FAQ Consulting
Energy, Economics & Strategic Planning
29/1 5 The Esplanade
Darwin NT 0800
08 -8981 0028
To the Senate Rural and Regional Affairs and Transport Committee
Inquiry into the investment of Commonwealth and State funds in public
passenger transport infrastructure and services
Statement for Committee Hearing in Darwin, 22 July 2009
Introduction
I am the principal of FAQ Consulting. I thank the Committee for your invitation
to address you today. I am reminded that I last gave evidence to a Senate
hearing in 1979 to an Inquiry into Alternative Sources of Energy. I developed
that submission as a member of the Central Western Regionai Advisory
Council based in Bathurst NSW. Looking back a lot of the issues have not
changed. The context of that inquiry was the global impact of Sheikh Yamani
and OPEC oil price hikes in the seventies. Today the context is more complex
and more urgent but the directions for change are much the same.
My opening statement, like my submission, addresses two of the six terms of
reference of your current inquiry:
d. measures by which the Commonwealth Government could facilitate
improvement in public passenger transport services and infrastructure;
and
e. the role of the Commonwealth Government legisiation, taxation,
subsidies, policies and other mechanisms that either discourage or
encourage public passenger transport.
Regarding d, measures to facilitate improvement in public passenger
transport services and infrastructure I will focus on two matters:
- expanding the generation of clean eiectricity to fuel Australia’s
transport requirements; - ensuring that new urban development is undertaken in concert with
public transit and transport faciiities; and - the urgent need to provide transport services: including school buses
community transport and inter-urban services in Indigenous areas of
the Northern Territory; and in particularto support development of
twenty new towns.
I am asking the Committee to consider the following measures in its
recommendations:
- A national response to the international demand and supply of
oil/petroleum to establish a super—grid to provide clean electricity to fuel
transport; and - National leadership in planning guidelines for land use and urban
design to ensure that expansion of cities overcomes transport
disadvantage.
My comments on e, the role of the Commonwealth instruments to encourage
public passenger transport focuses on economic issues — firstly, the impact of
petroleum imports on our balance of payments, and the importance of our
high levels of excise, consumer tax and GST on crude oil and fuels in instilling
some discipline in demand and in providing revenue streams for public
expenditure. in my view a larger proportion of that expenditure should be used
for the large capital investments necessary to make Australia an advanced
solar energy economy.
Secondly I recommend you consider recommending the use of border
adjustment to level the field for imports into Australia from those countries that do not impose a carbon tax.
Lastly I would like to add some comments to my submission dealing with
community bus options for the Territorians.
Demand and supply of oil/petroleum
The first thing to consider when making predictions about transport is to
consider the energy source: this is both critical and urgent and needs to
recognise both availability, and the environmental impact of carbon emission
and climate change.
Oil has been the ubiquitous ingredient behind alt our endeavours, not only
transport but also manufacture, agriculture and our mining. Oil ultimately
underpins our standard of living, and our leisure.
Petroleum is a finite resource. in 1956, Hubbert drew a graph oi peak oil
based on a statistical bell curve as the production possibility curve ,which
illustrated the rapid rate of exploration, and exploitation, and then the rapid
depletion.
BELL CURVE GRAPH FROM PAGE 3 $$$$
A bell-shaped production curve. as originally
suggested by M. King Hubbert in 1956.
By way of explanation, this is not Hubbert’s original, but a revised graph
upiifted from Wikipedia; but Hubbert’s principles are universally accepted. I
have called this bell curve the supply line, and have superimposed a demand
line on this graph to illustrate the problem of demand overtaking supply.
World Oil Production
PRODUCTION GRAPH FROM PAGE 3 $$$$
Looking at the two graphs above, it can clearly be seen that after the peak
point, there is no possibility that the demand will be satisfied. Beyond that
point those who are willing to pay the most will get oil; those who cannot will
miss out. What price will we have to pay’? What we do know is that each and
every oil price spike causes recession.
CARTOON FROM PAGE 4 $$$$
ARE WE THERE YET?
