submission.
Instead, through the 600 pages of report and appendices Owen's argument is reduced to:
"1. If electricity demand growth in NSW proceeds according to the average rate predicted by the expert agencies;
2. If the rate of implementation of more sustainable electricity generation technologies continues at its present pace;
3. If the NSW government doesn't increase taxation revenue or reduce spending in other areas; then
4. If electricity generation remains public the increased investment needed might mean that total NSW public sector debt might increase to a point where NSW's credit rating might be downgraded."
Electricity consumption
Owen's argument begins with likely trends in electricity demand in a "medium growth scenario" to increase by 12,720 gigawatt hours (GWh) by 2016-17. However, the rate of increase of electricity demand is not something simply determined by the growth of the population and the economy, nor can it be deduced from past trends. Indeed, because of efficiency measures already in place in NSW, average annual growth is predicted to fall to 1400GWh compared to 1700Gwh from 1991-92 to 2005-2006.
The degree to which governments promote energy efficiency can make a very big difference. For example, even in the energy-guzzling United States, peak-load electricity demand fell by 17% between 1996 and 2001 because of the introduction of electricity demand management.
In Australia analytical work carried out by the National Framework for Energy Efficiency (representing state and federal governments) indicates that "energy consumption in the manufacturing, commercial and residential sectors could be reduced by 20-30% with the adoption of current commercially available technologies with an average payback of four years".
Owen calculated that in NSW this would convert into a saving of 15,700 gigawatt hours a year, 1.5 times the annual electricity output of a major coal-fired station like Mount Piper in central west NSW, and more than the predicted increase in demand to 2016.
Why not then conclude that with the serious implementation of energy saving and demand management, there would be no need for increased investment in electricity generation capacity in NSW? Because it would blow the case for electricity privatisation out of the water.
Instead, Owen muddies the argument by saying: "A number of the main energy efficiency programs have been introduced in the last few years and therefore reliable measurements of the impact of these programs are still being developed. Despite the promising potential, there are a number of impediments or barriers which are limiting the uptake and effectiveness of energy efficiency investments."
Discussing these impediments, Owen finds that "some of the barriers which limit the uptake by households and businesses of investments in energy efficiency constitute a failure of the market … McKinsey Global Institute estimates that over 80% of cost-effective energy efficiency opportunities will not be realised without public policy interventions."
Public policy interventions
Owen's report lists a swathe of energy efficiency measures that the inquiry received in submissions. However, it makes practically no recommendations about the "public policy interventions" that might be appropriate to implement them. Instead, he lamely notes that "the Inquiry has not evaluated any of the above options but the Government could do so as part of its ongoing consideration of energy efficiency measures".
If the Owen Inquiry had dared to look beyond NSW, it would have had to notice that total energy consumption growth in Holland and Denmark, where comprehensive programs of energy saving, housing stock insulation and demand management have been in place for some time, is practically stagnant.
The growth rate of electricity consumption is not a law of god but something that government policy can radically reduce. That's a key reason to oppose the Iemma government's proposed privatisation of electricity in NSW.
[Dick Nichols is the national coordinator of the Socialist Alliance.]