Estimates Debate — Vote Energy

I would like to put two questions to the Minister. First of all, is he happy with the state of affairs with regard to energy in this country right now, and, secondly, does he believe that that state of affairs has become worse, better, or remained the same since the Labour Government came to power? If he thinks it has become worse, perhaps he could kindly tell us why, because there are people hurting out there, and hurting badly. They are facing price rise after price rise; they do not know when it will come or how it will come, and, furthermore, they do not believe they can take it any more.

Energy—electricity—is essential, and at one time this country had an abundance of it, but now it has slipped away, and we are barely keeping pace with what we need. The whole portfolio needs a ray of fresh thinking. Specifically, there are three aims. We must guarantee security of supply—that is essential. We have had two dry years, and business and individuals have suffered. We must make electricity available at a reasonable price to all New Zealanders, and available at the flick of a switch, and we must have increasing capacity. We must have more investment in the industry so that we can increase capacity. They are the three principle aims of the electricity industry. Our fourth aim would be to educate and encourage people, and, dare I say it, give some incentive for people to conserve energy. I have been told that in Australia, for example, the Government is offering financial incentives for people to install solar heating in their homes and wherever. It would make a huge difference here if many homes adopted solar heating for their water heating.

The Government recently announced that in October it will make it compulsory for retailers to offer the 30c plus GST maximum line charge for people who will use less than 8,000 kilowatts a year. That is a move in the right direction. Up until now, I understand that that has been voluntary and has been adopted by only one or two retailers but not everybody. The Minister is going to make it compulsory. But the public, by and large, do not understand it. Indeed, MPs in this Chamber do not understand it. Stephen Franks is on record as saying that that will give the high-flying businessman the opportunity for cheap power in his holiday home, and in an article by Ken Shirley of ACT, Mr Shirley endorsed that view. My understanding is that that is not true, and perhaps the Minister will advise this Parliament as to what the truth is. My understanding is that a person who goes on to that cheap line price will pay extra on a per unit basis and will gain something only if he or she uses less than 8,000 kilowatts per year. I understand also that it is aimed at only the individual’s principal home.

Cheap gas is running low, and New Zealanders are concerned. Hydroelectricity over the last 2 years has proved unreliable, basically because when our lakes are full they hold a capacity for only a few weeks, or a couple of months at most, I understand. So if we have a dry season, then we cannot depend totally on hydro power. Wind power is only a bit player, yet I think the Minister is pushing that like nobody’s business. But many, many people are concerned about the noise of wind generators, and they do not want to see windmills scattered all over hillsides. I understand that even if we adopt wind power in a fairly significant form, it could be only a bit player in the power game. But we have got an abundance of coal. There are huge coal resources in this country—15 billion tonnes. I am told that something close to 9 billion tonnes is reasonably accessible. Yet in reading the select committee’s report on coal, one has to wonder where the Government is going in terms of that fuel. We have an abundance of it.

I thank the member for his comments and acknowledge his ongoing interest in the energy portfolio and his knowledge of it. He wanted to know whether I am happy with the situation, and he wanted to know whether it has got better or worse. Well no, I am not happy with the situation.

I think the energy portfolio is quite a challenging one, and I think New Zealand is going through an energy transition. When one tries to work out why that is, one could say: “Oh, we are trying to fix up the Bradford reforms and all of that.”, but that will not do. The underlying cause of the energy transition we are going through is this: the Māui gasfield is running out. That gasfield had two characteristics. One was that it was very big. When it was discovered, it was big by world standards. Even now, it is big by New Zealand standards, but it is running out. The second characteristic of the Māui gasfield was that the gas was cheap. The gas was cheap because when the contract was signed 30 years ago the price inflator on Māui gas was allowed to be half the price of inflation. So right through the 1970s and right through the 1980s the price of Māui gas was rising at half the price of what then was a very high inflation rate, so that by now the well-head price for gas is NZ$1.80 or thereabouts a gigajoule. Let me just say that that is cheap.

New fields are being discovered. The member is wrong to suggest that gas is running low—gas is not running low—but he is right to suggest that cheap gas is running low. There are new fields. Pohokura is one, and McKee and Mangahewa are a couple of others that are running now. Dear old Kapuni does not seem to want to stop, Kupe will be around in another couple of years, and so on. Those gas fields, especially Pohokura and Kupe, will all sell their gas at a much higher price—maybe at twice the price; a 100 percent increase. So when the member says that we have price rises in electricity, that is the underlying reason. There are others, but that is the underlying reason. The future of electricity prices is not that they will return to where they were in the 1980s—they just will not. The member said we used to have an abundance of supply. We still do have an abundance of supply, but we do not have an abundance of cheap supply, and I invite the member to reflect on that. The cheap gasfield is gone, and the cheap hydro sites have gone—we can use them only once.

The member made a couple of other comments. He said that there is a bunch of things—he said there were four things, and then he added a fifth or whatever it was—that he thought were important for energy. I would simply say that I roughly agree with that list. I roughly agree, and I like the idea of security of supply at the top of the list. The member then went on to talk about incentivising conservation. I think probably he would prefer to use the language of incentivising energy efficiency, because conservation tends to mean going without and efficiency tends to mean using the same amount of energy but smarter. I would say to members that this Government has more than trebled the effort into energy efficiency over the last 4 years. The budget has more than trebled. That is a very, very significant increase and, in the same breath, much of it is still in front of us. There is still a lot of low fruit to pick in this country.

The member instanced solar water heaters. He told us that Australia has a subsidy system for solar water heaters. So do we—New Zealand has solar water-heating system subsidies. In fact, in the last Budget, that quantum doubled. The amount of money put in was doubled. The idea is not to subsidise every household, however. The idea is to grow quietly the level of solar water-heating installation by 30 to 40 percent a year until at some point—probably in the next couple of years—the number of units is so high that the price comes down and then the market transforms. At that point, solar water-heating will become more available and affordable for many other people. So that is the gain there.

Then the member went on to compliment the Government—and I thank him—on the 30c plus GST low fixed-charge option. He went on to say that the ACT party and the National Party had claimed this would mean rich people with baches would get cheap electricity, and he asked what was good and socialist about that. Well, of course, they are wrong, and the member is right. The ACT party and the National Party got it wrong, and that is because they keep changing their energy spokespeople and they do not have people who understand the energy portfolio—unlike New Zealand First.

I would say to the member that when he says that wind has only a small contribution to make, at the moment he is right. But the potential for wind is around 3,000 megawatts. Our total generation at the moment is around 8,000 megawatts, so let us not write it off. He talked about noise—I think he is wrong—and he talked about people not liking them. The member did not read the public opinion poll that was recently done by the Energy Efficiency and Conservation Authority, which said wind was easily the most favoured generator in New Zealand. It went down to a lower level and asked: “But what if it is close to you? What if you can see it? What if you can hear it? What if you can see and hear it? How do you feel?”, and still the level of support remained very high. So the member ought not to tell New Zealanders what they think about wind, because we have just polled them, and I think he should update his information.

The member says we have a lot of coal and should be using it. Nothing stops us except price. Coal is more expensive than wind, geothermal, hydro, or a combined-cycle gas turbine generally. Sometimes it is cheaper, and if there is an existing plant that has already been paid for, we should put coal in it by all means. That is why Huntly runs on coal. But generally speaking, the reason we do not have a coal plant built in New Zealand is not that the Government has a law against it—we do not. It is just that it tends not to match the price that can be achieved by other forms of generation.

Vote agreed to.

Vote Research, Science and Technology agreed to.

Vote Transport