Bratislava – Talking of Energy

The below is a speech delivered by Ron Manners at the Bratislava leg of the Free Market Roadshow 2023

Here we are in Bratislava (Slovakia) talking about energy and providing citizens and industry with reasonably priced, and most importantly, reliable energy.

We could be anywhere in the world with a similar discussion but, the most adversely effected countries are those who have followed the mass hysteria of climate catastrophism.

US$1.4 trillion has been spent, so far, on promoting so-called renewable green energy, with two results:-

1. Energy has become threateningly expensive.
2. The switch to renewables has increased by 1% (from 14% to 15%).

While we, the free world, have been closing down coal and nuclear power stations, China has been building more coal-fired economical and reliable power stations than the rest of the world, in total.

The world has become alarmingly dependant on China, for manufactured goods, to the same extent that Europe became alarmingly dependant on Russia for reliable energy.

Just before I left Australia I had a look around our office and our home to see if there was anything not made in China.

Yes, I found one thing!  Our toothpaste was made in Poland!

Just a word on Australia, as few of you may have visited.

Australia (The land of Net Zero = Net Wisdom)

Despite being the greatest country in which to live,  most of us are so busy enjoying ourselves that we do not spend enough time reflecting on the many good reasons, people from all over this world, choose Australia when they decide to flee from all-too-common dysfunctional authoritarian political systems. 

Yes, we are influenced by the Marxist Antonio Gramsci’s Long March Through the Institutions, but there are remnants enough of limited government and the Rule of Law, to enable us to successfully overcome the many obstacles to progress.  Australia has much to learn about the art of providing  citizens with reasonably priced and reliable energy and I am here to collect ideas to take back to Australia.

Australia has the natural energy resources (natural gas, coal, and uranium) to fill the huge supply gap created by current world events. But, instead of stepping forward and taking our place as responsible energy providers to the world, we are navel gazing as we are barely able to supply our domestic needs and existing export contracts, of natural gas, in particular. Many of Australia’s major energy providing projects are held back by an intricate web of suffocating “red and green tape”, with no end in sight.

We are caught up in a ‘debate with ourselves’, where there are few winners.  How could this be, you ask?   I will try not to turn this into a comedy, as my story is difficult to believe.

For today, in addition to my personal non-technical comments, I will also append some serious links for you to follow, in your own time.

I commend these links to you. That’s where you will find some usable detail.

Hopefully, this information will contribute some substance to your own considerations and planning, toward overcoming this energy challenge.

No country is alone in having to face this challenge.  The choice is between sane, rational decision making and ‘’populism’, as that is how many of the issues must be resolved.

Let me start with a chart, showing Australia’s historic electricity prices 1955 – 2018.

We appeared to be doing very well until two events occurred.

1. The establishment of the government’s National Electricity Market.
2. The compulsory imposition of renewables.

That chart shows the challenge facing us in Australia to ‘tame the escalating prices’ of energy.

And Here is a further chart updated with various influences added.

When I say Australians are debating with themselves, they are more like at war with themselves. I should explain that Australia started as a penal colony for the British and that is where our tendency toward over-government started.

The British brought more jailers and administrators than prisoners.  Now, over two hundred years later, half of the population is trying to ‘have a go’ (as we say) and the other half is trying to shut us down.

To succeed in business, or in any field in Australia, you needed to study and practise the strategies developed by Niccolo Machiavelli.

Machiavelli explains so well, just how those who seek to control and manipulate us, need to continually devise methods by which we become dependent on those very same people.

Unfortunately, the skills needed to dismantle government controls and regulations are less well developed than those working to expand them.

If you understand this process you can side-step such pressures and continue on your productive and merry way.

Let me give you two examples.  Both stories involve Australia’s leading energy company, Woodside Energy.

My first story goes right back to its beginnings in 1954 (yes, 70 year ago).

When Woodside started quite modestly with an issued capital of just $2M, their first Managing Director, Reece Withers, built a track through the coastal swamp and a footbridge over a small tidal inlet.

They needed that footbridge to establish a drilling platform and to commence drilling.

Then someone told Withers that he had not obtained a permit to build that footbridge, and when it was discovered, Woodside would be forced to remove it and lose access to the drill rig.  

In true Machiavellian style, Withers called an inspector to the site, to ask permission to build a footbridge ten metres from the existing footbridge.

The inspector had a look around and triumphantly declared that he would never give permission for the footbridge to be built, because it was too close to the “existing bridge” (which the inspector presumed to be the “approved bridge”.)

The inspector went away happy (flushed with power), and Woodside continued their drilling with remarkable success and is now a $64 Billion, super successful company.  (How a $2M company becomes A$64B company.)

My second story is from last week (April, 2023). 

