Future of the Australian Electricity Market

[Warb]

as a nation we need to decide if we are prepared to spend around 1/10 of our annual GDP every year for the next ten years to upgrade just three of the interstate rail routes. When considering that, be aware that the current tax to GDP ratio is around 25%, and also be aware of the inflationary impact of so much government spending.


Having worked inside government, I remain sceptical. I suspect that the Australian tax paying population is still around 10 years away from being prepared to make that level of commitment to address climate change.

I don't know what the Tesla semi will cost in Australia, but normally we can more or less double the US price for most things (at least that is my experience). On that basis, the Tesla might cost around AU$500,000 which is roughly in line with many prime movers over here (according to my friend who has just bought another one).

It seems to me that for long distances, bulk movement of goods or people is always going to be a far more efficient mechanism than a scatter-gun approach of thousands of small carriers. Unfortunately the problem with such a system is that it needs to be created, at great expense, with an overall plan that not only includes the long-distance portion but also the "local" distribution or collection at each end. We have never managed to achieve this - even now we create systems of public transport that can shunt large volumes of people to and from a city centre, but then simply dump them a station with no way to get from the station to their homes, hence stations with huge car-parks!

We are now faced with the need to move away from fossil fuel, which gives us the opportunity to "start again" (especially for long haul transport). Sadly I have no doubt that you are correct, and that we will get it wrong once again. Moving to an age of AI and automation, with the chance to create a system where shipping containers (or equivalent) of various sizes can be loaded at source and then automatically placed on a train to arrive hundreds or thousands of kilometres across the country in minimal time and with minimal human "work", we will choose to continue using trucks because that's what we've always done.

The reality is that the government (civil service) is totally incapable of carrying out such a process and would likely spend decades and billions just trying to figure out what colour the trains should be.....

[Mr Brush]

As soon as I saw the word "plan" in your post......my heart sank

[BobL]

On a related note, I was talking to a mechanic the other day (a "factory" trained and employed guy). We were discussing the touchscreen controls in modern vehicles. Apparently they have/had an issue where the control systems would shut down when they got too hot, much like an iPhone that has been left in the sun. This caused dramas in QLD because people had their sunroof open, overheated the controls, and were then faced with a sudden rainstorm - with the control system locked due to being overly hot, and therefore unable to close the sunroof.......

Whenever I park my EV in the sun I usually use a windscreen shade and always leave "Cabin Overheat Protection" (COP) mode on. This runs the ventilation fan (no AC) which equilibrates the Cabin temp with whatever the outside air temp is. COP works extremely well and even yesterday when I had to park the cark outside for a couple of hours where it was 43º, the cabin T did not go above 44º. If I were not to use COP, under those conditions the cabin Temp would get up to >65º+. The COP fan consumes less than 100W so it uses very little of the total battery capacity
COP also means that 5 minutes before I need to get back into the car and I remotely turn on the AC, it just takes a few minute to get the cabin T down to 20º so I get into a nice precooked vehicle. Getting the cabin T from 44 down to 20º using the AC does use more battery energy but it and it would be a lot more if COP was not used.

If I do this at home while the vehicle is plugged in the power for COP or any cabin pre-cooling effectively comes from the mains/solar.

[ian]

It seems to me that for long distances, bulk movement of goods or people is always going to be a far more efficient mechanism than a scatter-gun approach of thousands of small carriers. Unfortunately the problem with such a system is that it needs to be created, at great expense, with an overall plan that not only includes the long-distance portion but also the "local" distribution or collection at each end. We have never managed to achieve this - even now we create systems of public transport that can shunt large volumes of people to and from a city centre, but then simply dump them a station with no way to get from the station to their homes, hence stations with huge car-parks!

as a public servant who used to do that sort of big picture strategic planning such a system already exists with the Channel Tunnel.

The Folkestone truck-onto-train terminal was my model. (Info on the corresponding site in Calais was mostly in French so largely inaccessible to yours truly.)
The operation would be:
1. pick up a load from a Sydney / Central Coast / Newcastle / Wollongong manufacturer;
2. drive the BEV semi to a "Folkstone-style" terminal located in the vicinity of Douglas Park / Campbelltown area;
3. load the whole BEV semi onto an inter-capital shuttle train -- the semi driver stays and sleeps in Sydney;
4. the 1500m long shuttle train departs the terminal bound for Melbourne;
5. shuttle train arrives at a similar "Folkestone-style" terminal, in Melbourne's outer northern suburbs where a Melbourne based driver hops into the vehicle and drives the BEV semi to the final destination in the Melbourne / Geelong region.

