A new Labour electricity policy

Written By: - Date published: 10:19 am, September 9th, 2024 - 70 comments
Categories: climate change, Deep stuff, Environment, labour, science - Tags:

lprent: Note for confused journalists and others. This is a proposal for a policy from a Standard author for Labour to adopt. It is not a Labour policy. Hint: read our About “We write here in our personal capacities and the opinions that are expressed on the blog are individual unless expressly stated otherwise (see the policy). We do not write on behalf of any organization.”. 

Our Energy Strategy

Our Strategy for electricity generation and reticulation and consumers is this: 

Empower the people in their lives and systems, secure electricity use and production for New Zealand in perpetuity, and make the electricity system serve New Zealand not the other way round.

How do we do that? There’s three parts to it.

KiwiPower Ltd

Labour will form a new national generation company called KiwiPower and it will put its 51% ownership of shares in Meridian, Mercury, and Genesis into it.

Its goal will be to secure New Zealand’s energy generation and storage in perpetuity. It will co-invest with public funds – and with private funds that share public policy goals – to form new generation investment and expand what it already has. It will decide the right balance of investment to new households  – for example in rooftop solar or domestic battery or other new technologies, or large-scale generation projects like offshore wind. The new entity will be based in New Plymouth. Its governance will be separated from politicians just as the NZSuperFund is now. 

It will have the ability to buy and manage full ownership stakes in businesses, including those it has a 51% share in already, if that’s the most prudent use of its funds.

Labour will invite all parties in Parliament to commit to the new entity just as they did in the formation of NZSuperFund. This will permanently remove party politics from energy.

This approach will also ensure that major investment and supply agreements with system-wide implications are scrutinised using the same assumptions and criteria.

New Zealand will shortly become as reliant on electricity as it is on water.  Left to market forces it has turned into a mess that no-one trusts. Electricity needs to be reasserted as a public good which supports the need of the whole of our society and the whole of our economy.

The private sector has done nowhere near enough to secure existing energy demand nor prepare for full renewable energy. It is apparent from our long term history that if New Zealand is to drive more innovation in electricity generation, it is going to need to be state led. This is how we do it. 

Transpower 

Transpower will be the network owner and investor. Its goal will be to permanently secure electricity supply to New Zealand and beyond, in perpetuity. 

It will be owned by the public. Local governments that own electricity distributors will be invited to transfer their value and assets of their companies into Transpower, and each will share proportionally in the profits. The 75% of Vector in public hands will immediately be returned to Auckland Council, who will in turn be invited to transfer its value into the expanded Transpower. To incentivise greater common national and local investment in electricity distribution, those local governments gaining shares in Transpower will not pay tax on any profit or dividend for a decade. 

Its governance will be separated from politicians just as the NZSuperFund is now.

Transpower will provide a priced guarantee for electricity supply to anyone in New Zealand using electricity and provide the end users with choices to get that security.

New Zealand cities, councils, and regions will propose local grid investment priorities such as suburban powerline undergrounding, or greater local grid redundancy with more substations or parallel HVDC lines, similar to the way local authorities do now with transport investment. 

We can directly motivate nearby countries to greater energy security and faster transition to low-carbon energy. 

Transpower will be directed to form an Australasian grid system with Australia via undersea HVDC transmission line from New Plymouth to Sydney. This will empower Australia and South East Asia to form a common electricity system, which will provide greater energy security for all participating nations in South East Asia, Australia and New Zealand. This will enable durable confidence in electricity that accelerates energy transition, and empowers us to sell daily surpluses into a common market.

No generator – public or private – will be able to own an electricity distribution entity. Same works in reverse. 

Consumer rights and consumer choice

Every electricity user – large and small –  will have their rights supplied set out in minimum standards that must be included in every supply contract – no matter if it’s owned by public or private companies.

The New Zealand Electricity Authority will be charged with ensuring energy consumers of all kinds have access to a reliable and secure electricity and that they pay no more than necessary for energy to their homes and businesses. EECA’s role will be dissolved into this revived entity.

They will do this by setting the maximum amount of revenue that monopoly electricity networks can earn from consumers.

The Electricity Authority will monitor network, wholesale, and retail market performance and compliance with national energy legislation. They will take enforcement action when there is potential or actual harm to consumers.

It will also set a default market offer which is a price cap on standing energy contracts.

