Written By:
advantage - Date published:
7:00 am, September 8th, 2022 - 60 comments
Categories: assets, Economy, energy, health, Privatisation, privatisation, Public Private Partnerships -
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This COVID era is the decade in which the state is back, bigger and faster than ever before. But the one area this government won’t let the state expand again is the one area in which New Zealand is the most vulnerable: electricity generation. It needs to change.
At the end of July this year I commented:
Over the last fortnight, France and the UK have already renationalised energy companies, ready for greater political oversight from impending massive energy disruption.
The UK government has also started to put in place a windfall tax against petroleum companies.
Germany had signalled that it was ready to renationalise, and then did so.
While the Prime Ministership of Boris Johnson was falling apart, Britain’s government passed a law to fully accelerate their energy security strategy. Once you get past the spin, it’s substantial.”
The new Prime Minister of the United Kingdom Liz Truss has indicated today that one of her top three priorities is going to be controlling energy prices to consumers.
I will take action this week to deal with energy bills and to secure our future energy supply.”
She knows winter is coming, so she is going to generate greater and greater control over electricity markets.
This New Zealand government, based on no specific plan or electoral mandate, has in the course of just one calendar year renationalised the entire health system, centralised public television and radio, pulled in all property management from school boards, nationalised tertiary trade education, bought back the remaining local bank into state ownership, and is on its way to amalgamating all water entities into four with much greater state governance control and high regulation.
It is also clear that money is simply no barrier to this government to make these moves: if they want it they will print it.
The outstanding exception to increased direct state control is in electricity. Why?
Instead of taking active control of electricity generators beyond the 51% shareholding and their exceptionally distant governance instruments, it prefers to subsidise customers rather than control. Wave after wave of taxpayer cash gone in short term bills rather than long term assets that generate whole policy benefits. The outrageous short-termism has to stop.
It is in electricity alone that we have had the most acute market failures; last year in the big August blackout, and successively in Auckland by Vector the lines company since 2015.
Since the state is clearly so confident that it sees its role in direct control of so many areas of our lives, why is it missing from state control of electricity? What greater market failure do they need?
We do not need to rehearse here the current regulatory instruments available. They are frighteningly complex as MBIE discovered last year.
Indeed as winter slowly grinds past us into the storms of spring, New Zealand’s brittle, thin and uneven renewable energy system is highly vulnerable to being knocked out by the whims of the climate: smash out a wind farm, disable a dam, knock regional feeds out, and our increasingly electricity-reliant country is in a world of pain.
Climate violence is to our energy system when Russia is to Europe’s energy system.
Consider this recent comment from European Commission President Ursula von der Leyden in May during a visit to the Danish port of Esbjerg used by top wind turbine makers Vestas and Siemens:
The more interdependent we become in Europe, the more independent we will become from Russia,” she said. “We all know green power generation is great. But if you really want to use it, you need a grid, and there we have to step up.”
New Zealand’s threat is not from Russia but from major weather events that take out key generators and lines.
We need the renationalisation of our key electricity generators far more than many of the governments’ other nationalisation moves.
The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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The site will be off line for some hours.
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whenwhat Russia"apologies
I'm astounded that you all still seem to believe in the competence of vast, centralised government. Looking at the catastrophe that is our health and education sectors you actually think that it can run all these others things, plus electricity, merely because it once did? All such groups grow incompetent with time and I saw enough of that in the early 1980's in Railways and the like. And the supreme example of course:
Comparing state management of energy to the chaos of the corrupt end of Russia's response to glasnost is on a par with going "But, but, but, Venezuela."
NZ had a fully functional and vastly more efficient and reliable publicly owned energy sector for decades before Rogergnomics laid waste to our society. We can have one again once we apply broad spectrum anthelmintics to our neoliberal parasites.
It's not really a question of ideology but simply failing to scale up, as I've seen in many corporate environments. And corporations often stagnate precisely because the small, inventive, creative parts of themselves get stifled or outright killed off. Hell, Silicon Valley was created because people broke away when their ideas were rejected, and found start-up funding elsewhere. It's why the culture of that place has not been replicated elsewhere.
