November 2007

Thank you for the opportunity to speak with you and join your discussions this morning.
 
I want to particularly acknowledge Roger Wilkins this morning. As a leader in public administration, Roger was a true public servant in the real sense of the term.

As Director-General of the Cabinet Office, he was instrumental in driving policy debate within Government and generally keeping it on the rails.
 
I should assure you he was not responsible for implementing government policy nor for the political and media strategies, which have been NSW Labor's real driving force over the last twelve years.

I can only imagine how frustrated Roger must have been as he watched the incompetence and arrogance of the State Government. It is good to see he has now moved on to greener fields.

Ladies and Gentlemen, while acknowledging organisers didn't have prior knowledge of the election date, the week before a federal election is terrible timing for our discussions this morning. The state of energy infrastructure and the market warrants real public attention and it won’t get it this week.
 
But - let's be optimistic that at least in this room this morning, we can do a reality check about NSW energy strategies.

I’ll focus on electricity but gas and alternative fuels warrant equivalent debate in this state.

The bottom line on electricity is that clean coal is in fact an oxy-moron, nuclear is just not a realistic option for Australia but NSW can lead the world in championing renewables, especially solar, and in aggressively pursuing energy efficiencies to keep household and business costs down.

Clean, sustainable energy strategies are staring us in the face – we just have to grab them.

In Australia, we’ve been distracted by vested interests and by everything else imaginable including the prolonged Kyoto debate – I wish we had ratified Kyoto long ago and then led the world with bold initiatives in clean energy.

Next year, we have an opportunity to re-position NSW on a path of market leadership and I will be challenging the Labor Party to adopt this objective.

Let me explain why and how we can lead the world in renewables and efficiencies.

In the next two years, Labor’s electricity privatisation will provide a mega-billion dollar windfall to NSW Treasury and we must ensure it is not leaked to recurrent expenses to shore up Labor’s dysfunctional budget.

The funds released by the privatisation must be openly and strictly hypothecated for debt repayment in the short term, infrastructure investment and transformation of the electricity market in NSW.

Billions of dollars will be available to upgrade infrastructure across the state and our electricity infrastructure is as critical as any other.

In transforming the electricity market in NSW, the privatisation funds provide a once in a lifetime opportunity to embrace leading edge efficiencies for households and businesses, transform the generation sector towards clean energy and moderate the price shock of the transfer to renewables.

Given the quantum of privatisation dollars is unknown at this stage but will likely be a minimum of $4 billion and a maximum of $15 billion, I want to kick off this debate by arguing that at least $1 billion and up to $3 billion (depending upon the extent of privatisation) should be quarantined for the transformation of the electricity market in this state.

But it won’t be an easy task because firstly, in terms of challenges, I must note that our subject this morning, i.e NSW Energy, is another oxymoron. We have a few problems in this state.
 
We live under the fatiguing weight of the most lethargic public administration in Australia.
 
The bureaucracy is moribund, the media priorities of the NSW Labor Party usually over-ride community interest and this is especially so where the subject is a complex industry with entrenched vested interests - an industry confronting significant change and in need of further reform.
 
Additionally, NSW suffers a part-time Premier. Since his appointment, lazy leadership has become the operating style of the NSW Government.
 
As soon as he was appointed Premier, he did take some action. He buried the Energy Directions White Paper, due for publication in 2005, and it hasn’t been sighted since.
 
Laziness and politics versus community interest are the key reasons NSW doesn't have an Energy White Paper or Energy Strategy and are the reasons NSW does suffer confusion over investment opportunities, does suffer concern about inadequate responses to climate change, does suffer increasing blackouts and has been hit by a gas shortage.

It is also the reason NSW has fallen dramatically in competitiveness versus the other states.
 
Morris Iemma's one energy strategy at the moment is sell, sell, sell – but after the Federal Election.
 
Before the state election it was an open secret that, if re-elected, Labor would privatise anything not nailed down. After the election, Morris Iemma commissioned the Owen Report to give him an academic justification to flog off as many of the electricity assets as possible.
 