It will operate a price comparison website to make sure consumers of all kinds can find the best energy for them. This will publish the best and worst energy prices in national advertising every month, listing each company. It will also publish the most secure and least secure electricity distributors and lines companies, listing each company. It will be a commercial name-and-shame machine for all to see.

All electricity generators and lines companies will be banned from making party political donations or political advertising during local or central election periods. Current and previous politicians can’t go on Transpower’s board.

Summary

Between Kiwipower, Transpower, and a tougher more consumer-focused Electricity Authority, New Zealanders will have trust in the energy system restored.

Yearly party political blame and bickering will stop and political influence will be stopped. 

New Zealand and Australia will lead an international electricity market to rival that of Europe or the United States, and our energy transition will accelerate as electricity supply and transmission security increases. 

Regulators will be powerful enough to hold the citizen and business needs high, and greedy corporates will be punished.

Under Labour New Zealand will take its power back.

70 comments on “A new Labour electricity policy ”

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  1. Kate Lang 1
    9 September 2024 at 10:37 am

    Great policy. It can't happen soon enough!

  2. Patricia Bremner 2
    9 September 2024 at 11:28 am

    This would be a game changer. It needs more promotion.

  3. lprent 3
    9 September 2024 at 12:04 pm

    I certainly don't trust the current generator companies to put in capacity in advance of foreseeable requirements. They simply don't appear to think further forward than their next dividends to shareholders. They certainly don't seem to look at maintaining affordable supply to citizens or other businesses as being their mission.

    FFS: they can't even handle having the capacity to deal with a minor dryish hydro year without making spot prices skyrocketing through the roof. That isn't an efficient preparedness and an efficient usage of capacity resources. That is simply criminal lack of preparation for a highly foreseeable set of events.

    Quite how they'd handle an actual widespread drought? Based on their behaviour since Max Bradford screwed up the electricity supply system, it would probably be to profit take as fast as they can while revaluing their capital value of their existing capacity upwards to reflect its new ability to mint money.

    Max Bradford certainly enhanced the perversion of economics in favour of shareholders whilst throwing the rest of the country into the role of being victims of their price gouging.

    Regardless, I'm going to be moving to a household solar / wind / battery as fast as I can, simply because I don't want my systems to be be subjected to the foolish idiots at the gentailers.

    • bwaghorn 3.1
      9 September 2024 at 12:47 pm

      Is outlawing spot pricing a possibility?

      • lprent 3.1.1
        9 September 2024 at 1:14 pm

        Under our current system it would be difficult because there is no duty of care about providing capacity. To try to put a legal spot price limit in would effectively nationalises the shares of the non-government shares because it would limit their property ownership. That opens up a can of legal worms.

        Whereas with this proposal, we would simply have the majority shareholder exercising their property rights. Firstly by ensuring that paying capacity improvements were put before any dividends through their members on the gentailers board. Secondly making the management incentives directly related to lowering electricity generation and distribution costs rather than orientated towards upwards revaluations of assets (as it is now from reading the annual reports). Thirdly by voting depreciation to be accounted for on old assets. And lastly by dispersing the generation and grid to make it more resilient with better maintenance.

        All of which makes the power generation and distribution to more closely align to our economic needs rather than that of shareholders.

    • Tiger Mountain 3.2
      9 September 2024 at 3:28 pm

      Solar is great. You just have to wash the panels twice a year with water, no cleaning products. Got 16 North facing units a year back, and because of the 9 month install wait–it is the Far North…, the panel price had dropped so much I could afford a second storage battery. So, we charge an electric vehicle and run the house. With a back up circuit for important items like garage doors, lights and the fridge, power cuts do not apply.

  4. thinker 4
    9 September 2024 at 12:23 pm

    I don't think the right will commit to it. The private sector profits aren't huge but on a risk vs return basis they are good investments and the RW wont want to alienate their support base.

  5. Karolyn_IS 5
    9 September 2024 at 12:34 pm

    Is there a link for this Labour policy?

    • Ad 5.1
      9 September 2024 at 12:36 pm

      It's not policy it's a set of ideas for discussion

      • bwaghorn 5.1.1
        9 September 2024 at 12:47 pm

        Can't see nuclear in there?!!

