Category: Archive

© 2007 Australian Broadcasting Corporation

Air thick with carbon: Thick smoke and ash swirling upwards from a burning pine plantation near the main power interconnector between Victoria and NSW began to drift across three high-voltage lines strung between transmission towers. Electricity arced through the carbon-laden air from one line to the next. A second arc is believed to have leapt from the line to the ground.

Auto shutdown avoids worse: The sensor on the tower immediately detected the fluctuation in electricity levels flowing down the lines to meet Victoria’s near-record demand for power on a day when temperatures had reached 40C and air-conditioners were running flat-out. The sensor flashed a message, warning of the sudden disruption, to a computer at the central control room that constantly monitors the line. The computer “tripped” the line, shutting it down to avoid the arcing causing serious damage to the wires or towers.

Demand 20pc above supply: Up to that point, Victorians had been using about 9500 megawatts in an attempt to beat the heat. In the blink of an eye that was reduced by 2000mW. With the demand for power suddenly exceeding supply by almost 20 per cent, the state’s automatic load-shedding program kicked in.

Power supply remains at risk: Deputy Premier John Thwaites yesterday warned that with fires still burning in many parts of the state, including the blaze near Benalla that triggered Tuesday’s crisis, similar blackouts could occur. This included fires in Gippsland in eastern Victoria, which could cause problems for transmission lines linking Melbourne with the state’s main power stations in the Latrobe Valley.

The Australian, 18/1/2007, p. 4

No infection in Esperance deaths: Tests are continuing on the honeyeaters, yellow-throated miners, silvereyes and wattlebirds that were taken from Esperance, 760km southeast of Perth, where locals first started noticing the deaths before Christmas. So far, autopsies have ruled out any bacterial or viral infections as a cause of death. Esperance has a busy port and is a regional centre for agriculture, which some locals suspect may have played a part in the bird kills. The DEC should know by early next week if the deaths were due to pesticides or toxins.

No link established: At Narembeen, the swallows turned up at a house in the town’s centre between January 3 and January 5. Their appearance coincided with heavy rains that culminated in serious flooding and major stock losses further south. The owner of the house has told authorities that after the rains passed, he swept up the dead birds and took them to the local tip. DEC spokesman Paul Connolly said he did not know if the Esperance and Narembeen incidents were linked.

The Australian, 18/1/2007, p. 3

Joint contingency plan released: A contingency plan, jointly released on 12 January by the federal, Victorian and South Australian governments, sought to urgently address water shortages for towns and cities in the parched region.

Hydro scheme to be reviewed: Blanket Stage 4 water restrictions for all towns supplied by the Murray and a review of the Snowy Hydro electricity scheme were also proposed in the plan, which was yet to be endorsed by NSW. The emergency plan could be put into place if the drought persists this year but the external watering restrictions could be introduced before June.

Wetlands, irrigators under threat: Australian Conservation Foundation healthy rivers campaigner Arlene Buchan said a weir could cause environmental devastation. "An additional weir would go part of the way to solving the water supply problem to Adelaide but at the risk of permanently destroying internationally recognised wetlands and devastating irrigation industries in the area," she said.

Water buy-back option: Buchan called on governments to buy back water from irrigators as the only way to save stressed rivers. Federal parliamentary secretary for water, Malcolm Turnbull, said the crisis plan was based on a worse-case scenario that 2007 would be as dry and hot as 2006.

The Age, 13/1/2007, p. 1

Mr Brown also announced plans to offer low-cost loans for existing homeowners to install energy efficient equipment.

Under the plans, new homes will have to be super-insulated to prevent heat loss, and use modern "green" technology to produce their own heat and electricity.

Options include so-called biomass boilers using wood pellets rather than oil or gas, and energy sources such as solar power, pumps extracting heat from the ground, and roof-mounted wind turbines.

Other possibilities include heat exchangers to stop heat escaping with stale air through ventilation systems, and water recycling equipment. Careful design, such as using large south-facing windows to harvest "passive" solar heat, will also be included in the new homes of the future.

New homes will still be able to use electricity from the national grid, but will have to show that they can generate enough surplus power at night to offset any electricity used from the mains. Mr Brown also published plans to waive income tax on any money "green" homeowners make by selling their surplus electricity to the national grid.

Simon Reddy, of Greenpeace, said his organisation was working to build 200 zero-carbon homes in east London. He said Mr Brown’s announcement was "very welcome", but added: "The stamp duty concession is an empty gesture unless the Government makes sure that they build the things."

And the Home Builders’ Federation said builders "want to help people cut their carbon emissions," but urged Mr Brown not to withdraw his stamp duty concession too soon.

Is the surge in oil futures trading exacerbating the market’s ups and downs?
The Commodity Futures Trading Commission and New York Mercantile Exchange put out a study saying hedge funds weren’t causing more volatility. That’s nonsense. Traders are attracted by volatility. In the 1990s we had pretty flat markets. We didn’t have a lot of trading volume. Now we’re seeing bigger price moves, $2 a day. We never saw that before.

What kicked off this trend?
The trigger was availability of talent. Enron went down in 2001. Utilities started exiting energy trading. You had this meltdown of natural gas and power trading. Some of these folks started their own hedge funds, and some were hired by hedge funds. You had this pool of talent.

Where did price increases come in?
We had higher energy prices beginning in 2004. People wanted to come into energy because it was headline news.

Banks and insurers also are in the game.
Banks are really the biggest player in this market. They have the capital base, the global positioning, the traders. They have the relationships, they’re in project financing.

So interest in the energy sector is moving away from owners and consumers?
This is a financialization of the energy markets, and it’s immature. We size it at $3 trillion, compared to, say, $26 trillion in interest rate swaps. Energy is the world’s largest business, at $4 trillion. It should trade at 6 to 20 times the physical market. The growth potential is enormous.

What’s the downside?
Risk, risk, risk. Energy is a risky business. You’ve got headline risk, weather risk, geopolitical risk–it just goes on.

What about volatility?
We saw a big hedge fund go down–Amaranth Advisors. But that’s only 1% of the market. There’s no risk to the financial marketâ…but [hedge fund investing] is too risky for small investors. This is big money that should know the risks and afford to lose it. Energy trading is a zero-sum game. When Amaranth lost $6 billion, somebody made $6 billion on the other side.

London’s Intercontinental Exchange (ICE ) came into this space about a year ago. What has that done?
ICE launched West Texas Intermediate crude futures last February. It was the biggest launch ever in trading contracts, [and] a lot of it was hedge-fund-driven.

Why so big?
They’re totally anonymous. That’s an attraction for traders. If you’re trading on the commodities floor, people know your positions. You know the size, the direction, the scale, the length of the trade. You don’t know any of that in cyberspace.

You predict that green trading is the next big thing.
The global carbon emissions market was about $25 billion for 2006, and it’s doubling every year. Once the U.S. enters a carbon-trading regime, the uplift will be incredible.

Where is the money coming from?
It’s coming from high-net-worth [individuals] and private equity. There’s unprecedented interest in clean energy. …When you put that together with the world’s largest business–energy–it’s going to be huge. It’s absolutely a new asset class.