The advantage of this schema are that:
the semi drivers are based in their respective capital cities and sleep in their own beds each night,
the semi doesn't require a sleeper cab, so a less expensive truck compared to the sleeper cabs fitted to current ICE semis,
a BEV semi should be able to make the local pick-up / deliveries on a single battery charge.


of course, the schema outlines presupposes that the two terminals either end of the route are first constructed and the rail line upgraded to the required quad track(?) standard.

[GraemeCook]

We are now faced with the need to move away from fossil fuel, which gives us the opportunity to "start again" (especially for long haul transport). Sadly I have no doubt that you are correct, and that we will get it wrong once again. Moving to an age of AI and automation, with the chance to create a system where shipping containers (or equivalent) of various sizes can be loaded at source and then automatically placed on a train to arrive hundreds or thousands of kilometres across the country in minimal time and with minimal human "work", we will choose to continue using trucks because that's what we've always done.

The next question is: "why have we always done it that way?"

Economists have a concept called the "free loader principle" and accountants, lawyers, historians and economists have a maxim: "Follow the dollars." So why have we always done it that way? The answer is deceptively simple; because road transport has been massively subsidised. In Australia, it is commonly cheaper to ship stuff by road rather than on a ship or train. Crazy! Coastal shipping has almost disappeared, apart from Bass Strait.

Fact 1: Sea transport has to pay for the costs of creation, maintenance and operation of wharfing and terminal facilities,

Fact 2: Rail transport has to pay the costs of the rails and maintenance:

Fact 3: Road transport does not have to pay for access to the roads, the costs of the wear & tear and damage that they do to the roads. They make a very minor contribution through registration fees and fuel tax. The emphasis is on very nominal.

Engineers have had a detailed understanding of the issue for at least 50 years and economists for about 30 years. But the political ramifications make resolution extremely difficult or impossible. Think of the political connections of the big players in the transport industry, the legion of owner-drivers, the supermarkets and other major transport users. Too hard!

[Warb]

Engineers have had a detailed understanding of the issue for at least 50 years and economists for about 30 years. But the political ramifications make resolution extremely difficult or impossible. Think of the political connections of the big players in the transport industry, the legion of owner-drivers, the supermarkets and other major transport users. Too hard!

Indeed. But they might get photographed planting a tree. That'll help.....

[ian]

Fact 3: Road transport does not have to pay for access to the roads, the costs of the wear & tear and damage that they do to the roads. They make a very minor contribution through registration fees and fuel tax. The emphasis is on very nominal.

Hi Graeme
I will take issue with this statement.
As far as I am aware, road freight operators -- i.e. the trucking industry -- already pay more in fuel excise than is spent on road construction and maintenance.

I no longer have access to the actual data, but from memory, fuel excise raises around 3x what is spent building and maintaining the National Highways and Roads Of National Party Importance -- the actual acronym was Roads Of National Importance, but RONPI was closer to what the acronym really stood for. (MR92 -- the only Main Road in NSW where, in the mid 2000s, the Annual Average Daily Traffic (AADT), east of Nerriga, was less than the road number -- comes to mind as the archetypal RONPI.)


In broad terms, about 10% of the fuel excise raised is rebated to the mining industry because, although the industry pays the fuel excise, most of their vehicles operate off-road on mining sites and, prior to sometime in the 1990s, were exempt from paying the excise.
an amount less than about 1% is rebated to REFER operators to compensate for the diesel used to keep the refrigerated boxes cool.
About 40% is used to build and maintain the road network -- noting that the number of heavy goods vehicles is used to determine how thick a road pavement needs to be, while the number of light (<4.5 tonne) vehicles determines the number of lanes required,
and the balance, about 40%, goes into General Revenue where it mostly offsets the externalities (health impacts) of vehicles using the road network.


If you have a more up to break down of the fuel excise can you please share it.


The slow demise of Fuel excise as a revenue source due to the uptake of BEVs is the primary reason that government is looking to introduce a system of road user charging -- aka a universal toll based on the weight of the vehicle and how far it is driven each year.

[Warb]

This ABS page, in the total fuel used graph, suggests that passenger vehicles use more total fuel than haulage, whilst I have no doubt that trucks do far more damage. The road on which I live has been destroyed in the last year by truck+dog combos shifting material to a site a few kms up the road, and whilst the rains have caused havoc on many roads, this damage clearly started only days after the trucks arrived.