        • Bearded Git 5.1.1.1
          9 September 2024 at 1:09 pm

          Nuclear is expensive and absolutely not needed.

          The much cheaper option is to invest in solar, both rooftop and large-scale grid, with grid storage batteries, as they are doing massively in California, Texas, Australia and so on.

          This will enable less use of the water in the lakes such that additional hydro will always be available if there are occasional shortages from solar and wind…..effectively part of the existing hydro network will become Lake Onslow.

          The above scenario is consistent with ad’s suggestions in the post.

        • lprent 5.1.1.2
          9 September 2024 at 1:44 pm

          Nuclear is a stupid option for NZ.

          We have no place in NZ that is safe to store high or medium level radioactive waste geologically.

          We don't even have a place that would be geologically safe to have a large reactor or even a smallish one. The nearest we'd have to a usable site would probably be next to the Waikato river which has the river and the transmission lines to Auckland. Or possibly the Wairoa river north of Dargaville if the plant can handle brackish water and we add a lot of new transmission lines.

          They are out of the main geologically active zones, reasonably near a usage site (Auckland) and have water for the turbines. Of course they are also going to have a lot of local opposition as well.

          But we have no local sources of radioactives to mine. The known sparse deposits would be incredibly expensive to mine. It'd leave our baseload energy wholly dependent on an externally sourced and processed fuel.

          Besides nuclear power is too damn expensive and takes too long to put into place. Especially when you compare it solar, wind, or even geothermal.

          Just to nip the usual stupid hope in the bud, for all of the talk of over two decades of Small Modular Reactors, we still haven't seen only seen two actually built. There have been a long list of failed proposals simply because the power generated decades in the future would be really expensive compared to renewable technologies available right now. Once someone builds a reproducible tested reactor design that we could use, we will be in decades into the future.

          BTW: neither completed SMR indicates that they are viable and inexpensive option.

          The Chinese HTR-PM effectively started life as a project in 2001, and went online to the grid in 2021 with a capacity of 210MW. The Russian Akademik Lomonosov is a barge with a couple of modified icebreaker nuclear reactors on it that requires a lot of refuelling(every 3 years) and teeny power output of 35MW per reactor.

          Both cost a lot and the power generated is relatively expensive compared to what we are already producing in recent plants in NZ.

          Nuclear looks pretty sick economically compared to something like our geothermal plants. Which are way cheaper to create, faster to build, have no fuelling or waste issues, longer life spans, and that we have been shoving out every few years for decades. They also run on nuclear fission – just indirectly using the heat coming up from Earths hot core.

          • Macro 5.1.1.2.1
            9 September 2024 at 3:51 pm

            The nearest we'd have to a usable site would probably be next to the Waikato river which has the river and the transmission lines to Auckland.

            Nope!

            The Kerepehi Fault is the most northerly active fault in New Zealand with clear evidence for activity in the Holocene; it therefore makes a contribution to seismic hazard in large northern North Island cities including Auckland, Hamilton and Tauranga.

            …. In the towns of the Hauraki Plains in close proximity to segments of the Kerepehi Fault, the earthquake inten- sities are expected to be in the range of MMI 8–9 when the nearest segment ruptures, and may even reach MMI 10 in the extreme case involving combined rupture of the Te Poi, Waitoa and Awaiti segments (Table 4). The damage expected at this level of shaking is great and poses significant life safety issues for all structures without specific seismic design (Table S10). Structural damage to buildings with seismic design, even those built after 1980, can be expected in some instances. Landsliding and liquefaction impacts will be severe. Major earthquakes on the Kerepehi Fault when combin- ing recurrence intervals for all segments (six segments with an average recurrent interval of 6 ka) occur on average every 1000 yr or 1% likelihood per decade

            …The three large population centres of northern North Island–Auckland, Hamilton and Tauranga – may experience MMI 6–7 shaking as the maximum impact associated with rupture of the nearest segments of the fault.

            • Jilly Bee 5.1.1.2.1.1
              9 September 2024 at 5:33 pm

              Thank you Macro – I was thinking along the same lines. We lived in Morrinsville in 1972 when a decent shake, followed by a series of aftershocks gave us all a wake up call, the epicentre was in Te Aroha. We now live in Matamata and have felt the effects of the Kerepehi fault having the odd blip in the 9 years we have lived here. The last swarm of earthquakes originated close to Te Aroha and a couple had their genesis in a new found fault line in Waharoa. I read that article about the possibility of a MMI 7+ shake, which really gave me pause for thought. Being the oldie I am now, hopefully I'll be pushing up daisies, or my ashes will be helping some to grow.

