Estimates Debate — Vote Energy

I wish to question the Government’s performance on energy supply, or the lack of it. This is the fourth year, since the Government came into office, that there has been an electricity crisis. New Zealand has relied on a broken-down cable between the North Island and the South Island, running at only 5 percent of capacity. An inefficient gas-fired plant that was riddled with asbestos had to be fired up to keep the lights on. The so-called emergency plant at Whirinaki burnt millions of litres of expensive and carbon-emitting diesel just to keep the lights on. That is not a matter of electricity supply; that is a lack of supply. It is an insecure situation.

Spot prices hit the highest levels since the electricity market began—over $450 per megawatt hours at some points. I will not question at this stage the way that we calculate that spot price. Suffice it to say it has brought misery and economic difficulty to a number of companies. High-value companies that would normally be having economic success were suddenly faced with a period of downturn and had to consider cutting shifts and reducing staff, simply because we seem not to have security of supply.

The Government’s response to the difficulty was pathetic. Mr Parker spent weeks telling the country there was no problem at all: the security of supply was tight, but nothing else needed to be done. He said for the entire infrastructure to be broken, all at the same time, was a coincidence. Finally and reluctantly, through gritted teeth, he was forced to admit that New Zealand needed to save power. In June the power companies, to which he had devolved responsibility, launched a power-saving campaign. What happened as a result of that campaign? I can imagine the misery in some households, where elderly people felt they had to have only one bar of a heater on and shivered in the cold. Old people, particularly, suffer under these experiences. People who would normally bottle fruit were constrained not to engage in such a useful activity. Finally, the rain fell and the Government escaped having to require even more serious savings.

💬 Pita Paraone: The rain fell and it’s been falling for weeks.

But it was pure luck, I tell that member, that we managed to get through that situation, not good management. The member knows that, because people have had a bit of rain up in the north.

The Government has been irresponsible in its approach. Savings should have started far sooner than they did. Of course we have reservoirs, but our reservoirs are generally fairly shallow and they do not hold great quantities of water. In a similar crisis in 2003, an electricity savings campaign started in April. This year the Government waited until mid-June before sounding the alarm. The difficulty with that is that we will not ever be able to calculate the economic damage done to New Zealand during that period simply through not having a reliable supply of electricity.

What is most galling is that the Government now mocks the Opposition for raising serious questions about New Zealand’s security of electricity supply. The Opposition was being responsible and was listening to the experts, who were raising the same questions that we were. We were actually the party that was looking out for New Zealanders’ interests, because the present Labour Government had walked away from its responsibilities.

Electricity prices have gone up by nearly 50 percent in the past 5 years; I think that they have gone up by 48 percent. Security of supply is perilous and not guaranteed.

💬 Hon Shane Jones: Geothermal energy’s growing.

Geothermal energy—I see. Well, thermal energy use is growing under this Government. We have heard Dr Nick Smith asking what the actual figures have been on carbon emissions, and there was a reluctance on the part of the Minister in the chair, the Hon David Parker, to take a call. Here the Government, as in most other fields, has utterly failed.

I rise to respond to some of the comments that have been made about energy policy and its relationship with climate change policy. Of course, we hear National again claiming that we had a crisis this year in electricity, which was quite the opposite conclusion to the one reached by the New Zealand Herald, the Dominion Post, and all of the energy analysts other than Bryan Leyland, who is always out there on the fringe with the National Party. In respect of this year, in the 3 months to June we had the lowest inflows to our hydro lakes since 1947, and the data going back to 1947 is so old that we have to question whether it would be quite as accurate as the data we have today. By June we had the lowest inflows since 1947, and, despite those record low inflows, we have maintained higher lake levels than was achieved in the 1992 power crisis under the previous National Government, when it had to put out streetlights and things like that.

💬 Sue Moroney: Now, that was a crisis.

That was a crisis, as was the crisis in Auckland in the late 1990s, when the lights went out on the whole of the Auckland central business district for 2 weeks, under a National Government. By contrast, we have managed our way through this situation very well—and why? It is because security of supply margins have improved under a Labour-led Government.

The two main aspects that we need to have investment in, in electricity, in order to achieve security of supply, are transmission, which is the big lines that are owned by Transpower, and sufficient generation build. In the 1990s, investment in transmission was running at about $50 million per annum. This year it is $450 million. That is a ninefold increase. Next year it increases further still. We have enormous projects under way, consented to under the Resource Management Act, throughout the country, and paid for without borrowing. In addition to the billions of dollars we have coming in transmission investment, which is, as I said, $450 million this year alone, we also have 1,400 megawatts of new generation capacity being built in the next 4 years. To put that in perspective, 1,400 megawatts is something like 10 years’ demand growth. Security margins in that period are increasing substantially, and they have improved significantly over the last 2 or 3 years.

Of that 1,400 megawatts, more than half is baseload geothermal. Just about all of it is renewable. The way to reduce our greenhouse gas emissions in the electricity sector is to build renewables. That is what this Government is doing. We have an ambition of 90 percent renewables by 2025. In order to achieve it we have to build 170 megawatts of new renewables each year. That enables the increase in demand to be met, as well as allowing some existing thermal plant to be retired or to be put into more of a dry year role.

💬 Phil Heatley: Ha, ha! It doesn’t do that.

I heard Mr Heatley laughing and calling out that that was not being done. This year alone we are building 400 megawatts. There are 400 megawatts of renewables under construction as we speak. As I said, 1,400 megawatts is coming on stream in the next 10 years, just about all of it renewable.

In terms of the effect on greenhouse gas emissions, of course, notwithstanding Dr Nick Smith’s comments, he is wrong. The deficit projected for the first commitment period under the Kyoto Protocol, which runs from 2008 to 2012, was until this year in the mid - 30 million tonnes. We have trimmed that deficit back to a projected deficit of 14.7 million tonnes, because we are on top of our electricity-related emissions. For the first time in our history our transport emissions have plateaued. We are on the way to carbon neutrality in the electricity sector by 2025, and in the whole of the energy sector by 2040.

An important part of that is energy efficiency. We have for the first time introduced into our energy settings the principle that, as a country, we should invest in efficiency ahead of extra energy, or extra energy capacity, where it is cheaper. In that cost-benefit analysis we should include environmental externalities, like the cost of carbon emissions, which are already a cost to the country.

How do we do that? We do it through an emissions trading scheme. How do we bring forward renewables? We do it through having a renewables preference through the emissions trading scheme legislation. Notwithstanding the cant we hear from the National Party, National members opposed both of those measures, and every other measure for sustainability that we have brought forward. Criticisms were made of the earlier projects to reduce emissions. Those, too, were unfounded. That has brought forward wind, and that is why wind is now economic in New Zealand. Under a Labour-led Government we are charging towards sustainability.

Vote agreed to.

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