The Times Australia
The Times World News

.

the tide is turning on private ownership of electricity grids

  • Written by John Quiggin, Professor, School of Economics, The University of Queensland
the tide is turning on private ownership of electricity grids

The promise by the Andrews government to reintroduce public enterprise to Victoria’s electricity industry, through a revived State Electricity Commission, is something of a shock.

The process of electricity privatisation in Australia began with Labor in Victoria, when the government of Joan Kirner sold 51% of the Loy Yang B power station[1] in 1992. Her Liberal successor, Jeff Kennett, then sold the remainder of Loy Lang B, as well as the rest of the state’s publicly owned generation, transmission and distribution assets.

Labor has been office for all but four years since Kennett’s defeat in 1999. Until now it has made no attempt to reverse his policies. Rather, it has undertaken some rather dubious privatisations of its own, notably the Andrews government’s 2018 sale[2] of the Land Titles and Registry office.

Premier Daniel Andrews’ statement that “it was wrong, it was a mistake, to sell our energy companies” therefore marks a clear shift.

Labor leaders change tack

The change is part of a broader shift in Labor’s position throughout Australia.

Arguably this shift began in Queensland after the trouncing of Anna Bligh’s Labor government in 2012, winning just seven of 89 seats. The Bligh government had sold a range of public assets (though retaining distribution and transmission networks, and coal-fired power generators). The remnants of the Labor party concluded privatisation was electoral and economic poison.

Labor was returned to power in 2015 after the LNP government of Campbell Newman, having sought to push privatisation further, was ousted after one term. Under Annastacia Palaszczuk the Queensland government is now investing in new renewable generation through the publicly owned CleanCo – including 18 wind turbines[3] as part of the MacIntyre Wind Precinct, the largest wind farm project[4] in the southern hemisphere.

NSW Labor went through similar contortions over privatisation, with a series of premiers and treasurers trying and failing to find a way of selling the electricity industry.

alt
caption. Shutterstock

The disastrous defeat of the Keneally Labor government in 2011 was driven by this failure, along with the string of scandals that seem to be the rule rather than the exception in NSW politics.

Now, with the prospect of Labor returning to power next March, Opposition leader Chris Minns has given a guarantee[5] there will be no more privatisations.

At the national level, the biggest single commitment of the Albanese government is the $20 billion Rewiring the Nation initiative, to build the transmission network needed for clean energy. The first two projects to be financed – the Marinus Link between Tasmania and Victoria, and the Kerang link, between Victoria and NSW – are publicly owned[6].

Taxpayers worse off

What explains this shift?

First, public opinion is now opposed to privatisation[7].

There was significant public support for privatisation in the 1980s, but this went into decline after major privatisations began in the early 1990s. Contrary to the hopes of supporters, experience with privatisation only made voters more hostile. This has finally permeated through to political commentary. The failings of formerly public enterprises like Qantas are now regularly traced back[8] to the process of privatisation.

Read more: Public's view of the politics of privatisation comes full circle[9]

More importantly, politicians now understand that the economics of selling income-generating assets don’t stack up.

The premise for privatisation was that it was better for taxpayers to sell state-owned assets and reduce public debt.

But, particularly when interest rates on public debt are below the rate of inflation, government-owned enterprises generate returns well above the cost of the capital invested[10] in them.

Those states that kept ownership of their electricity networks, such as Queensland and Tasmania, have received a steady flow of dividends, and the value of their assets have appreciated. The proceeds of privatisation in other states have long dissipated.

Read more: The end of coal-fired power is in sight, even with private interests holding out[11]

According to the ideology of privatisation, the low cost of borrowing for public enterprises is an illusion, because the public is on the hook for the cost of a bailout in the event of any business failure. But such bailouts have been very rare in Australia, and taking their costs into account does not change the calculation significantly.

The risk premium demanded by investors in private equity has always been large, and is now growing, making the gap between the private and public cost of capital even larger. There has been a corresponding drop in private investment globally, and (outside mining) in Australia. The case for public investment has never been stronger. Labor politicians seem finally to have realised this.