              • lprent …
                9 September 2024 at 6:50 pm

                My dad feels like that. He is 85. He is living in a fairly active volcanic crater at Rotorua. Gives me the ‘too much knowledge’ creeps every time I drive down the crater wall into town to visit him.

                I live in a town with a about 50 odd volcanoes. But they’re nice basalt ones and are liable to give me reasonable warning to get out of town. Not like those explosive pimples in the volcanic plateau.

            • lprent 5.1.1.2.1.2
              9 September 2024 at 6:46 pm

              Ummm that is a new level. I knew there were faults there. Didn't realise that they were quite that level. Looks like I have been falling behind. Some nasty hidden faults around Hamilton as well.

              The modern SMR reactors could probably deal with a 7 at Huntly or Mercer if their purportedly inherent safe shutdown works. But I'd like to see a actual testing on that before I'd trust it.

              My biggest issue with a Waikato site would be when Taupo goes off again and dumps itself down the Waikato. The ignimbrite pyroclastic flows down the Waikato river valley would pretty catastrophic to Hamilton (as it has been in the past) and probably further down the river valley with a water waves from push and damming. But if that happened then a reactor breach would be the least of all worries.

              Perhaps I should move further north than Auckland. 🙂

              • Belladonna …
                9 September 2024 at 7:06 pm

                Perhaps I should move further north than Auckland.

                Tasmania? The whole of NZ is a geological disaster zone waiting to happen…

              • adam …
                9 September 2024 at 7:41 pm

                Perhaps I should move further north than Auckland.

                Drivers are worse, just saying…

              • Macro …
                9 September 2024 at 9:07 pm

                I did a paper together with Lloyd Geering in the late 70s early 80s can't remember the actual date for a national body on the energy requirements for NZ with an emphasis on the use of nuclear power. Our conclusions then we're the same as yours above. That is, there was more than sufficient renewable sources then and in the future the problems of disposal of nuclear waste and the safe sites for nuclear power stations.

              • lprent …
                9 September 2024 at 10:08 pm

                Problem is that there hasn’t been a modern survey looking at faults in the north. Bearing in mind what was found in ChCh, Kaikoura, and now doing side scanning in the Hauraki plains and the Waikato – want to take a bet that there aren’t undiscovered rupture faults down under large chunks of Northland? I wouldn’t take a bet against undiscovered faults under the surface. Planning from the surveys done prior to the 1970s is just scary. I remember looking at what they estimated from drilling for the Clyde Dam projects in the 70s and the horrible faulting that they found during excavations in the 1980s.

                Still way simpler, cheaper, and a lot safer to just develop dispersed renewable sources. Geothermal and hydro are ideal for base load. The problem with wind and solar is grid + storage.

                Onslow would be pretty good for soaking up excess SI hydro spillage. Even better if the bloody smelter wasn't taking uber cheap power. The Waikato system isn't particularly useful.

                Batteries are getting better for storage at a price point, not only lithium but also the sodium batteries that are starting to go into service. Small pumped storage and generation would be even better because they just rely on pumps and gravity. All of those are largely tested and in service technologies. They all have lifetime and generating costs that are way less than the full life nuclear power station costs. And a lot less risks.

                • joe90 …
                  10 September 2024 at 11:04 am

                  20/20 hindsight says the proposed Te Kawau scheme was only ever an engineers dream but when I started at the NZED trade school, Ladies Mile in the early seventies, we were convinced that one day we'd get to work on a NPP.

                  • Macro …
                    10 September 2024 at 4:55 pm

                    School mate of mine who after finishing his BE in electrical engineering was employed by the then Ministry of Works was sent off to Canada to study Nuclear power stations so your conviction had some basis in reality

                • Graeme …
                  10 September 2024 at 12:56 pm

                  When Clyde was being built the explanation (story doing the rounds of the site) for the unused 5th and 6th penstocks was that machines 5 & 6 were for a future pumped hydro project above Roxburgh. Whether that was true or construction site speculation I don't know, but I heard it from people fairly well up the chain.

