Tricks of Accountancy?

I previously demonstrated that the NT Power Utility (Power & Water Corporation) puts about $698 of margin on the cost of the energy content of every 100L of fuel that they turn into electricity (albeit not overly efficiently).  This assumes they pay similar fuel prices to us. However, given how much they buy, I’d imagine they get their fuel MUCH cheaper. 

They nevertheless sell the output energy to us at $0.265 per KWh.  It seems fair to assume that the margin for ‘on costs’ (at the very least 365%) is used to cover the costs associated with the inefficiencies of burning the fuel, servicing the Internal Combustion Engines and generators, distributing the electricity over the grid and paying for the management and staff that make this all possible (oh, and amortising the original investment in the publicly-owned Grid and Generation assets – if that’s not already done).

Still, fossil-fuelled electricity looks somewhat expensive when compared to solar PV – with fossil fuels needing at least 365% on-costs!

Naturally – if the Power Utility used solar PV there’d be some solar panels, batteries and controllers to amortise (say over 10 years – ‘though panel warrantees are now 25 years – so they could be amortised over a longer period if so desired) and of course there’s the grid to amortise, maintain and operate (management and staff to pay, etc.) but the zero-input cost on fuel (which effectively negates any photon to electron conversion inefficiencies) would make a significant saving (no fuel cost!) that the utility could (should?) pass on to us, the NT public – the ‘owners’ of the utility operation!

Given that the PV panels, controller and batteries don’t need a lot of maintenance, or management (they’re intelligent devices) – and never need an oil change, doesn’t it seem reasonable that we should expect a dramatic reduction in the price of electricity?

Of course, someone may have calculated the ‘on costs’ of solar PV deliberately disadvantageously? Given a fuel cost of ‘zero’ – all PV ‘on costs’ are infinite when expressed as a percentage of fuel cost. If such accountancy is applied without thought (or is applied with malice aforethought) we all suffer!

Is it safe to assume that our politicians are smart enough to spot (and prevent) that?

Published by Malcolm Duffield

Malcolm Duffield provides advanced high-level sales coaching, ‘basic sales training’ and sales training for pre-sales and post-sales engineering staff. In ways markedly different to the typical classroom lecture approach. Like the game of ‘Go’ – selling is strategically complex, nuanced and more dependent on intuition than process. Sales – process alone is no guarantee of success because customers are humans, are fiendishly complex, intuitive and need to be met on their terms. Humans need to interact rather than merely transact. They have many needs, wants and aspirations – not all clearly stated. Having a proposal that is a good fit to the stated need is a start. Having a price that’s in the ball park will also help – but what will invariably make the difference between success and failure will be our ability to understand, connect with and provide value to the customer as a person. Focused primarily on IT sales, where solution and value, but above all human connection through respect, integrity and empathy, have to be brought together to win high-value deals - it would appear that other 'capital acquisitions' benefit from a similar approach. I have 30 years experience in such sales, and know what works and what doesn't work.