#NBN

We pray the Gov’t makes more $60bn mistakes!

Can the media and shadow politicians get a grip? Since when should taxpayers complain when the government makes a huge error in our favour? We can pretty much stake our lives on the fact that 99% of government programs end up way more expensive than initially budgeted for. French Submarines anyone? NBN? We should be looking at the JobKeeper revision as a massive positive.

The federal government estimated that the JobKeeper program would initially cost $130 billion. Now it appears they overestimated it by $60 billion. That was driven by the idiosyncrasies of who would be eligible at the employer end – from the self-employed to big business and everything in between.

Given the limited time window, forgive the Treasury and Tax Office for not landing estimates on target. It is ridiculous to expect they could estimate such a fluid piece of legislation.

The unwelcome arrival of COVID19 and the sudden stay-at-home orders that ensued hardly gave a generous window of opportunity to apply Japanese level precision engineering to the process.

Our only criticism lies with the drip feed approach to restarting the hibernating economy. As we mentioned yesterday with respect to the 50 US states, so many appear to be copying each other rather than making bold data driven decisions based on facts not consensus.

The reality is that the Treasury will need to make many more multi billion dollar mistakes in the spirit of JobKeeper to help mitigate the damage caused by the looking trillion dollar deficits.

Perhaps the $60 billion saving can be redeployed to building a bullet train from Sydney to Melbourne. A 20-yr project that is just the type of infrastructure spending which ticks so many boxes – relieving pressure on the state capitol cities, housing, assist a growing population and provide lots of jobs.

CSIRO cost energy transition at $1tn (oh plus $175bn to integrate renewables)

CSIRO

As our political class push for net-zero emissions by 2050, we shouldn’t be surprised that there aren’t costings. In reality, we would prefer politicians pave the roadmap to where the mystical decarbonized industries that will replace all of the jobs we will give up in mining, agriculture and transport will come from to fund it all? One way to cut our emissions is to tank the economy. Job done. After all being on the right side of history involves sacrifice. Our grandkids will thank us for it. Greta assures us.

The bigger question is why haven’t our politicians made a b-line to reference our CSIRO’s energy transition costings which exceed $1 trillion with a “T” out to 2050 (p.135)? Note this report isn’t a net-zero study – just lower emissions. So by that logic, net-zero will cost even more. 

You will feel even warm and fuzzier after reading the next sentence.

CSIRO assures us that “these costs do not include the full integration costs of renewables, but that these costs are expected to be significantly less than $175 billion.” Who cares about billions in a world of trillions? Significantly less? Can anyone name a government project that has come in on time and on budget? Submarines? NBN? The beauty of spending other people’s money.

The power generation pathways are quite interesting. In Pathways 1 & 3, solar and wind are capped at 45%. Pathway 1 relies on biomass (actually dirtier than brown coal) with Pathway 3 allowed to include HELE coal, nuclear and geothermal. In Pathway 2 renewables are uncapped with battery storage. Pathway 4 is the same as Pathway 1 but with additional electricity consumption from hydrogen electrolysis for transport.

Electricity wholesale prices are contained on p.231. Even in the best-case scenario, we should expect a 50% increase in electricity costs. In the worst-case scenario on Pathway 3, wholesale prices will surge over 4x. Politicians should proudly tout to the public that they have energy prices under control.

Retail prices remain the cheapest on a no abatement basis (p.233)…who knew? In 2016 dollars, no abatement electricity will rise 40%, Pathways 1-3 +60% and Pathway 4 +80%.

CSIRO also assumes that by 2030, 5% of rooftop solar owners elect to leave the grid increasing to 10% by 2050.

Why aren’t our politicians looking at the world’s biggest renewable crash test dummy – Germany? As we wrote, Germany’s Federal Court of Auditors is even more forthright about the failures…The shift to renewables, the federal auditors say, has cost at least 160 billion euros in the last five years. Meanwhile, the expenditures “are in extreme disproportion to the results…

Note 330,000 German households are in a state of energy poverty and have had their electricity provider cut them off. Australia is around 45,000.

We have a home-grown movement to reference commitment to climate change. 98.9% of households in the electorate of Warringah, that supposedly voted Zali Steggall OAM in on a climate change ticket, still haven’t signed up to her ‘Roadmap to Zero’ plans. Maybe they are just too busy filling their high powered V8 SUVs on Military Rd to get around to it.

If we want to stop global warming, at the very least politicians should stop creating all this hot air. This net-zero policy is an economic suicide note.

National Bloody Nuisance

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If anyone is surprised about the cost blowouts of the National Broadband Network (NBN)  they must have been hibernating. For as much as $91,000 to connect one home this sum would probably cover one’s fixed line, mobile, internet, wifi and FOXTEL subscription for life. It doesn’t take a rocket scientist to work out that in this day and age of ‘health & safety’ that to put in underground optic fibre requires 8 people – 5 to supervise, 2 females with traffic paddle pops and one bloke in the ditch with a shovel. Then multiply by 100s of thousands. The economics could be written in crayon such is the elementary nature of the formula.

I recall listening to talk back radio around the time NBN was launched when the sunshades at schools program was underway. Not a word of a lie, the government was shelling out near as makes no difference $1mn per school. Dozens of builders were calling in to say they could erect these structures with all of the concrete, steel poles, roofing materials and labour for 1/10th the cost. So digging holes and inserting optic fibre which will rapidly become redundant across a country with such massive distances between places was only ever going to be a white elephant.

Yet as ever governments are only too happy to cost things on the back of an envelope and tell us all of the rosy scenarios as to how it will come in on budget. If the taxpayer asks for clarity on the math, they are conveniently fobbed off. It is not unreasonable for taxpayers to want to receive full disclosure on how things are to be funded. If a CEO told his shareholders to take a hike when they requested the costings of major capex spending they’d be summarily fired. Every citizen has the right to transparency. Yet why is it the South Australian government celebrates clearly failed renewable policy with an extra $600m bill quickly drawn up on a Friday night? Instead of accountability we are told to use electricity more sparingly (even paid to stay off the grid).

So the NBN is another abject failure. Better to admit defeat and cauterize the gaping wound than to keep filling it with more limited taxpayer funds. At least Turnbull can blame the former government on implementing it in the first place, just as the incoming government can blame him for the disaster that is the $50bn submarines programme which is already running intro huge production issues before the design is even completed. We deserve better.