Power and Speed

Written By: - Date published: 10:22 am, August 27th, 2024 - 17 comments
Categories: Abuse of power, Christopher Luxon, national, Politics, same old national, Shane Jones, simeon brown - Tags:

We are in a power crisis and the government has had to respond, but will their response make any difference?

We should set out that the power supply+price spike is real.

As Minister Shane Jones warned Parliament just over a month ago, soaring power prices have been blamed for the impending closure of Winstone’s Tangiwai sawmill and Karioi pulp mill just outside of Ohakune, at the loss of over 200 jobs in an area in which another local economic bedrock, tourism, is down to a minimum because the snow fields are no longer reliable and the Chateau Tongariro is shuttered.

Methanex has temporarily mothballed its entire operation in northern Taranaki because it can make more money onselling its gas to electricity peaking plant generators. It is the world’s largest generator of methanol, but with local gas rapidly running out, its future is uncertain.

The Tiwai Point aluminium smelter has agreed to further reduce its energy use to help ease the country’s supply constraints. The agreement with Meridian Energy sees the smelter reduce electricity consumption by another 20 megawatts (MW), with the energy made available to the national grid over a five-week period. The deal was separate to earlier demand response agreements signed with Meridian and Contact Energy.

Last year another major gas user, Refining NZ at Marsden Point, simply ceased operation.

Our gas use has been declining for some years now. In exploration, most explorers had long since given up on New Zealand before the new offshore exploration came in, because there just wasn’t any new gas to find.

Unhelpfully, MBIE made a massive and fast revision downward in the amount of gas they thought we had.

The amount of natural gas in New Zealand’s reserves has decreased by 335 PJ or 20% between 1 January 2023 and 1 January 2024, to 1,300 PJ.

44% of this reduction is due to gas extracted and used over the course of 2023. The remaining 56% is a result of revisions to reserves figures from gas field operators. Operators revise their reserves figures as they get a better idea of exactly how much gas exists in – and can be extracted from – their fields.”

Not sure how many New Zealand still have gas appliances from being encouraged to do so in the late 1970s and 1980s after the big gas field finds, but I still have a flat with a gas hot water cylinder which would take a bit to replace.

Prime Minister Luxon is doing what he’s entitled to do which is blame the previous government. In reality these massive short-term crises have been caused by a super-low rain-and-snowfall winter in the South Island which means our hydro lakes are low and the big four generator-retailers particularly Contact Energy can’t generate as much electricity, and by sustained low investment in new generation of any scale.

That’s Meridian, Contact, Genesis, and Mercury. In August 2023 the companies announced their largest-ever single-year rise in earnings, with a combined profit of $2.7 billion, or $7.4 million out of our wallets per day. The majority of that went to the government in both tax and direct dividends.

Sure, some like Mercury have invested recently, but generating that amount of profit is the powerful incentive to run their existing generation lean and hold on to new generation consents, and keep on maximizing profit. So that’s what they do, and when we complain they run to the government and blame it on consenting.

And contra Luxon’s assertion that the previous government stifled energy investment, in 2023 the Electricity Authority reported that committed generation was already slightly more than the amount of generation required to displace the uneconomic thermal generation left in the system.

There has also been a step up in the pipeline of “actively pursued” generation that could be completed by 2027 (mostly solar and wind) compared to the last survey”, from 12,700 GHh to 20,800 GWh, and particularly in large utility-scale projects.

Of none involve pressuring power companies to lower their prices, or to invest more capital more quickly in new generator capacity.

If you’re wondering about the rush to put in an LNG port (into either Taranaki or the old Marsden Point site), look no further than Meridian Energy. Already 51% government owned, they want to be in the consortium that will make this facility happen. When Meridian’s dams are low, it has to hedge for low lake levels by buying gas- and coal-fired electricity from companies like Contact and Genesis. The Cabinet decision on investing and locating it will be done by October this year. That’s fast.

It would be useful for Labour and the Greens to swallow hard and admit that they really did and do need gas to buy us time to transition away from oil. More time than they thought. Otherwise Luxon will offload more and more of the blame for brownouts and company failures back onto their own noble 2017-2023 conservation measures, and every time we open a power bill we are likely to agree with him.

On current trajectory, we are about to see this govenrment fully empowered to form essentially another Think Big, but this time one in the full cooperation of local gentailers, local super funds, and international investors, all working without the guidelines of a national energy strategy.

It’s also going to become very, very hard to stop new power stations from being built near you. The Fast Track Approvals Bill is intended to be in force by the end of this year.