This peak point is imminent, and according to some oil economists may have
occurred in 2007-2008, and this has been masked by the sub -prime
mortgage crisis which in turn caused a contraction in demand for oii.
In January, 2009, when oil prices went above $140 per barrel, the demand had
cleariy been greater than supply. It was not due solely to OPEC, rogue traders
or hedge funds.
We need to make a rapid transition from our dependence on oil, and the best
route is the renewable electricity option. Gas will piay an enormous role in this
transition from oil to electricity, but it’s ever increasing price as a substitute for
oil, together with ever increasing carbon emission restrictions will mean it wiii
be only a short run substitute.
Electricity will replace oil for transport
For transport some oil will be replaced with gas, and some with electricity. The
car companies are now underway making hybrid , piug-in electric and battery
cars. The new plug-in electric cars are clean, but they too need to be supplied
with clean electricity. Where will this clean electricity come from?
The electricity used will need to be solar or wind generated, as we will be
obliged to phase out carbon emitting coal/gas/oil fired power stations. Nuclear
reactors have not been considered because of their long construction and
commissioning, and are not needed. We can achieve a better and quicker
outcome using renewables such as wind, photovoltaics and concentrated
solar power [CSP], also known as solar thermal.
On 13 Juty 2009, Munich Re and several European companies underwrote
DESERTEC, for 400 billion Euros to build a network of concentrated solar
power plants through North Africa to supply 15% of Europe’s total electricity
demand, through high voltage direct current [HVDC] submarine power cables
from North Africa to Europe. The scale of this and the confidence must be a
challenge to the rest of the world.
MAP FROM PAGE 5 $$$$
Gaphic courtesy of DESERTEC
Establishing a super-grid to provide clean electricity to fuel transport
A similar smaller scheme of HVDC linked concentrated solar power plants
would be suitable for our desert areas. The reason for HVDC linkage is to
create a supergrid where electricity can be moved long distances and where
electricity energy losses are minimised (3% per 1000 km). The rationale for
CSP is that big quantities of dispatchable electricity are produced, and the
power is produced at the time that it is needed, i.e .during daylight hours
This month’s G8 meeting on climate change foreshadowed the possibility of a
worldwide supergrid using only renewable energy as a global strategy!
By linking the individual State grids Australia wide, it is possible for the east
coast to be generating usable power for the west coast for 2 or 3 hours
before the sun rises in the west, and vice versa, i.e. the west coast could
dispatch power to the east coast for 2 to 3 hours alter the east coast sunset.
The early morning and late night gaps could be filled from conventional power
stations, wind power, or existing hydro electricity schemes
Alternateiy, some CSP systems are capable of generating power from heat
stored in salt for up to 6 hours after sunset, and one Australian company is
now using graphite blocks to prolong the storage up to 24 hours and longer;
and to provide power on demand.
There are three basic CSP systems, namely;-Tower, Trough and Dish
systems, including the Stirling engine. Each has specific attributes for different
applications which are of particular interest to Australia, i.e. Tower systems
can provide good storage of heat to prolong electricity production. Trough
systems can be used to hybridise existing power stations. Sterling engines
require no water supply for cooling.
Photovoltaic generation should also be encouraged, because in the long run it
may turn out to be the cheapest route in providing a large part of the base
load. However, like CSP it would require access to dedicated tracts of land for
photovoltaic power stations, in order to provide a big percentage of base load;
as there is inadequate roof area in Australia to generate sufficient power from
photovoltaic cells.
Solar energy also makes good sense for desalination of water and for many
industrial uses, and will be vital in providing the extra electricity demand to
meet increasing energy demand of motor vehicles.
Gas will provide a path way from our dependence on oii. Initially, car owners
will convert their existing petrol vehicles. However, governments will need to
ensure the new cars coming on the roads are either hybrid or electric, to meet
tighter emission standards
Heavier duty applications such as haulage, agriculture and public buses can
now replace diesel with gas, e.g. high pressure direct injection LNG, and these
engines reduce green house emissions by up to 20-25%.
