Energy prices

Energy prices

In the mid-1990’s energy prices in Australia were some of the lowest in the OECD.

I distinctly remember the politicians of the day boasting about how good this was for industry and business and I have to say I bought the argument. Utilities that people have to have should be affordable. The marketing men can persuade me that a Mercedes is so much better than a Hyundai and well worth the price tag because it is a discretionary spend on my part, but water, power and waste removal I must have or we are back in the dark ages.

Twenty years later, the current government has announced a new energy policy that they claim will save the average family $100 a year on their energy bill. This new policy is supposedly a response to the problem that domestic energy prices have risen by 67% in the last decade, and with supply shortages forecast regularly, the medium term economics suggest this annual rate of increase will persist. Energy costs in Australia are now at the top end of the OECD ranks.


Australia is also going to struggle to meet emission reduction targets it promised in Paris in part because this cost pressure from energy has become an excuse not to focus on renewables and to continue with power generation with a heavy emission profile.

Oops again.

Lots of rant and rave opportunities here, classic Muppetville. The one I want to unpack is that cost saving, $100 a year for the average family.

Median annual income in Australia is around $81,000 and has been increasing steadily at around 3.5% more than doubling since 1990’s when energy was cheap.

An income of roughly $220 per day is right up there with the highest in the world. Savings on the energy bill proposed by the government is 27c per day, not even the price of a coffee and cookie in a month.

The average household energy bill, on the other hand, is around $4.20 per day and currently increasing at close to 7% or roughly 29c per day.

Phew, that’s a relief. The government policy is going to save the average household most of the money they would have to spend to on the price rises. Superb.

Should average annual income continue to rise at 3.5% the 29c cost saving on energy is further compensated by an additional $7.70 per day in extra income.

This explains why economic growth is so important to governments. Despite inevitable difficulty around the margins, on average it puts money in voters pockets.

It also makes that first ‘oops’ identified earlier a huge blunder.

Energy is literally the engine of economies so to let its costs spiral and allow the security of supply to lapse is stupid however you spin it.



A decision is made to dam a modest sized river In the foothills near a big coastal city. The city is growing and water security is regularly a hot political topic as the area is prone to drought.

Construction on the dam wall begins in 1948 and on its completion the wall creates a lake with the capacity to hold a little over 2,000 Gigalitres of accessible water.

When the dam was completed the city was home to 1.8 million people. Today there are over 5 million inhabitants and the lake remains the primary source of freshwater for these people and their economic activities.

Downstream of the dam the floodplain has become an important area of agricultural and peri-urban development. The dam protects against flooding and the planners have allowed people to live in previously inundated areas. The dam not only holds a large proportion of the water supply to the city it also protects built and commercial assets from flooding.

When the engineers say that the dam wall could be raised by 14m, what do you think the planners will do?

Naturally, they will allow greater access to land on the floodplain, most likely by releasing some areas for residential development. It is a growing city after all.

In the planning meeting some wag says that it will all be alright because the climate is changing “It will be drier anyway, so no worries”.

This comment goes unchallenged despite the evidence for increased storm frequency and intensity in the region, and the obvious connection between this and major flood events.

Here is a hint with a biblical origin.

Don’t buy a house on a floodplain…. especially downstream of a dam.

Post revisited – Journeys

Post revisited – Journeys

Netflix has an excellent period drama called Victoria on the life of the iconic queen of England who ruled for 63 years and married off her progeny into most of the royal families of Europe. She died in 1901 aged 81. Throughout her life, she moved around in luxury carriages drawn by horses. Steam trains and iron-hulled ships occasionally took her and her entourage further afield but it was the stables that did most of the heavy lifting.

She was in her late sixties when the first motor car appeared in Germany but did not live to see the mass production of cars or the first powered flight (1903) but she did have a few photographs taken.

Skip just 100 years and there are websites that track air traffic so you can follow the travel of your own flight or that of a loved one across the vast reaches of land and sea to every far-flung destination on the planet. Browse one of these sites and the globe lights up with traces. There are a million people in the air at any one time.

Amused or not, Queen Victoria would not have believed it was possible.

Here is an Alloporus thought on air traffic from June 2011

In 2009 2.5 billion journeys were taken in aircraft.

Evened out across the global population, every third person on earth took a flight. In reality it is the wealthiest proportion of the 1 billion people in western economies who took most of the journeys.

The projection is that by 2014 there will be 3.3 billion journeys taken.

This represents a 32% increase in 5 years.

Mobility is an inevitable consequence of affluence. As more and more people have disposable income, many will want to use some of those funds to travel. As economies grow, more business is done and so travel to buy, sell and negotiate also increases.

In the mid 1960’s the first Boeing 737s carried 100 passengers up to 2775 km. This was quite a revolution at the time.

The latest Boeing 737-800s carry twice the number of people over 5,500 km and use 23% less fuel.

Suppose it were possible to replace all the aircraft flying in 2009 with the latest fuel efficient models. It would be possible to absorb almost all of the 5 year increase in passenger volume to 2014 through fuel efficiencies that these more efficient vehicles bring.

Future aircraft construction materials that are lighter and still strong enough will see even greater fuel efficiencies. Aircraft built in the next decade or two might only use a third of the fuel guzzled by the earliest models.

Replace all the 737-800s with aircraft of composite material designs and 13 years of growth in passenger numbers could be accommodated without increasing fuel use above that used in 2009.

But even if all these replacements were possible by the mid-2020s, less than a generation from now, fuel use in air travel would begin to increase over 2009 levels.

In half the time since those first Boeing 737 aircraft began flying all the fuel efficiencies would have been used up by the increased volume of traffic.

Clearly instant replacement with the best technology is impossible.

Some of those fuel hungry early models are still in the air on the more remote routes operated by obscure airlines. And it is these cheaper fare options that will be responsible for much of the growth in passenger numbers. The fuel efficiencies will arrive incrementally.

In the absence of some remarkable technology that can replace jet engines running on aviation fuel, greenhouse gas emissions from or air travel will grow along with the airline industry.


There is talk of a jet-rocket vehicle that would travel in the stratosphere, have no emissions because it flies above the atmosphere on hydrogen fuel and could reduce the travel time from Sydney to London to a few hours. Commercial flights might happen by 2040.

By then there will be close to 10 billion journeys per year.

Turns out there were 3.1 billion journeys in 2014, a little down on projections, but not by much. Dreamliners notwithstanding, the fuel consumption numbers are still up there as is the prospect of Tesla rockets.

There is no obvious solution to the emissions issue. Aircraft are going to continue flying passengers and freight, we are now over 100,000 flights per day, and the fleet still runs on aviation fuel.

In China alone, the expectation is that over 800 million people will join the ‘middle class’ meaning that there are going to be plenty of bums to put on all the seats. A GFC 2.0 or nuclear confrontation might slow things down but in the short term, there will be journeys taken and plenty of them.

The scale of all this is very difficult to comprehend. Numbers like this only come up when we are buying a house. Volume is an issue but the kicker is the rate of change. Horse-drawn carriages to 100,000 flights a day in 100 years is staggeringly rapid, even for a planet that is no stranger to the odd dramatic shift in fortunes.

‘Journeys’ was a post about emissions to highlight how significant they were going to be in the near future. The real message is to think about the rate of inevitable change. Those aircraft are here for their productive lifetime. They will fly as long as they can be operated at a profit. The fleet is added to rather than replaced and more flights are taken. More this year than last and more than the year before that. This is change that is fast and locked in. There is no reason, bar catastrophe, to suggest otherwise.

I don’t think we really understand what this means.

Queen Victoria would not have believed a word of it and I am not sure that we do either.