Daily Archives: February 14, 2012

The dangerous effects of technology

With the rollout of the NBN (National Broadband Network), the benefits of a faster internet access will create huge benefits for Australians to use it for their own personal needs as well as develop and deliver new services online. But it will also create opportunities to further outsource local jobs that can be done cheaper in countries like the Philippines. The challenge for governments is to continue to invest in education and training to address  these new challenges and opportunities.

Broadband to speed trend of sending service jobs offshore

Ian Verrender
11 February 2012

It began as a trickle last year. There was the odd announcement detailing cutbacks and job losses at companies like CSR and SPC before steelmaker BlueScope announced massive losses, the closure of a major section of its Port Kembla facility and 1000 retrenchments.

Less than six weeks into the new year and the drip, while not quite a deluge, certainly has become far more serious.

A host of corporations, all facing tough trading conditions, has been lining up to deliver the bad news. Manufacturers, led by each of the three auto-makers, have been labouring under the yoke of a record Australian dollar that has made them uncompetitive. The price of imported cars has dropped while export markets have dried up.

As the political furore over emergency packages gathered heat, the smooth-talking head of GM Holden confided that governments around the world ”support” their automobile industries. Without it, the message seemed, there would be no Australian auto industry.

Other industries, however, don’t seem to engender the same kind of political support.

Aluminium maker Alcoa Australia this week confessed that it may have to close one of its two Victorian plants, at Point Henry, threatening the livelihoods of 600 workers. Again the company cited the strength of the currency along with the distressed state of the global aluminium market. The company is unable to compete.

In between, there has been a steady stream of dire warnings and pink slips from our financial institutions, capped off by a confession from Macquarie Group this week it had shed 1000 jobs in the past year with more to come.

While circumstances unique to each company often play a role in these decisions, it is clear that several forces have begun to take effect that will permanently reshape our economy and our roles within it.

The demise of our manufacturing industry is a familiar tale of steady decline, one that has been well-documented since the 1960s and a trend that now appears to be accelerating.

But it remains one of the nation’s biggest employers of skilled and unskilled labour and each factory closure comes attached with an enormous degree of individual pain that has the potential to spill over into the political arena, something rarely mentioned in the economics textbooks.

It gradually is becoming clear just how painful the ”economic adjustment” now under way within our economy could become. For while a stronger currency bequeaths greater wealth upon us all, through increased spending power, it’s no real help if you’re unemployed.

Up until around 2007, our economy was evolving in a fairly predictable and traditional manner. From Federation in 1901, rural employment gave way to a rise in manufacturing. And from the 1970s, as protection levels were reduced, manufacturing was overtaken by service industries.

In the mid-1990s, manufacturing was still the dominant contributor to the economy, accounting for 15 per cent of gross domestic product. But in the decade up until 2007, it declined to 12 per cent and it has been shrinking ever since as around 100,000 jobs have evaporated in the past three years.

Nevertheless, according to the latest statistics, just under 1 million Australians still are employed in the sector with the vast bulk in NSW and Victoria.

Those declines were largely offset by the growth in the services sector, which in the decade to 2007 grew from 10 per cent of our economy to 14.5 per cent.

A large proportion of those new service jobs sprang up in the business and property areas, more skilled and better paid. Australia was showing all the signs of a country that was growing up and an economy that was maturing.

The American experience was far different. Between 2001 and 2010, 42,000 factories closed and 5.5 million manufacturing jobs (about one-third of the total) disappeared. But the high-end jobs were not created to anywhere near the same extent.

There’s no prizes for guessing where most of those jobs went. China, with its heavily manipulated and artificially depressed currency, now makes more cars than the US and Japan combined.

Those trends now are accelerating as Australia’s transition to global quarry gathers pace. And it is no longer simply affecting our manufacturing. Increasingly, more complex service jobs are being sent offshore. That trend will gather pace within the next decade, driven by two fundamental forces.

The first is the changing nature of the developing economies themselves. As the middle class in China and India and other Asian nations swells, the number of highly trained graduates will grow exponentially. The offspring of factory workers, they will be no longer be content to work on car assembly lines and in clothing factories.

They will be providing information technology and business skills. And they will be available to sell those skills on an international market, thanks to the emergence of a second fundamental force – high-speed broadband.

Until now, India and the Philippines have been the major beneficiaries of the Australian trend to import business services, mostly through lowly-paid call centre work.

But once the National Broadband Network is constructed, the capacity for Australian business to import a vast array of skilled services from emerging Asian economies will be limited only by the imagination.

Already, this has begun to emerge.

Macquarie Group’s chief financial officer, Greg Ward, this week outlined a trend that is bound to be replicated by others in the banking world.

In 2008, Macquarie had about 100 people working in ”low-cost jurisdictions”, offering support services in areas such as technology, human resources, finance and business services. Those numbers have swelled to 1000.

While some may argue Macquarie is an atypical example, given it has been under siege ever since the financial crisis first gripped global banking four years ago, it merely has been forced to look harder for greater savings. The others will follow.

Westpac’s recent announcement that it would lay off 560 employees hinted that a large number of more highly-skilled jobs will be sent offshore. One pessimistic report last month suggested that up to 7000 workers in the financial services sector could find themselves out of a job within the next few years.

While the enormous capital influx into our resources sector has provided us with windfall gains and lifted our living standards, it also has the power to unleash powerful forces upon Australian society in the next few years.