Failures are increasingly catastrophic as more decision-making occurs in places like Wellington, Brussels and Washington D.C.. This isn’t just because of corruption, dishonesty, malevolence and incompetence, but because of scale. We have forgotten the valuable lesson of subsidiarity.
Decisions should be made at the smallest workable scale, not the largest possible scale. A town imposing some insane and destructive policy destroys only the town. Same for coporations. When the Capital imposes some insane and destructive policy, it can destroy the entire country. Subsidiarity isn’t maximally efficient I admit – but it is highly reliable. It’s expensive – but its robust.
By contrast its opposite – what we have today and will have more of tomorrow – is tremendously fragile. It isn’t even efficient because the government is populated with thieves, liars and fools (and often in combination).
Totalitarianism doesn’t and can’t work for this reason. Even assuming the starry-eyed sincerity of the totalitarians (a situation we most decidedly do not have), mistakes have perfect coverage and no one is immune from the totalitarians’ decisions. Failure not only stops being a good thing from which you learn, it becomes a constant threat and source of terror. This is compounded and made infinitely worse when the totalitarians are dishonest, lying, stupid psychopaths.
Centralisation and incompetence, centralisation and malice, and centralisation and malicious incompetence are poisonous combinations.
In this case you might think your proposals are brilliant because now you've got central control and can do things right. But what if you're wrong? It might even kill off the smaller solutions that work. Such things certainly have in the past.
There's no need to go sifting through pseudoentrepreneurial examples, the privatisation of our electricity sector failed because it was corrupt. A collection of public benefits were promised, none of which materialized. As with any other defaulting debtor, there comes a time when the debts are called in.
We need not concern ourselves with the hypothetical acumen of a non-performing sector.
Nonsensical.
Alternatively you could say
Profit-taking and incompetence, profit-taking and malice, and profit-taking and malicious incompetence are poisonous combinations.
Also, you seem to be hung up on the idea of a vast organisation being unable to manage different branches while completely ignoring the consolidation of the private sector.
Is Disney a vast bloated organisation unable to produce quality content or drive the cultural conversation because of it's size-driven incompetence? Does Alphabet struggle to make a profit because of it's vast size? How about Meta, having to manage Facebook, Instagram, Messenger, WhatsApp, Oculus, Mapillary, Workplace, Portal and Diem?
That is obviously false and you're ignoring the fact that nobody in one part of the government like say education has to take into account or is directly impacted by decisions made in another like health care.
I mean, it was privatised because it was working and there was money sitting there begging to be hoovered up by corporates.
Re-Nationalise NZ Electricity generation. Can't come soon enough.
That Max Bradford …..not "quite" single handedly…..but aided by neolibs from both National and Labour, screwed OUR NZ Electricity System. For what benefit? Some have made fortunes. The rest of us…screwed over.
https://www.consumer.org.nz/articles/the-chill-of-rising-power-prices
Absolutely P.L.A. Max Bradford caused endless problems with those changes.
Not sure how much the US is affected by the war but this is happening.
https://twitter.com/hugh_mankind/status/1567257731765080070
the world needs much better solutions to our problems, and we need way less greenwashing, and we need humans to pull their heads out of their asses.
Overconsumption, on a private and commerical level is our main issue. Like the Easter Island we will not stop until nothing grows anymore and then we realise that we can't eat cars, boats, gadgets and other items we purchase to give ourself a fleeting moment of happiness.
Ironic anomalies like the above example will be made illegal in California under plans to phase out small ICE engines, including generators.
Proving the necessity of government regulation to tackle climate change.
If you can't recharge your EV sustainably, no cheating allowed, it is public transport for you.
well it seems that a fossil fuel driven generator is 'sustainable' enough to charge your EV.