Land use, urban design and transport
One vital area of neglect since the oil crises of the ‘TOS has been the lack of
focus on urban cleveioprnent; no one wanted to think that we might one day
face a situation without oil! All levels of governments put their heads in the
sand! Have we now created millions of transport disadvantaged people by
spreading our cities endlessly with poor urban design? Have we created a big
social problem? It is again time for serious government intervention The
problem is twofold:
- urban sprawl and
- lack of public transport infrastructure.
By example, the NT has announced a new city of Weddeli to accommodate
40,000 people. This planning decision has been made not recognising the
new oil crisis! Again it is an example of urban sprawl resulting in tack of
access to existing services and transport disadvantage for residents. There
are preferable alternatives within Danrvin, such as urban consolidation,
rezoning and/or relocation of Darwin Airport. It does not now make sense to
push people further away from existing schools, hospital services and jobs.
In capital cities, change will involve using existing corridors for eiectric and
gas buses, trolley buses and/or tight rail. it is possibly too Eate and too
expensive to undertake construction of heavy rail though much of the
established urban areas.
For all our rail line we should consider eieotrification. In NSW attempts to get
haulage operators to use eiectric iocomoth/es on the sections of electrified
tines failed, partly because the operators did not want to contribute to
catenary overhead power supply installations and partly because they needed
to change iocomotives and drivers. These iooomotives were abandoned.
Thus, one attempt to reduce our dependence on imported oil failed; our
balance of payments suffered! Now in NSW no freight hauiage is done using
electrification, whereas Queensland has electrified many of its freight iines.
Economic issues — balance of payments, excise, consumer tax and GST
Governments have not given enough consideration to the extremely adverse
impact of imported oil on our balance of payment, and the problem is
worsening. The production of Australian crude has falien dramatically, while
our ever growing dependence on a car based lifestyle has dramatically
increased our need for imported fuei. 30 % of our import bili is for petroleum
products. If we are unable to satisfy our demand from overseas it will be
necessary for the Rudd Government to introduce rationing and controls on
who uses our scant locally produced oil resource!
Australian Oil Production vs Demand, 1970-2020
GRAPH FROM PAGE 8 $$$$
Figure 6. Australian Oii Production itéeoscience Australia. actual and P50
forecast) vs Demand (ABAREJ. 1970-2030.
It is expected that by 2015 the import gap, or the petroleum trade deficit could
grow from $12 billion in 2005,to $40 billion in 2015! It makes better sense to
invest $40 billion annuaily in solar generation, rather than as a recurrent
annual expenditure on imported oil. [ If there is any around in 2015!]
Some credit is due to the foresight of both State and Federal governments for
maintaining high ievels of tax, excise and GST on crude oil and fuels for motor
vehicles. This policy has given both State and Federal government revenue
streams so that they have funds for schools, hospitals and social services,
etc. as well as roads. They should not weaken their resolve .One can only feet
that at least part of the problem in the U.S. has been the inability to get the
motorist to make sufficient financial contribution and has caused a great
waste of a scarce resource.
The rationale for continuing high taxes and excise, and the implementation of
greenhouse emissions control legislation clearly must be to reduce
consumption of oil, and increase the price to the end consumer. These
measures must clearly act as a disincentive.
Carbon emissions and border adjustment
One element of the carbon control initiative legislation should be a provision
for border adjustment. This would make an additional charge on imports from
countries where goods from the exporting country have been excluded from a
carbon tax, in the exporting country. This would mean these goods are not
landed in Australia with an unfair advantage over goods produced locally in
Australia. This principle has been adopted in the US.
Many economists believe that globalisation is now going in reverse. This is
because of the rising cost of oil driving up the cost of sea and air transport.
This, they see is removing the low wage advantages of Asian producers.
These, together with the border adjustment, will improve employment
prospects in Australia. if we do not apply border adjustment we wilt iose all
our manufacturing to Asia!
Some Americans are now predicting a renewal of manufacturing for the rust
belt of the USA! For Australian industry ,these should again open up
opportunities for domestic producers. They may provide a real financial
opportunity to produce an all Australian electric plug-in car!.