                  Unfortunately geology had the final say on Clutha / Kawarau development, and Douglas and his mates dealt to the Ministry, so that as that.

          • Bearded Git 5.1.1.2.2
            10 September 2024 at 11:24 am

            Great post lprent….agree totally.

      • Karolyn_IS 5.1.2
        9 September 2024 at 5:22 pm

        OK. Thanks.

  6. Shanreagh 6
    9 September 2024 at 1:04 pm

    Wow Ad! "First we take NZ and then we take the world' (apols to Leonard Cohen)

    https://en.wikipedia.org/wiki/First_We_Take_Manhattan

    I like the use of the concept of the undersea cable. I can't help thinking that those thoughtful people who pushed for the cable joining the North & South Islands and us to Aus would be smiling at the thought that we can export via these cables.

    Will have another look a bit later….

  7. Michael who failed Civics 7
    9 September 2024 at 3:03 pm

    Nationalise electricity generation and, possibly, retail too. Don't pay current owners a cent in "compensation". The bastards have milked us for long enough. But I guarantee no "Labour" government will do anything of the sort. It's probably just as well we won't see a "Labour" government any time soon.

  8. adam 8
    9 September 2024 at 6:21 pm

    If we have learnt one thing in the last 40 years.Competent government can manage public goods. Whilst ideological goat lovers, have proven private interest is not capable to act in the public interest, as the greed factor is too alluring.

    • Kerry 8.1
      9 September 2024 at 9:01 pm

      Labour can keep talking till they are blue in the face, it won't change the fact that they fail 90% of the time at what they attempt.

      • KJT 8.1.1
        9 September 2024 at 9:10 pm

        Another satirist?

      • Macro 8.1.2
        9 September 2024 at 9:47 pm

        Better than the 100 percent failure rate of the current shower.

      • adam 8.1.3
        9 September 2024 at 11:20 pm

        When did I become a labour supporter?

        That said, I would have thought, the public health system that has worked better than what was before, since labour created it and state housing get them over 90%.

        Sure the whole ideological goat lover thing they have run with the last while has dropped their hit rate.

  9. Graeme 9
    9 September 2024 at 11:20 pm

    I doubt your restructure the gentailers would change anything. They would still be 49% privately owned, and still operating under the Companies Act, so obliged to return the maximum profit to shareholders. So the current shenanigans continue.

    A meaningful reform would be a new class of entity for public good entities that allows them to operate for public good, rather than private / state profit. The separation from the government of the day, like the Super Fund is on the right track, just got to get the entities out of the Companies Act. The same class of entity could control 3 Waters, roads and telecom infrastructure.

    With the Trans Tasman cable, and integration with the Eastern Australian market, has there been any work done on how the two markets would integrate, and the respective benefits to each market. I would presume the 3 hour time difference would allow some load sharing along with geographic and climate diversity with wind generation, but is New Zealand's excess generation enough to make enough impact to Australia to warrant any contribution to the cost of the cable. Also would Eastern Australia have any excess to export to NZ, and would that be economic. We're not Singapore that produces 94% of it's electricity from natural gas

    • Ad 9.1
      10 September 2024 at 7:20 pm

      I don't think we need to reinvent things too much. But the models to watch are the British Energy model from British Labour which is based in Scotland, Electricite de France S.A. (EDF), and of course Orsted of Denmark which has led its country through a massive shift from carbonised to decarbonised power.

      There have been good studies done on how the Northern Territory feeds would integrate into Singapore's. The next questions however will be along laying cable on the continental shelf and EEC of Indonesia. Not insurmountable when many northern European states have done it already.

      No, eastern Australia would have little electricity to sell us. That makes our supply good for them and good for us.

      I'm not presuming this collection of reforms will solve everything. I would certainly expect that Labour's Winter Heating subsidy for old people would still be required, for example.

  10. Descendant Of Smith 10
    10 September 2024 at 8:49 am

    They would still be 49% privately owned, and still operating under the Companies Act, so obliged to return the maximum profit to shareholders.

    There needs to be a clear removal of this requirement.

    Also the questions of cross – subsidisation need to be addressed as well as discounted pricing. Previously urban areas cross-subsidied rural as part of the commitment to rural electricity supply. Business also cross subsidised home.

    In my view all household consumers should pay the same rates across the country. A low rate for a certain level of usage with a couple of tiers of higher rates for higher usage.

