No Right Turn has an apt way of putting things some times. The way that the smelter operates is the exact equivalent of some thuggish barbarians with big swords extracting tribute for not burning, raping and pillaging. In other words Danegeld or any other form of protection racket. I’ll repeat his succinct post here and then follow up with a few of my comments.
So, Rio Tinto has supposedly reached a deal with Meridian and Contact to give them cheaper electricity prices and keep the Tiwai Point smelter open. Down south, they’re celebrating. But the rest of us shouldn’t be. I’ve argued before that the best thing this foreign polluter can do is close. It uses 12% of our total electricity generation, effectively making it responsible for that entire sector’s carbon emissions, while receiving huge carbon subsidies (latest figures: 1.7 million tons in 2019, worth $65 million at today’s prices if they’re getting an equivalent amount this year, a huge whack of their annual “profit”, and enough for us to pay every worker there $65,000 a year for the rest of their lives to find something else to do). Added to that, their constant threats of closure to extort ever-more-favourable terms from governments who want it to close, but not on their watch, plays havoc with our electricity market, deterring renewables investment as no-one can be sure whether there will be a glut in three or four years time. The smelter seems to exist solely as a machine for extorting subsidies from the New Zealand government – subsidies paid by you and me, in the form of higher taxes and electricity prices. And our chickenshit politicians keep falling for it, and paying the BluffGeld, to avoid the horrific situation of us not having to pay them anymore.
Rio Tinto says this deal “mak[es] the smelter economically viable and competitive over the next four years.” Naturally it expires in 2024, just after the next election, so next election time we can expect them to be claiming that the smelter is economically unviable and uncompetititve and asking for another subsidy. And I expect our chickenshit politicians to roll over and pay them off again, dooming us to higher emissions and more expensive electricity. Because once you pay the DaneGeld, you never get rid of the Dane.No Right Turn: “Paying the BluffGeld“
The point about the level of risk is especially valid. Markets are horrible at dealing with longer term uncertainty. This on again, off again extortion damages the current electricity markets. As NRT says “…their constant threats of closure to extort ever-more-favourable terms from governments who want it to close, but not on their watch, plays havoc with our electricity market…”.
It isn’t hard to find statements by renewable companies and analysis on the electricity market (which looks about as free and fair as any other semi-monopolistic cartel) to support the havoc argument. I don’t have the time to do it right now. But I’m sure that some will come up in comments.
The generating capacity at Manapouri isn’t going away. At some point this extortion and blackmail by the Tiwai Point operators will have an unhappy ending – the Electricity Authority needs to perform its basic mission, providing an efficient market.
They need to continue to fund Transpower to fund a line direct from Manapouri towards the alternate use sites around Christchurch. In other words the “Net Zero Grid Pathways: Accessing Lower South Island Renewables“. The first part of that is underway…
Clutha Upper-Waitaki Lines Project
In the immediate-term, Transpower has committed to deliver the Clutha Upper Waitaki Lines Project (CUWLP) by May 2022. The project is set to deliver benefits in the order of $100m per year by enabling low-cost renewable electricity generated in the lower South Island to be transported north. For more information visit the CUWLP project page hereTranspower: “Net Zero Grid Pathways“
But I’m sure that the usual short-sighted responses from National’s shareholder community will want to divert the costs of that and the follow up projects to get rid of the structural into immediate rewards like short term lower prices and larger dividends to shareholders (including the government itself). After all National prefers tax cuts over long term planning – you only have to look at the disaster of their immigration without building housing ‘policy’ of their last terms in office to see that.
But I also suspect that there needs to me more of a user pays incentive for Meridian and Contact as well. To speed the grid reconstruction in the lower South Island up, the infrastructure levies on them should increased. After all, the reason for putting the infrastructure into the lower South Island si to provide some choices when inevitable the government or Rio Tinto decides to give up on playing chicken. The shareholders of Meridian and Contact should carry the can for that.
In the meantime, I think that I need to send a consumer message to gutless short-sighted wonders at Meridian and terminate our power account. I’m interested in a long-term sustainable power supply to run this site and this country with. Clearly Meridian isn’t being sustainable over the long term. They are wasting their asset of generated power into an unsustainable industry and effectively charging me higher prices to support that.
For the country as a whole we need to increase our available power generation and distribution to target non-fossil fuel systems. Like electric vehicles. Having Meridian and Contact need to focus on the longer term infrastructural issues instead of the shorter term in the way that they appear to have been doing. Clearly the dumb arse market solution that National foisted on us in electricity isn’t achieving that.