The default consent duration for renewable energy projects will be 35 years, which is really no change because wind generators barely last that long and neither do solar.

They are also going to further concentrate market power by enabling generators to own lines companies. If one looks at Vector and Aurora’s performance in respectively Auckland and Otago, that’s a chilling thought. That’s the opposite of what should happen.

They are also introducing a Bill to enable a regime for offshore renewable energy to be in place by mid-2025 with the aim of opening a first feasibility permit round in late 2025. This actually builds on over a year of work by the previous government who had based a proposed offshore wind generation regulatory regime on the Victoria Government one. But don’t let anyone be fooled into thinking that offshore wind will be fast to build or easy. Even if the NZSuper consortium buys the existing undersea networks off Taranaki, they will be difficult builds to both form and to maintain.

There’s some not unreasonable questions that aren’t answered in this blizzard of “do something” policy announcements:

  • Will our power prices come down as a result?
  • Will our manufacturing factories and their jobs be saved as a result?
  • Will power companies actually invest more in generation as a result?
  • Will the government use its own dominant shareholding in the big four companies to achieve any policy outcome at all?
  • What if any difference will occur to what is happening right now?
  • Will New Zealand be measurably more energy-secure than now in the term of this government?

Labour and the Greens would do worse than to promise the public that they will expect answers to those questions inside a year to see if this govenrment is actually working.

And finally for Labour and the Greens, is it time to agree that, as with the Carbon Zero arrangements, maybe it’s time to form a cross-party national energy strategy that we can all live with. Because otherwise this government has pretty much all the political cards it needs to play, and can keep playing the equivalent of political Snap at every crisis, when the left and still figuring out multi-partner Bridge. 

17 comments on “Power and Speed ”

  • Comments are now closed

  1. lprent 1
    27 August 2024 at 1:22 pm

    Will power companies actually invest more in generation as a result?

    Unlikely. They haven't for the last 30 years. NZ gets dry years, 1992 being the obvious example. However that was when we actually had a drought. This last year has not been one. It has simply been a year with mildly high demand.

    A combination of below average inflows in Aotearoa’s hydro generation catchments, constraints in the gas market, high electricity demand in May and recent low wind generation has contributed to a rapid decline in hydro storage.

    By early August, hydro lake levels were just 55% of average for the time of year, which is among the lowest levels we have reached in around 90 years of historic records.

    What we have seen is the power companies putting in for consents, getting them, and then not using them. Pretty obvious when looking at the list of proposed powers stations.

    For instance Picks one at random. Consent applied for in 2011, granted 2012, appeals resolved 2013. Their consent ran out a decade later, so they applied for and were granted an extension.

    The Castle Hill Wind Farm is a proposed wind farm being developed by Genesis Energy. It will have up to 286 wind turbines with potential output of up to 858 MW, depending on what model(s) of wind turbines are selected. The project is estimated to cost more than $1.6 billion and will be New Zealand's largest wind farm.[1]

    The resource consent application was lodged in August 2011 and consents were granted in June 2012. This was appealed to the Environment Court. In July 2013, Genesis announced that all appeals had been resolved.[2] Resource consent for the project expires in 2023.[3]

    Resource consent for the wind farm expires if work is not begun before 2023.[4] In February 2021 Genesis announced that constructing the wind farm remained an option.[4][5] In August they announced they had no plans to build it.[6] In September 2021, Genesis said that the wind farm was still part of their plans for renewable development, but that other projects had been prioritised ahead of it.[3]

    In March 2023 Genesis applied to extend the resource consent for the wind farm and vary its conditions.[7] Its proposal involves reducing the size of the windfarm to 300MW.[8] Consent was granted in October 2023, and now expires in 2031.

    The problem isn't consenting. It is power companies dragging the chain about building. The consents should be for 5 years, automatically revoked if they haven't started work in 2 years.

    Automatically nationalised without recompense and sold at auction prices if they haven't fully completed in 10 years. No extensions.

    That should improve performance.

    Fixing the energy market would also help – probably by scrapping or limiting it. Clearly it isn't working for energy supply and for changing our generating mix.

    Requiring long fixed price term contracts with the retailers and customer companies from the major generators. Leave the spot markets to the non-major generators.

    • Ad 1.1
      27 August 2024 at 2:36 pm

      Our biggest wind farm was called in by Minister Smith in the previous government. Result: decreased number of turbines, years extra delay, redesigned, extra cost and years to complete and connect to Transpower. That was Turitea.