It was a very real shame the Owen Inquiry summarily dismissed renewables and energy efficiencies and didn't pursue the dysfunctional structure of the sector.
 
Currently, the privatisation is on hold until after the Federal Election. After that, it will be on for young and old as Labor executes an opportunistic grab for cash to feed the bureaucratic juggernaut.
 
The electricity retail and generation sectors will be flogged off probably without attention to the industry's structural problems.

The lack of a White Paper ensures the only public “energy policy" document is the Owen Report, which simply provides Labor with a justification for the sale.
 
While structural, renewable and efficiency issues need urgent attention, the burning issue post-privatisation will be “Where will all the money go?”.
 
As I said before, the electricity privatisation, depending on the terms of the sale, could realise up to $15 billion if all the generators are also sold.

Taxpayers are totally in the dark as to what Labor will do with their winnings. I have indicated my priorities but I also know what Labor WILL try to do with the money.

Regrettably, everything in NSW needs to be viewed through the prism of Labor Party politics to understand what is happening and what is possible.

The best way to understand NSW, even in relation to the energy market, is to follow the money trail.

Remember NSW does have a budget problem but it’s NOT a revenue problem - it’s an expenses problem.

NSW Treasury has record revenue flowing in the door and that has been the case since the mid 1990’s when Michael Egan and Bob Carr decided they would adopt a tax and tax and tax strategy.

Labor’s high tax allows a record spend strategy but it does so without focusing on value for money. Instead NSW funds are largely expended keeping public sector unions happy and keeping public sector managers silent OR sacked - if they dare attempt to undermine union power.

In terms of frontline employees, eg police, nurses, teachers, we need to ensure their salaries lead Australia. It is a very competitive market and we must have the best frontline people.

But in the NSW bureaucracy, billions are wasted every year on unproductive, politically motivated legions, which protect Labor Party ministers instead of serving the community.

The public sector can excel, but history suggests most governments and the New South Wales Government in particular are not efficient nor are they very effective in what they do.

That is why I propose restructuring the NSW Government reducing departments to nine, using natural attrition to reduce bureaucrat numbers by 20,000 over four years and changing the culture from process to outcomes.

That initiative will not only speed up decision making and refocus the culture on community interest it will save at least $4.5 billion over four years - funds that could be used for more frontline staff and for infrastructure.

The current bureaucracy is an expensive political asset of the NSW Labor Party and is part of the morally-corrupt process in this state which means people in genuine need quite often don’t get the resources they need, sectors such as Energy don’t get the policies they need and Labor Party friends get rorts beyond their wildest dreams.

With the assistance of their political bureaucracy, over the last twelve years Labor had built up large buffers against electoral change and knew they could enjoy themselves and ignore public opinion for some time.

But, this year we finally achieved a 3.9% state-wide swing against the Labor Party at the March election.

In the previous four state elections (ie 1991, 1995, 1999 and 2003), voters turned away from the Liberal / National Coalition with swings to Labor of a cumulative 12% over those four elections.

But this year we turned the tide.

We took some big chunks out of the extraordinarily large margins Labor had built up in NSW electorates – with swings to us this year as high as 13% in some seats.

Anyone interested in the detailed results can see them on my website peterdebnam.com.au.

The good news is the tide has turned against the NSW Labor Party for the first time in nineteen years and that is encouraging for the energy industry.

NSW Labor WILL now be more sensitive and more responsive to community, industry and media pressure over the next four years. Incompetence will remain but at least we will all have more influence on their priorities.

In that context, it’s important to continue doing what I have been doing over the last few years and lay out an alternative policy framework to fix NSW.

As an Opposition, we have to make sure the community knows what we stand for and we have to relentlessly hold the Government to account week by week.
 
As part of that process and in the absence of an Energy White Paper or any other strategic directions paper from Morris Iemma, let's take a few minutes to briefly consider several strategies, which Labor could put in place in the next twelve months.
 