References

  1. ^ 51% of the Loy Yang B power station (researchdata.edu.au)
  2. ^ 2018 sale (www.abc.net.au)
  3. ^ 18 wind turbines (reneweconomy.com.au)
  4. ^ largest wind farm project (cleancoqueensland.com.au)
  5. ^ given a guarantee (www.chrisminns.com.au)
  6. ^ publicly owned (www.energy.gov.au)
  7. ^ opposed to privatisation (theconversation.com)
  8. ^ regularly traced back (www.crikey.com.au)
  9. ^ Public's view of the politics of privatisation comes full circle (theconversation.com)
  10. ^ the capital invested (onlinelibrary.wiley.com)
  11. ^ The end of coal-fired power is in sight, even with private interests holding out (theconversation.com)

Read more https://theconversation.com/labors-love-lost-the-tide-is-turning-on-private-ownership-of-electricity-grids-193091

Times Magazine

Building a Strong Online Presence with Katoomba Web Design

Katoomba web design is more than just creating a website that looks good—it’s about building an online presence that reflects your brand, engages your audience, and drives results. For local businesses in the Blue Mountains, a well-designed website a...

September Sunset Polo

International Polo Tour To Bridge Historic Sport, Life-Changing Philanthropy, and Breath-Taking Beauty On Saturday, September 6th, history will be made as the International Polo Tour (IPT), a sports leader headquartered here in South Florida...

5 Ways Microsoft Fabric Simplifies Your Data Analytics Workflow

In today's data-driven world, businesses are constantly seeking ways to streamline their data analytics processes. The sheer volume and complexity of data can be overwhelming, often leading to bottlenecks and inefficiencies. Enter the innovative da...

7 Questions to Ask Before You Sign IT Support Companies in Sydney

Choosing an IT partner can feel like buying an insurance policy you hope you never need. The right choice keeps your team productive, your data safe, and your budget predictable. The wrong choice shows up as slow tickets, surprise bills, and risky sh...

Choosing the Right Legal Aid Lawyer in Sutherland Shire: Key Considerations

Legal aid services play an essential role in ensuring access to justice for all. For people in the Sutherland Shire who may not have the financial means to pay for private legal assistance, legal aid ensures that everyone has access to representa...

Watercolor vs. Oil vs. Digital: Which Medium Fits Your Pet's Personality?

When it comes to immortalizing your pet’s unique personality in art, choosing the right medium is essential. Each artistic medium, whether watercolor, oil, or digital, has distinct qualities that can bring out the spirit of your furry friend in dif...

The Times Features

NSW has a new fashion sector strategy – but a sustainable industry needs a federally legislated response

The New South Wales government recently announced the launch of the NSW Fashion Sector Strategy, 2025–28[1]. The strategy, developed in partnership with the Australian Fashion ...

From Garden to Gift: Why Roses Make the Perfect Present

Think back to the last time you gave or received flowers. Chances are, roses were part of the bunch, or maybe they were the whole bunch.   Roses tend to leave an impression. Even ...

Do I have insomnia? 5 reasons why you might not

Even a single night of sleep trouble can feel distressing and lonely. You toss and turn, stare at the ceiling, and wonder how you’ll cope tomorrow. No wonder many people star...

Wedding Photography Trends You Need to Know (Before You Regret Your Album)

Your wedding album should be a timeless keepsake, not something you cringe at years later. Trends may come and go, but choosing the right wedding photography approach ensures your ...

Can you say no to your doctor using an AI scribe?

Doctors’ offices were once private. But increasingly, artificial intelligence (AI) scribes (also known as digital scribes) are listening in. These tools can record and trans...

There’s a new vaccine for pneumococcal disease in Australia. Here’s what to know

The Australian government announced last week there’s a new vaccine[1] for pneumococcal disease on the National Immunisation Program for all children. This vaccine replaces pr...