      And yes the questions were mostly rhetorical.

  2. Bearded Git 2
    27 August 2024 at 7:41 pm

    NZ has 4.4 gw of solar power proposed or under construction (google solar power NZ and wiki lists all the many projects).

    This is roughly equivalent to 10 Clyde Dams and doesn't include any rooftop solar which is finally starting to take off, though still only 2 per cent of NZ homes have it…30% in Oz.

    It would be silly to spend anything on LNG infrastucture because of one dry year …much better for a serious push by the government to get all the proposed solar schemes happening while offering significant subsidies for rooftop solar.

    Also keep the coal power station as a back up till solar happens…the coal burn only amounts to 3% to 5% of NZs power.

    • SkyLark 2.1
      27 August 2024 at 8:03 pm

      Better yet, store a stack of pine logs at Huntly and a chipper.

      Turn the logs over by training them through to Tauranga for export and rail /truck in a fresh load.

      When a dry year looms, start the chipper and feed the Rankins.

      This was seen as the best option by the NZ Battery Project. The files are still available at MBIE.

    • lprent 2.2
      27 August 2024 at 8:42 pm

      NZ has 4.4 gw of solar power proposed or under construction

      See my first comment in this post about consents and built.

      Solar has exactly the same problem as every other power projects. They get consented reasonably fast, but then don’t get built or get built years after consents. That is despite a much simpler build and installation process.

      For instance https://en.wikipedia.org/wiki/Pukenui_Solar_Farm

      Far North Solar Farm applied for resource consent for the project in February 2021.[3] Construction began on 1 July 2021, with Prime Minister Jacinda Ardern turning the first sod.[1] It was expected to be operational in the second half of 2022, but as of October 2022 the site was untouched.[4] Earthworks started in late 2023.[5] Construction started in April 2024, and is expected to be complete by early 2025.[6]

      It isn’t exactly hard to put in solar farms. It isn’t like a dam or geothermal with the kinds of geological issues with those. Basic earth works of the type required for a housing development.

      • Bearded Git 2.2.1
        27 August 2024 at 8:49 pm

        Agree with all of that…but this has nothing to do with Labour and everything to do with the structure of the energy market in NZ.

        And rooftop solar is a piece of cake…they don't take long to install these days. Rooftop solar powered 51% of Queensland's power last week. Incredible.

        • lprent 2.2.1.1
          27 August 2024 at 9:04 pm

          They also tested the South Australian rooftop solar remote close off last week as well. (didn’t keep the link).

          That is an important step forward because closing the the excess at the source is the key to making sure it doesn’t blow out the grid. The only problem was that some of the older systems shut down supplying the house from solar after the command. That was pretty damn stupid to build into the protocols/hardware/firmware.

          • Bearded Git 2.2.1.1.1
            28 August 2024 at 2:24 pm

            Apologies …it was actually a combination of rooftop solar and grid solar that powered the 51%….still incredible.

    • aj 2.3
      28 August 2024 at 10:14 am

      Will never happen under this lot, would be far to sensible.

  3. adam 3
    27 August 2024 at 8:26 pm

    So more your unwillingness to even engage with Māori ah Ad? Unless they bow to the labour party of course.

    Just so you know their is policy around this, by Te Pāti Māori.

    https://www.maoriparty.org.nz/climate_change

  4. roblogic 4
    28 August 2024 at 4:04 pm

    NZ (mostly National) has really fucked this up. Scrapping the Lake Onslow battery project is typical short-sighted Nactoid stupidity.

    We have power prices surging towards $1000/MWh (6-7 August 2024), compared to Australia and most of the OECD at around $100/MWh.

  5. Georgecom 5
    28 August 2024 at 7:48 pm

    Any politician or citizen who was taking notice will have seen the potential for electric power squeezes/crunches as the country moves away from fossil fuels. It can be a narrow rope to walk. That is what onslow was about, enabling a less risky transition. National have now scrapped onslow but seemingly didnt have much of a plan? Simeon brown panics and comes up with costly LNG. Shouldnt have been any surprise Simeon. One thing for sure he has sunk any new gas exploration with his LNG announcement.

  6. roblogic 6
    31 August 2024 at 2:12 am

    Australia is the example of what we should do. Britain is the example of what we should not do.

    The UK has fully privatised Energy, France fully nationalised. (@BladeoftheS)

The server will be getting hardware changes this evening starting at 10pm NZDT.
The site will be off line for some hours.