The page reports that diesel trucks used 12479megalitres of fuel. This number seems to be about half the total volume of diesel used (data from other sources), presumably the rest is used in off-road activities such as mining and farming.

The downloadable PDF file from Infrastructure Partnerships Australia here suggests that the states spend $5.5billion a year, and local governments spend an additional $1.5billion a year on road maintenance.

Fuel excise is, I believe, 49.6c/l. The haulage diesel (12479ml) therefore supplies $6.19billion dollars, against the $7billion estimated to be spent on road maintenance. This does not include any deduction for the fuel tax rebate, which I believe runs at around 17c/l.

Passenger cars, in total, pay roughly 20% more fuel excise than haulage, but could be said to do significantly less damage to the roads.

The elephant in the room is the fact that only around half the fuel excise raised from road vehicles is actually spent on road maintenance.

[GraemeCook]

Hi Graeme
I will take issue with this statement.
As far as I am aware, road freight operators -- i.e. the trucking industry -- already pay more in fuel excise than is spent on road construction and maintenance. .

You are welcome, Ian.

The basic statistics that you quote are accurate with on exception. Each year the total spend on road building and maintenance is roughly 40% of the collections from fuel excise and registration fees. The other 60% just goes to consolidated revenue. With the move to electric vehicles, the demise in fuel excise will cause a big hole in government revenue which must be plugged.

The exception is that heavy transport causes exponentially more wear on roads than light vehicles - that is simple engineering - and their excise payments do not approach the level of wear that they cause. Economists call this free loading.

I will look us some references and come back with a more detailed response - give me 24 hours.

[GraemeCook]

Hi Ian

I think I am about to catalyse you into doing a bit of research to refute/confirm/extend what I am about to say. Please note, I am dealing with averages and nothing is average. I now drive about 5,000 kms per year, when I was 20 I drove 20,000+ kms, and the Australian average is 11,000.

In this analysis I will compare a nominal private car against a semi-trailer

Excise Payments

The average private passenger vehicle travels 11,100 kilometres and has a fuel consumption of 11.1 litres per 100 kilometres.

The average articulated vehicle travels 78,300 kilometres and has a fuel consumption of 53.1 litres per 100 kilometres.

Source: Survey of Motor Vehicle Use, Australia, 12 Months ended 30 June 2020 | Australian Bureau of Statistics

Average fuel use per annum by vehicle type:
* Private car = 11100 / 100 * 11.1 = 1,232 litres
* Articulated vehicle = 78300 / 100 * 53.1 = 41,577 litres
Ratio: = 41577 / 1232 = 33.7

Summary: An average articulated vehicle will use 34 times more fuel than an average passenger car in a year.


Road Wear and Tear

I studied transport economics 50 years ago and I based the first part of my reply on a paper by an (unknown) assistant professor at the University of Tennesse (I think - and not an economic powerhouse). Our professor had noted an egineering concept regarding wear and abrasion rates and asked - "Does that apply to roads?" His engineering colleagues answered "probably yes" and were otherwise disinterested. He then wrote a peer reviewed paper that hypothesised the fourth power rule in relation to road wear and tear.

Measure	Private	Articulated	Units
	Car	Vehicle
Gross Vehicle Mass	2	42	tonnes
Number of Axles	2	6	number
Mean Axel Load	1	7	tonnes
Road Wear per Axle	1	2,401	ratio (1)
Road Wear per Kilometre	2	14,406	ratio (2)
Annual Milage	11,100	78,300	kilometres
Annual Road Wear	22,200	1,127,989,800	ratio (3)
Standardised Road Wear	1	50,810	ratio (4)
Ratio (1)	Mean Axle Load Raised to Fourth Power
(2)	Road Wear per Axle Times Number of Axles
(3)	Road Wear per Kilometre Times Annual Milage
(4)	Relative to Private Car Road Wear

Bottom Line: The average semi-trailer causes 50,000 more wear to roads than the average private car. Or 7,000 times more wear per kilometre.


Quantifying the Costs

It is hard to quantify car registraion fees as they vary so much and in some sates include Compulsory Third Party Insurance - a guestimate is $600.
Our average motorist in a year will pay excise of 48.8 cents per litre on 1,232 litres totalling $601, which, when added to Registration fees gives a annual motorists contribution of $1,201.
Forty percent is then spent on road construction and maintenance = $480.
This is effectively a measure of the average road wear caused annually by the average private car.