Given it is a highly mechanised industry, not all those being laid off in manufacturing and services will be absorbed into this lucrative new growth sector. And therein lies a challenge for our politicians.

This story was found at: http://www.smh.com.au/business/broadband-to-speed-trend-of-sending-service-jobs-offshore-20120210-1siev.html

Developing renewable energy is always a challenge

Developing renewable energy is a challenge in the Philippines due to the high power rates. Its interesting in Australia, the cheap power generated from coal makes it equally a challenge.

Published on CSP Today (http://social.csptoday.com)

Australia: Solar Flagships extends deadline, re-opens bidding

Posted on Feb 7, 2012

The Australian government has given the Areva-led Solar Dawn project a six month reprieve, and has re-opened bidding for the PV portion of its national solar program.

By Giles Parkinson in New South Wales

The Solar Dawn consortium proposing to build a 250MW solar thermal plant in south-west Queensland as part of Australia’s Solar Flagships program has won a six month extension to its contract after initially failing to gain finance for the project.

Solar Dawn is led by the French nuclear energy giant Areva, which is looking to deploy the Compact Linear Fresnel Reflector technology it bought from Ausra in 2010.

However, the future of the $1.2 billion project looked uncertain after it failed to meet a December 15 deadline to complete financing, and after the subsequent withdrawal of the state-owned energy utility CS Energy, which declined to take up the O&M contract or an equity position in the project, leaving only Areva and the UK-based Wind Prospect CWP as the equity partners.

On Tuesday (Feb 7), the Australian government, which had offered it a grant of $465 million, allowed an extension to secure the financing by June 30.  Energy Minister Martin Ferguson said that after a six week review, his department had judged it to be the “best value” solar thermal project for the flagships program.

The decision was welcomed by project manager Anthony Wiseman, who said the delay would not affect its goal of delivering the project by December, 2015. The project had also recently secured Au$75 million in funding from the Queensland state government.

“Like all major infrastructure projects, finalising the design, approvals, financial and commercial aspects takes time, and we appreciate the continued support of the Commonwealth and Queensland Governments,” Wiseman said.

PPAs elusive

The consortium has been struggling to gain a power purchase agreement, crucial to securing any finance from bankers. Analysts have said part of the problem has been a surplus of renewable energy certificates in the Australian market, the novelty of trying to secure a PPA based around the ability to deliver during day-time peaks, and the sheer size of the project.

Other adjustments have also been made. Late last year, the consortium abandoned plans to add a “gas booster” to the 250MW array (which consists of two 125MW modules) because of design complications.  “Necessary refinements and adjustments are being made as the consortium works to ensure the project is in the best shape possible to achieve financial close,” Wiseman said.

“We are doing what we need to do to ensure the project’s long-term commercial success, whilst providing Australia with the foundations for a large-scale solar thermal industry.”

The departure of CS Energy had raised eyebrows in some quarters, but the utility’s CEO, David Brown, said it was based around a decision to concentrate its efforts on other capital projects. Brown said the company remained involved in a project with Areva to build a 44MW “solar booster” at its Kogan Creek coal-fired power station, near the site of the Solar Dawn project.

Construction of the $104 million solar booster project, which is supported by government grants, has started and is due to finish in 2013. “We are committed to working with them to explore potential synergies between the proposed Solar Dawn Project and Kogan Creek Solar Boost Project, which both use AREVA Solar’s CLFR technology,” Brown said.

PV bidding re-opened

While Solar Dawn won an extension, the Federal Government decided to re-open the solar PV component of the flagships program after the 150MW Moree Solar Project also failed to reach financial close. Moree Solar, a $930 million project that would benefit from a $306 million grant, comprised FRV, Australia’s Pacific Hydro, and BP Solar, despite the latter’s decision to exit the solar business.

Analysts suggested that the PV tender was thrown open to bids because three other projects remain deployment ready, and it would enable the bidders to reflect the fall in PV prices in the last 12-18 months. The cost of the PV projects might be revised down by around 30 per cent, insiders said. Solar Dawn might have benefited from a lack of serious rivals among the shortlisted candidates.

However, some consortia that did not make the shortlist are looking on with interest. This includes BrightSource Energy, which is constructing several large projects in the US based on its solar tower technology, which now have storage add-ons.

“There are tangible examples in other jurisdictions that that these sort of projects are being constructed,” said BrightSource’s Australian representative Andrew Dyer. “We would welcome the opportunity to revisit this and help Australia along in the quest of a balanced renewable energy portfolio.&rdquo

Competing with coal

Andrew Want, the head of the Australian Solar Thermal Energy Association, said it was difficult to get such projects delivered in Australia because of the relatively cheap source of coal-fired electricity. “Solar Flagships is a first step in helping Australia’s energy industry catch up with the rest of the world in understanding the value of solar thermal power generation, and learn how to develop large-scale solar thermal power as a key element of the future energy mix.” he said.

“As painful as the current financing challenges are, they are part of that learning process – and one of the key learnings is that our electricity market is not adjusting quickly enough to deliver Australia best value in the low-carbon economy of the future.

The current challenges facing the Solar Flagships projects are not unique to solar power projects, nor are they unexpected, explains Want. “They are a function of the structure of Australia’s electricity market and its focus on cost of power rather than value, and the lack of awareness in Australia of large-scale solar power generation technologies and project financing techniques.”

Giles Parkinson is a regular contributor to CSP Today and is editor of RenewEconomy.com.au [2]

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