    Should bulk business users get discounts is an interesting question. It seems to be costs have been pushed from business to homeowners over the years and small businesses pay more relatively. Someone has to pay the costs of generation and if it isn't the bulk buyers then it has to be everyone else.

    • Graeme 10.1
      10 September 2024 at 10:58 am

      Electricity price could be framed as tax cuts paid for by using your power bill as a de-facto tax on everyone, but offset by divided for those who own shares.

      Once government saw electricity as a source of revenue, rather than an economic and social good, we went down the gurgler. Not to say that energy shouldn't have a price, sufficient to encourage efficient use, but that price shouldn't be the limit the market can stand.

    • KJT 10.2
      10 September 2024 at 3:06 pm

      Home owners and small business have been cross subsidising power companies "competing" for big customers since privatisation.

      Not to mention the extra costs of fake competition and the disincentives to add generation for cheaper power.

      Then there is the constant "revaluation" of assets to justify predatory pricing.

      The real answer is to set up sustainable state owned generation and put the current ones out of business. Nationalisation without compensation is the best option. But I don't see any political party having that much courage.

    • Belladonna 10.3
      13 September 2024 at 10:35 am

      I'm hoping that you're allowing for graduated increases in rate depending on usage.

      There is a very good reason to incentivize people to use less electricity. In the same way as there is good reason to incentivize people to use less water.

      • Descendant Of Smith 10.3.1
        13 September 2024 at 10:37 am

        I'm hoping that you're allowing for graduated increases in rate depending on usage.

        Maybe if you read or comprehended what I wrote you'd know the answer.

        A low rate for a certain level of usage with a couple of tiers of higher rates for higher usage.

    • SPC 11.1
      12 September 2024 at 10:06 pm

      This may be why.

      Decreasing gas supply resulted in a drop in gas use, with large users responding by continuing to operate at lower levels.

      https://archive.li/i0rz6#selection-3891.95-3891.114

      • Graeme 11.1.1
        12 September 2024 at 10:37 pm

        Or Methanex can make more profit selling the gas on the spot market than processing it into methanol.

        • Graeme 11.1.1.1
          12 September 2024 at 10:56 pm

          Yep

          The Government will pay between $24 and $30 a gigajoule to buy back natural gas that Methanex has bought for less than $6 a gigajoule, according to industry sources.

          A spokesperson for Economic Development Minister Melissa Lee, who has responsibility for such procurement contracts, said she couldn’t comment until an agreement was finalised.

          But an industry insider defended the proposed arrangement, likening it to someone renting a tuxedo for $200 rather than buying one outright for $600.

          The Ministry of Business, Innovation and Employment (MBIE) is understood to have found itself over a barrel re-negotiating an “all-of-government contract” to source gas for schools, hospitals, prisons, universities and other public sector bodies this year.

          This looks a tad messy, and another Melissa Lee project, so could be an interesting week ahead.

          • Descendant Of Smith 11.1.1.1.1
            13 September 2024 at 7:54 am

            Stephen Joyce's whole of government contracting seems to have simply resulted in the transfer of public funds to the corporate private sector with no reduction in cost.

            • Graeme 11.1.1.1.1.1
              13 September 2024 at 9:18 am

              The entrails of this one could be revealing.

              We've got a resource (fossil gas) that's running out a lot faster than expected, demoralised public servants negotiating a supply contract with some fairly sharp companies, which may be 51% government owned, and overseen by a minister with a solid track record of hubris and fucking things up.

              Of course it will all because Labour banned new exploration.

              Reality is that we ere sold a pup with Taranaki gas, it was squandered on low return uses (we weren't alone there), and when it started to not produce as expected no one would come out and directly say it would run out very soon.

              It'll get very tricky soon as a lot of people will be locked into buying imported LPG for hot water and cooking. Most houses built after mid 90's have an external gas hot water heater, replacing those with electric alternatives generally isn't trivial, there's nowhere in the house for an electric cylinder, and external cylinders have their challenges. Electric replacements for cooking can easily turn into a full rebuild of the kitchen to get enough power in there. Add in appartments and unit titles / cross lease and it really turns to fun.

              • dv …
                13 September 2024 at 9:30 am

                The irony is that an energy source can be found by looking out your window. Okay there will need to be some builds to make it work BUT….