Thursday, 18 April 2013

There is a Light that Never Goes Out

Labour and the Greens announced today their plans to reform the electricity sector.

It's not a bad start, and the message that power bills will drop by more than $20 per month is simple and powerful, especially when compared to the likely retorts from National, which will be "bad economics/stalinism".

I read some commentary that this will leave a hole in the government's accounts.  The other side of that coin is that it will leave money in people's pockets; it's kind of like a tax cut.  So National can't really use that line of argument, because they say they like tax cuts, though their actions say the opposite.

In my opinion it is just a start.  Labour and the Greens still appear to believe that electricity is a commodity, whereas it is in my opinion an essential service.  As a commodity the system is run to maximise return on investment, or in simplified terms, profit.

There's a school of thought that says by maximising the profit the system becomes efficient, through competition.  It's a reasonable theory, the practice is somewhat different (the same applies to communism - good as a theory, doesn't work in the real world).

So even with Labour and the Greens plan implemented (and the latest Roy Morgan poll tells us they will get the chance, because National are festering in their own muck), we still have competing electricity generators supplying a single buyer of electricity.

The change of mindset I think is necessary follows on from treating electricity as an essential service is this:
the system should be run to provide electricity at a minimum cost.
The way to achieve this is not by "hoping it will be achieved as a by-product of competition between companies trying to maximise their profit".
It is quite possible to work out, every year, month, week, day, hour and minute, how to run the generation, transmission and distribution system as components of a single system to produce electricity for the lowest possible cost.  It is a complex task and requires clever people, however, the techniques are well known and the data are available.  The obvious question is - "if it's that easy, why hasn't it been done?" and the obvious answer is "electricity is sold on a market, there's no money to be made from changing how we produce and sell it".
Disappointing, really, the money saved could surely be put to better use.

The Smiths - The Queen Is Dead, 1986

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