It is estimated that the global electricity market wilt be forced to spend over
$10 triiiion over the next three decades to expand supply capacity in a bid to
meet demand.
it would seem that this impending energy crisis should be given funding
preference above the national broadband network and the enormous capital
expenditure for defence procurement. It is my humble belief that this is
Australia’s most pressing need!
We are now in an historic period of scarcity of capital. The Federal
government should set aside low interest funding for companies interested in
making the iarge capital investments necessary to change Australia to
generate electricity from ciean renewable sources. This would be a more
effective way to get investment, rather than a strategy of offering grant
incentives.
Traditionally transmission and distribution have been more profitable than
generation of electricity. Forthis reason, if Governments want to ensure
investment in new forms of electricity generation, they need to guarantee a
“feed—in tariff” to producers which is sufficientiy high to ensure a satisfactory
return on investment for their iarge scale capitai investments.
Improving transport for Territorians in remote areas
On 20 May 2009, the Chief Minister announced that 20 new towns wilt be
developed in Indigenous areas of the Territory. if the communities agree to
changes in land holding arrangements, these new towns wiil provide central
iocations for schools, medical services, businesses, jobs and new
opportunities for indigenous Territorians.
Over 40 000 people or approximately 20% of the Northern Territory population
reside in remote or very remote townships and communities. To make the
potential of these new towns a reality, they witi need transport for schooi
children, regular transport services to move people to and from homelands
and outstations into town, and interurban services.
Free bus services are available for school children in Darwin and environs but
in rnuch of the Territory they are not available. The ABC reported in January
this year Yipirinya school in Alice Springs, that educates children from the
town camps, was spending $400,000 per annum, a quarter of its
Commonwealth education funding, on provision of school transport.
It the Territory is to realise Mick Dcdson’s call for every Aboriginal child to be
enrolled and attending schooi by Australia Day 2010, we will have to act now
to design and put in place a Territory-wide school transport program.
To enable residents in the catchments of these new towns to come in to shop
or do business they will need reliable bus services. in my view regular
community bus services, ie bus services designed to meet the needs of iocal
communities. For Indigenous communities this could include travel for social
occasions, for cultural, health, funeral needs, to attend sporting fixtures, etc
Int 980, in Bathurst a community bus service started with the goat of helping
elderly people stay in their homes in small outlying centres. Community buses
from the surrounding villages terminated at the Bathurst community
information centre. Supermarkets delivered shopping there to be loaded on
the bus home, the centre was a contact point for people coming in who had
made medical and other appointments to fit with their day in town. When the
drought in villages like Sofala dried up water supplies, the information centre
installed a washing machine and dryer and people couid bring their washing
down to town. These are examples of tailoring community transport services
to the needs of communities.
NSW transport authorities responded to the Bathurst Community Bus model
and has recognised that there is a need to ensure effective community
transport services are available, especially in rural and regional communities.
Transport NSW has minimised impediments to community transport
volunteers and addressed road safety needs by requiring particular classes of
driver’s licence for particular types of vehicle categories, that included size
and weight of vehicles.
in the mid 1990’s Transport NSW developed and implemented operator
accreditation standards for community transport buses. Accreditation
standards for community transport operators are less stringent than those for
bus operators and could provide a model for training and accrediting
Aboriginal community bus drivers in the Territory.
Accreditation should also include a school service operator category to enable
community members to be licensed, contracted and subsidised to drive
children to and from school. Australian Government leadership and expertise
can plan and develop effective email scale transport services to support and
develop Aboriginal schools and communities.
I recommend that your inquiry look at measures by which the Commonwealth
can facilitate community transport services for transport disadvantaged
Territorians, in particular to support the development of our twenty new towns
and to get our Indigenous children to school and settied in by Australia day
next year.
Wal Walker
QDA, B.Com(Eoon)- M.Urban Studies, CPA
Director, FAQ Consulting
Mobile: 0401 455 148
Email: wwwa]ker.faq@gmail.com