Machiavellian strategies were again required last week (April 2023) when the current Woodside Chairman had to stand up against proxy activists (ESG motivated groups, including Labor Union controlled superannuation funds who were accusing Woodside of ‘repeated failure to present a credible strategy to address climate change’). 

Nothing short of closing down the natural gas industry will satisfy those on the left.  I spoke about the extreme government pressure being imposed on Australia’s natural gas industry at our Emerging Leaders event earlier this year (you can read about it here).

The Australian Labor Party is dependent on the extreme Green Party, whose leader, Adam Bandt, says, “Labor seems ‘more afraid’ of the coal and gas corporations than ‘climate collapse’.”

Let us pause, for a moment, and examine these words.  What is “climate collapse”?

The climate has been changing forever and will continue to do so but what exactly is “climate collapse’?

‘Climate Collapse is the language of fear’ used by the enemies of civilized society.

‘Fear’ is their weapon.  In much the same way that Putin blows up hospitals and schools.  That creates much more ‘fear’ than blowing up military targets, like tanks.

If we recognize ‘fear’, as today’s weapon, we can develop strength to resist.

I could talk forever on the so-called climate debate, but for anyone undecided please listen to Al Gore to hear one side of the story and then have a listen to Australia’s Prof. Ian Plimer or America’s Mark P. Mills (Manhattan Institute).

If you have studied the economic subject of Public Choice Theory, you can recognize how those receiving the ‘concentrated benefits’, work so hard for their cause and how they carefully (Machiavellian style) off-load the costs to the unsuspecting millions of consumers, like us.

Yes, we are Conservationists.

I’m sure that we are all conservationists at heart.

I know, that with a background of farming and mining, I am.  For every tree that I have cut down I have grown more than 100.

The reason I am a conservationist is simply that ‘I live here too!’.   In the mid-1970s I imported the first low-profile diesel trucks for operating in underground mines in Australia.

The platinum pellet exhaust scrubbers convert the diesel exhaust fumes into breathable exhaust air.  I have continuing faith in the march of science to conquer challenges like this.

Yes, we will move to electric vehicles, in our own time, when it is appropriate.  That time will be different for each of us, depending on our circumstances and where we live.

There can never be a legislated answer that suits us all.

A colleague of mine, one of Australia’s leading engineers, Peter Iancov – has recently visited Europe and produced a report European Energy Insights.  With his permission, I share this report with you.  His summary is as follows:-

• Energy security is key to civilisation therefore in Europe is particularly prominent. Most countries have found a way to secure alternative sources from the Russian gas and to some extent are continuing to diversify. Italy in particular secured alternative gas supplies from other sources including import terminals.

• Energy transition: is not focussing on full electrification. To some extent we in Australia seem to be out of synch with the rest of the world. The European energy regulator is seeking 55% electrification away from fossil fuels. There might be a debate within EU if 45% or 65% is the right target but no one is targeting 100% as we seem to do in Australia. Nuclear and Gas generation are considered ‘green’ and counted as solutions in Europe.

• Regulatory regime: it is better in Europe and the relationship with energy producers and transporters is a lot closer and more collaborative to ensure significant incentives are applied to key drivers like customer safety, service, reliability, availability, and cost.

• Customer service: front of mind with a genuine focus to support the customer and earn the incentives attached to it. Improvements are rewarded and whilst there are penalties that apply, their application threshold is a lot lower than in Australia. That may change one day, but so far business is incentivised to perform and not be penalised.

• Digitalisation – core activity that enables data analysis and usage to support improvements. Costs are rarely challenged by the Regulator, and they become part of the tariff calculation formulas in most cases.

• Risk: all future capital work is delayed due to supply chain availability. Securing supply channels for plant and equipment is paramount including for mega companies like Enel with a customer pool 3x (three times) the size of Australian population. Resourcing is of some concern but not a lot since the rules of moving people across utilities and countries seem to be a lot easier that transferring tradesmen from Queensland to Victoria.                  “

The other two pressures being imposed on Australia’s natural gas industry are:-

• Lexology:  Last minute Safeguard Mechanism Reforms
• Bans on fracking
• Bans on onshore gas exploration
• Potential restrictions on exports of LNG
• Potential price caps on domestic gas

Yes, we can work toward net-zero emissions, but we will never get there without the help of natural gas, hydro, hydrogen, batteries, and nuclear power.

In Conclusion
All these options must be encouraged to vigorously compete for our business (without distortions of government subsidies) and, may the best economic answer be the winner!

---

EDIT:
Additional and relevant information is now included, with permission of the author Dr. Stephen Wilson, Managing Director CAPE OTWAY ASSOCIATES. Text and Slides from a briefing to IPA in Canberra , May 11-14, 2023.