Month: February 2014

After the car industry (revised and updated)

John Quiggin67 Comments

Quicker than I expected, Toyota has announced that it will be abandoning motor vehicle manufacture in Australia by 2017. That presumably will flow through to components manufactures of all kinds.

The impending end of the car industry constitutes the effective end of large scale manufacturing in Australia, at least as the term is ordinarily understood. The remaining manufacturing sector consists mainly of basic processing of agricultural and mineral products for export, along with food and beverages for the domestic market. Elaborately transformed manufactures, on which such high hopes were pinned in the 1980s and 1990s have been declining for years, and will be confined to niche markets once we stop exporting automotive products.

An immediate policy implication of the end of car production is that it’s time to drop a bunch of policies whose rationale was to support the domestic industry. The most obvious candidate is the FBT concession, just reinstated by the Abbott government. But there’s also the maintenance of some of the worlds weakest fuel efficiency standards, driven by the desire not to tilt the playing field against Falcons and Commodores. More generally, a whole range of pro-car policies will need to be reassessed, given that they increase our dependence on imports and therefore our vulnerability to terms of trade shocks.

The other big policy implication is that there is no longer any reason for Australia to have fuel efficiency standards much weaker than those in the rest of the world. The original rationale was to protect local icons like the Falcon and Commodore. Now that all cars will be important, we should demand that they meet the same standards as in their home markets.

Finally, in political terms, the Abbott government’s toughminded attitude on the end of manufacturing represents a striking contrast with its eagerness to help favored groups like the financial sector (including the salary packaging industry) and primary industry. This produces bizarre contradictions. For example, as Peter Touhey of the Victorian Farmers Federation recently noted, the Coalition government is spending more than $1 billion to upgrade privately owned irrigation infrastructure in the Goulburn valley region, but is then unwilling to come up with $25 million to keep the processing end of the industry open.

A conversation with Arthur Gietzelt

John Quiggin165 Comments

There’s been quite a lot of discussion about the political views of former Senator Arthur Gietzelt, who died recently at the age of 93, and in particular about claims[1] that he was a secret member of the Communist Party.

Although it’s scarcely conclusive, this is one of the few occasions when I have some direct evidence to contribute to a discussion of this kind. In the aftermath of 1975, I formed the view (ill-advised in retrospect) that I could help fix Australia’s problems by becoming a Labor party staffer. I wanted to move to Sydney, so I applied to all the shadow ministers based there, receiving replies only from Doug McClelland and Arthur Gietzelt.

I can’t remember much about McClelland, or even for sure if I met him. As I recall, he was associated with the Right, but didn’t have the thuggish persona that generally went with that group, especially after the rise of Graham Richardson.

But, although I didn’t get the job, I did have a brief conversation with Gietzelt, who said something to me along the following lines “When I was your age [I was in my early 20s at the time], we all thought the Soviet Union was the way of the future. But you young people will have to find a different way forward”. My politics then were much as they are now, on the left, but strongly anti-communist, and of course, I was puzzled as to how the left should respond to the resurgence of neoliberalism/market liberalism, represented at the time by Malcolm Fraser(!). So this resonated with me in a number of ways, and I’ve never forgotten it.

I took it to mean that Gietzelt had once been a communist sympathizer (whether a party member or ‘fellow traveller’) but had ceased to be so. That wouldn’t be totally inconsistent with an association with the then Communist Party of Australia, which had broken from Moscow after the invasion of Czechoslovakia in 1968, but that wasn’t the impression I had: I assumed that his views had changed well before that, presumably in the wake of the Hungarian invasion and Kruschchev’s secret speech.

As I say, this is scarcely decisive evidence, but Gietzelt had no reason to mislead me, and no need to say anything at all to me along these lines: in all probability we were never going to meet again, and we didn’t.[2] So, my own guess is that, if Gietzelt was ever a member of the Communist Party, it was well before he entered the Federal Parliament.

[fn1] Made most prominently, I think, by Mark Aarons, who, however, wasn’t drawing on personal knowledge but from a reading of ASIO files – scarcely a reliable source as anyone who remembers the ASIO of the Cold War era will attest

[fn2] It was a long time ago, and it’s possible that I was still a candidate for the job. But presumably, in that case, a secret CPer would be dropping hints in the other direction, to see if I was likely to be OK with the idea.

Some thoughts on energy storage

John Quiggin107 Comments

A lot of the discussion of my last post on energy issues was devoted to discussion of energy storage. Rather than get involved in that, I thought I’d collect my own thoughts on this. Broadly speaking, Here are some observations, labelled for convenience and partly derived from this study by the US Department of Energy

(a) Any reversible energetic process represents a potential storage technology. Reversibility entails that some energy is stored (as potential or chemical energy) when the process goes one way, and released when it goes the other. Of course, the Second Law of Thermodynamics implies that we will always add entropy (that is, lose useful energy) in this process
(b) Any technical or social change that shifts the time at which energy is finally used replicates the effects of storage
(c)Energy storage is in much the same position as renewable electricity generation was, say, 15 years ago.
(d) There are a lot of potential approaches, most of which have been developed in niches where particular characteristics are required. For example, car batteries need to store a lot of energy for given weight, household batteries need to store energy for a long time and so on. The needs of a renewable-dominated electricity system are very different and will require substantial modifications of these technologies
(e) With one big exception, there is currently no price incentive, in most jurisdictions to use storage technologies and therefore none are used
(f) The big exception is off-peak hot water. Coal and nuclear systems generate baseload supply when it is not needed for consumption. Price incentives are used to encourage people to store the resulting excess energy in the form of hot water
(g) There’s no technological obstacle, given the availability of smart meters, to changing the timing of hot water systems to reflect actual availability of excess electricity rather than reflecting the assumptions of a coal-based system
(h) All of this applies to electric cars. Even ignoring the possibility of feeding power back into the grid, the economics of electric cars would be drastically improved if they could be charged using low-cost power in times of excess supply (in the case of solar PV, around midday when lots of cars are sitting in parking lots)
(i) Something I just found out from the DoE study: Electric car batteries are considered unfit for services when they fall to 80 per cent of their original charge capacity (recall that energy density is critical for car batteries). But they still have a long potential life as static storage devices. This enhances both the economics of electric cars (since the battery has resale value) and of storage (since the opportunity cost is zero)

Here’s an older post, with a really simple example of how the argument works, once you get away from the fixation on replicating the characteristics of a coal-fired system.

Monday Message Board

John Quiggin69 Comments

Last week was pretty much a blur for me, with loads of work and other commitments. It’s already time for another Monday Message Board. Post comments on any topi. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please