Our semi-trailer also pays 48.8 cents per litre on diesel, but gets a rebate of 20.8 cents meaning his actual excise charge is 28.0 cents per litre. On his annual usage of 41,577 he pays $11,974.
Thus, the average semi-trailer pays about 20 times more excise than a private motorist in a year.

But the cause 50,000 times more wear to the roads.


Equity Argument

One estimate of the annual costs of the wear on public roads by a private car is $480.

Therefore, the costs of wear by a semi-trailer are about 50,000 x 480 = $24,000,000. Yet they pay less than $12,000 excise.

The poor old taxpayer is effectively subsidising every "average" semi-trailer by about $24 million each and every year.

And that is the reason for the demise of coastal shipping and the decline in railways. It is far easier for politicians to do nothing, rather than mount a complex argument. Vested interests are major advertisers, so guess which argument the media and shock jocks will support.

[Warb]

Summary: An average articulated vehicle will use 34 times more fuel than an average passenger car in a year and will therefore contribute 34 times more in fuel excise payments.

There is a fuel tax rebate (20c/L ish, depending on the situation) for commercial road use of diesel. If we regard that as a rebate against the excise, which is 50c/l odd, surely that knocks nearly 40% off the contribution of trucks?

[AlexS]

Hi Ian

Road Wear and Tear

I studied transport economics 50 years ago and I based the first part of my reply on a paper by an (unknown) assistant professor at the University of Tennesse (I think - and not an economic powerhouse). Our professor had noted an egineering concept regarding wear and abrasion rates and asked - "Does that apply to roads?" His engineering colleagues answered "probably yes" and were otherwise disinterested. He then wrote a peer reviewed paper that hypothesised the fourth power rule in relation to road wear and tear.

I recall, from about the same time, research from a NSW PhD(?) student that found that wear & tear was proportional to about the 5th power of the mass. Considering the assumptions that are probably made in both studies, I'd accept either, or anything in between, as an approximation.

[GraemeCook]

Thanks Alex and Warb

I have added the second half of my above post - just ran out of time yesterday.

Now, stand by for incoming flack.

[GraemeCook]

Article on the ABC that the Snowy 2 tunnelling machine, Florence, is finally on the move after being bogged for over a year. Flo is doing 3-6 metres per day, only 7,500 m to go.
Florence is back to the grind, but Snowy 2.0 has a long way to go - ABC News

Interesting quote from that article:

For Dennis Barnes (CEO of Snowy Hydro), the project is as viable — economically, environmentally and systemically — as ever.


“The project has a 7.4 per cent return and a $3 billion net present value on a $12 billion cost,” he said.


Those numbers really are a worry.

A return of 7.4% on the revised budget means that they anticipate an annual profit of $888 million each year. This requires that they sell an incredible amount of electricity at incredibly high prices.

If they really anticipate a return of 7.4% on the revised $12 billion budget, then it means that on the original $2 billion budget the projected return must have been 44.4%. Unbelievable. Why wasn't there a queue to do the project?

What does a $3 billion net present value on a $12 billion cost actually mean? Does it mean that they have already written off $9 billion of the latest cost projection?

I smell incompetence. I just hope that it is with the reporting journalists and not with the senior management of Snowy Hydro.

[Bushmiller]

You may have heard that there were some significant events in Vic. On the 14th Feb. Apart from a pretty serious fire, a storm hit much of the state. Some of the casualties included 5 or 6 hv transmission towers near Geelong. When they went down, 2 500kv lines to the Latrobe Valley tripped, followed by all 4 units at loy yang A. As a result, power prices peaked at $16k/Mhw. And stayed there for about 4 hours...
My Amber tarrif is attached.. Attachment 535518

As I was watching I was able to switch from charging battery to exporting and managed to earn a few dollars as well as supporting the grid.


What I don't understand is why only loy yang a tripped. I believe aemo did a fair bit of load shedding. ( as did the storm itself, with up to 500k households off grid, including 20k or so still off.)

Russ

Apologies for not replying sooner. Currently in Norway visiting first grandchild. This is first opportunity to reply. Loy Yang stations may have different outgoing feeders, but I have no information on this.

On EVs, I have mentioned before that Norway is streets ahead of almost any other country you care to mention. No new ICEs after 2025. Incentives galore: An example is that tolls for EVs are half price. They are already everywhere. I think it just shows that with the will, there will be a way.

We visited the most northern distillery (Bivrost) today and parked our rental van in the only available parking spot. When we returned to leave, we realised we had backed up to a double charging station, which was two timber barrels on their side. Oooops! We just are not switched on to such things. Charging points are everywhere.

Regard
Paul