The first I call the “Head in the Sand (or Coal)” strategy. The second is the “Therapeutic Politics” scenario. The third is the “Leadership” strategy.
 
“Head in the Sand (or Coal)” Strategy

As the State Government notes, NSW produced 125 million tonnes of saleable coal in 2005/06 with an income of $8.5 billion, including $6.7 billion in exports.

Last year, the coal industry directly employed 12,658 people and the year before NSW Treasury received about $395 million in royalties.

Ignoring greenhouse gases, the coal industry provides a relatively cheap energy source for generation of electricity in this state and the structure of the Generation Sector concentrates market power - providing a strong cash flow for NSW Treasury dividends and next year for privatisation proceeds.

These facts provide a very solid foundation for the “Head in the Sand (or Coal)” strategy exhibited by NSW Treasurer Michael Costa who it seems is a Climate Change sceptic, Hunter Valley-based coal enthusiast and promoter of the sale of electricity assets.

As Treasurer, he needs as much cash as possible to keep the public sector unions happy, feed the bureaucracy and pay for the expensive infrastructure stuff-ups his ministerial colleagues deliver year after year.

As a result, the NSW Treasurer promotes the “Head in the Sand (or Coal)” strategy and he’s been largely successful to date. The full strategy includes lauding coal and it’s economic benefits, scoffing at renewables and limiting investment in energy efficiency programs.

Under this strategy, Labor will do whatever it takes to protect the coal cashflow, including selling electricity assets to the highest bidder.
 
“Therapeutic Politics” Strategy

The second strategy for consideration is the “Therapeutic Politics” strategy where spin replaces substance and community interest runs second to “I feel your pain” rhetoric from political leaders.

Tony Blair pursued the “Therapeutic” strategy for some time and NSW Labor have tried to perfect it.

Bob Carr and his spin doctor, Walt Secord (now managing Kevin 07), led the rhetorical charge on this strategy and attempted to pass the sophistry to Morris Iemma.

The strategy includes acknowledging community concerns whenever caught out, ordering reviews and inquiries and working the media to fix the headlines not the problem.

Given large sections of the community are increasingly concerned about pollution and climate change, therapeutic politics suggests the Premier must be seen to share the concern and be seen to do something.

Part of the theatrics is to roll out token programs, which appear at first glance to be relevant to solving whatever problem is causing front-page angst that day.

One example is Government’s promotion of Clean Coal which was unexpectantly but correctly labelled an oxy-moron by Phil Koperberg.

Morris Iemma attempted to follow this “Therapeutic Politics” strategy with the added tactic of blaming Bob Carr for as much as possible.

But because his acting skills are poor, the Premier is steadily losing the public’s sympathy vote and their confidence.

My advice to Morris Iemma is to change strategy now – try LEADING the state instead of MISLEADING it - especially in electricity where the Government’s role is not only to keep the lights on but to do so in an environmentally responsible way and to protect our economic interests.

NSW can lead Australia - if we want to do it.

“Leadership” Strategy

In the March election campaign, I released a policy titled “For Future Generations – A Plan to protect the Environment and tackle Climate Change”.

The Policy is on my website (peterdebnam.com.au). It set out a plan to invest $300 million in environmental programs.

The energy policy initiatives costing $140 million included:

• Fast track roll-out of smart-meters;
• Incentives to use electric vehicles;
• Solar power systems for all schools;
• Replacement of peak electric hot water systems;
• Installation of Solar hot water systems in new homes;
• Increased funding for CSIRO research into renewable energy;
• Mandatory 20% Renewable Energy Target by 2025; and
• Construction of a large scale Solar Power Station in North West NSW.

At the time these initiatives were very well received but now I think they were too cautious. The 20% by 2025 should be a walk in the park if we were half serious. I think 20% by 2020 is a better target.

The proposal for one solar power station is too slow. We need to really demonstrate a commitment to lead the world in clean energy.

In the next twelve months, with the prospect of billions of privatisation dollars, NSW can take a quantum leap in energy policy and fast-track these policies and others to lead the world in efficiencies and renewable energy.

