Market Design In Practice
The revolutions in the energy and transport industries have different origins. In energy: the incredible fall in the cost of solar panels, and the incredible rise in the quality of battery technology, means power can now be produced efficiently and stored effectively exactly where it will be consumed. In point-to-point transport, the rise of cloud computing means companies like Uber, Lyft and Google can use the cloud to run sophisticated algorithms that match people headed in a particular direction, with people willing to transport them.
Both of these technological revolutions have had this effect: they’ve surged new capacity into the market, with relatively minimal investment needed. For economists, this is an occasion for celebration. For incumbents, it’s a signal of impending competition. But for state governments it should be a cue for leadership. Because it is state government which decides first whether this new capacity trades in the market. And it is state government that decides the circumstances in which it trades.
The point about solar: how it gets on the grid matters.
NSW Labor knows it. Luke Foley acted. He committed to new market designs for both industries. In energy, he committed Labor to keeping the grid in public hands. And he said if the grid can’t be kept in public hands, it should, by law, remain neutral. Neutral towards which forms of energy — be it Coal, Solar or Wind — that can connect and compete on the the grid. And neutral in deciding what price the grid pays for the power each generator creates; especially the price the grid pays for surplus power.
In point-to-point transport he made a commitment of equal value. The call in his budget-reply address for a point-to-point market based on co-existence between ride-sharing and the traditional taxi industry. Pledging to make NSW the 25th jurisdiction in the world to accept that ride-sharing can’t be wished away by RMS cancelling the licenses of forty drivers; so it should be used to serve the public good.
Neither of these commitments has been matched by the Baird Government. In time, they will. But in the meantime, we Progressives should be thinking about how to impel these revolutions forwards. About the suite of policies needed that elevate New South Wales to the top of the new global value chains in both the energy market, and in point-to-point transport.
In energy — one policy that would have an impressive impact would be for the New South Wales Government to switch all its power to renewable energy by 2030. Every hospital. Every school. Every TAFE. Every train. Powered by clean energy. Making the New South Wales Government one of the world’s biggest buyers of renewable energy. Making a massive contribution to meeting Bill Shorten’s target of having half of Australia’s power generated from renewable sources. A practical example of how a creative periphery creates the conditions for a creative centre.
In point-to-point transport — an equally impactful commitment would be to make New South Wales the first jurisdiction in the world to incorporate the taxi-industry and ride-sharing into the public transport system. Assigning to the taxi-industry and ride-sharers responsibility for last-mile transport: the journey between a bus-stop, or railway station, to a person’s home. An adaption that will provide people with a practical alternative to their car. An innovation that can only be undertaken if you welcome technology that connects people going in the same direction at the same time, with the people willing to transport them. If you have a Government willing to sync that technology with road and rail.
Both these ideas have this in common: they are leverage plays. They give the NSW Government sufficient clout to move the state to the top of the global value chains. So if the NSW Government becomes the world’s biggest buyer of solar panels, if it becomes the biggest buyer of battery technology, it will have enough clout to meaningfully partner with Trina Solar and Tesla in the manufacture of both. High tech manufacturing; exportable product; growth industry; long term jobs: achieved with the canny use of the State Government’s purchasing power.
The same opportunity is available in point-to-point transport. If New South Wales is the first jurisdiction in the world to plan for last-mile transportation, it will be the first jurisdiction in the world to develop the network of designers, modellers, planners and firms that will collectively comprise a new knowledge core about urban transport. This — in an urban age. When, by 2050, three out four human beings will live in cities. When the demand for people who can plan smart cities outstrips those who can build them. Another chance for New South Wales to go to the head of the class.
Market design, be it for energy or transport, are a tool used by Governments who aren’t retreating from the future, but are instead, shaping it. But those who succeed know for whom that future should be shaped. Ultimately, its Citizens. And Citizens, judge the success of any market according to whether it delivers them more power; either as a consumer or as producer. Which is why future market designs are entwined with the future of work. And the future of work has always been Labor’s first mission. A responsibility of both State and Federal Labor Governments.