Regrettably, much of the federal election campaign has been consumed in a “Kyoto Ratification” argument.

I wish Australia had ratified the Protocol to establish our credentials, do without the months of political debate and move the Parliament and community on to address fast-tracked energy policies.

The nuclear debate provided another distraction. It is simply not going to happen in Australia and it shouldn’t. After looking at community concerns, construction costs and long-term decommissioning and storage costs, it is clear for Australia that renewables beat nuclear.

The shame is that the theatrics of the one-year federal campaign have delayed genuine progress on energy policy.

For the sake of future generations, let’s find a genuine commitment to renewables and efficiencies.

Australians have a one hundred year history of early adoption of new technology and a thirty-year history of innovation in solar energy (mostly photovoltaic).

Australians are demanding clean energy now.

Australia has a world beating sunshine resource and many relatively small, scattered population centres suitable for disaggregated power generation.

We already use thousands of small photovoltaic installations to power or light remote area services.

Despite these obvious assets, our Governments have spectacularly failed to date to embrace large-scale solar generation.

For the next few years, there is a window of opportunity to establish a world-leading role in large-scale solar generation.

Let’s use some of those privatisation funds to encourage the construction of three large-scale solar generators in NSW – at least 100MW and up to 500 MW each.

Let’s encourage solar R & D but let’s also provide financial incentives for NSW firms to drive solar generator construction costs down the learning curve.

Additionally, despite widespread agreement that the quickest way to reduce greenhouse gases is by aggressively pursuing energy efficiencies, Governments have been unwilling to invest in and mandate fast-tracked efficiency programs.

The world is moving on with energy innovation and we not only have to keep up, we can lead if we want.

In the Sydney Morning Herald last week, two articles caught my eye.

One small item referred to San Francisco’s Berkeley Council proposing to pay all up-front costs of installing solar panels on homes within its jurisdiction. Costs would be tacked onto owners’ property tax bills, to be repaid over twenty years. Thank goodness some Government body somewhere is getting on with it.

Well in NSW, we wouldn’t have to tack the costs on to property taxes. With the NSW Government selling the community’s electricity assets, we can use those funds to roll-out solar power panels and water heaters on homes.

The second article in the Herald discussed Australia’s long history of rating energy efficiencies of appliances such as fridges and washing machines. But it also noted the program is simply too slow and just scratches the surface of what is possible.

Governments have been too scared of aggressive demand management thinking it meant largely jacking up electricity prices. Governments haven’t grasped the reality that a combination of price increases and efficiency investments could actually reduce costs for households and businesses in many cases.

With the history of lost opportunity in NSW and across Australia, it behoves us all to demand quick progress now.

The NSW Government can’t back out of its responsibility to stimulate renewable energy through construction of wind and solar energy generators in this state (not other states as their current Bill before the NSW Parliament allows).

It is apparent the NSW Government is stumbling towards approving another dirty coal generator when it should be leading with large scale renewable energy generators backed up by gas peaking plants.
 
NSW’s energy leadership strategy must include a clear, transparent plan driven from the top, ie with political will.

Instead of just talking about clean energy efficiently used, NSW has the ability to lead the world.

That objective must be wholeheartedly supported by the Parliament with the oversight of a bipartisan Standing Committee of Parliament – just as we do for road safety.

Ladies and gentlemen,

On the night of the state election in March this year, I said the people of New South Wales had given Labor one last chance to fix the state’s problems – including our infrastructure.

Since then, it is clear the New South Wales Government hasn’t really changed its modus operandi and lazy leadership remains the order of the day.

However, I remain hopeful ongoing public debate can exert some real influence.

As professionals involved in the field you have an opportunity to also add to the debate and achieve change.

We now must take action if we are serious about excelling in this field, instead of living with mediocrity.

Thank you again for the opportunity to meet with you today and I hope you will join me in arguing for change – real change. 

I hope my address will provoke debate here this morning and I am looking forward to hearing your views.

Thank you.