Now try cooking, keeping your house cool/warm, showering with hot water, using elevators in your high-rise, flush the toilet in your high-rise, keep your food safe in your fridge and freezer and come again with that sustainability and accessibility to electricity and work over your list of must haves in your life vs nice to have vs totally useless and greenwashed male sexed bovine manure.
disclaimer: I still don't have a car a nd have no intention of buying one. In fact i personally have argued on more then one occasion here – over the last 8 odd years that I am in favor of FREE public transport ON DEMAND for EVERYONE all the time.
Banned leaf-blowers – clearly my soul mate lives in Cali.
Soon they'll be raking it in (sorry, but the puns, along with the climate, will only get worse).
3 things spring into mind on your photo,
1 is that verified, There's plenty of redneck fuck wits willing to stage anti change bs
2 whoop de do , There's going to be bumps on the road to change
3 if it is a super car maybe the cashed up owner should consider some solar panels and batteries to charge his car, I here California is sunny
It might relate to that.
https://www.cbsnews.com/losangeles/news/flex-alert-extended-to-saturday-ev-owners-asked-to-not-charge-vehicles-during-peak-hours/
whoop de do, if your grid can't keep it up can't keep up. whoop de do.
a super car. lol……..lol…….lol……..
The point i am trying to make, is that electricity is generated, needs to be created. If not enough electricity is generated batteries can not be charged. If batteries can not be charged, things tht depend on charged batteries can't be run.
Rather then phase out fossil fuel cars, why not phase out fossil fuel. Because that electric car is nothing more then a big waste o'money if you have to fill your generator with gasoline to give your car a bit of a charge to maybe make it to the gorcery store or the next charge station which may or may not be able to supply the electricity to run said 'super' car.
disclaimer: I do own a generator and am investing in solar cells :), still not getting a car, super or not.
edit: if a redneck owns a E-vehicle are they still a redneck who refuses change?
mind this is from NZ and last year 🙂
https://www.stuff.co.nz/environment/climate-news/300306177/department-of-conservation-caught-charging-plugin-hybrid-electric-vehicle-with-diesel-power
Now this is a remote island, and it is a hybrid plug in. But still if you don't have the electricity cause the grid is overwhelmed then your E-vehicle is not worth a dime.
Do we need E-vehicles? We will need some form of transport. Are E-vehicles the green way out of our misery? No. They are at best a band aid at worst a blindfold to the realities that will come and hit us square in the face in a few month, if not earlier.
Locals opposed a wind farm on Stewart Island that would have enabled removing the diesel generators.
Wind farm development on Stewart Island shelved | Stuff.co.nz
It's just the way it is.
And it shows the limitations of it.
Personally i am more for a almost no car world.
Vehicles for first responders, government, certain businesses.
Vehicles for doctors etc. but limited use.
Community vehicles for towns that can be rented / leased/ shared by the public for the time they really need a car. Free public transport / subsidized bikes / e bikes, for all other times.
The idea that we all can have an E-vehicle and all get on the grid on the non peak hours to charge is a very limited idea.
And for a remote island it makes good sense to have a spare generator or two hanging around.
What would the environmental impact of putting a 'wind farm' (as in how many) on Stewart Island. I would include in that impact, shipping the materials, logging a few trees and such for placement, shipping the workers etc? Would it have been a cost that would have been worth it?
A hell of a lot less than continued diesal generation.
I would have gone for solar and tidal myself. North end of Stewart Island has good numbers for both, and much less obtrusive.
I have never been there so can't really comment on the location.
Yes, tidal and solar seems to be less intrusive.
Sabine, this screams of a set up there have been many posts like this on the web.
I'm surprised this article didn't mention the NZ Battery Project that the government is working on, which will totally up end the existing electricity market.
It's like light rail: nowhere near market yet and completely reliant on Labour getting a third term. I'll post on it after the 2023 election.
Right, but it's weird to say "the government is doing nothing" when actually this change will be MASSIVE.
And yes it does require them to get a 3rd term to actually cement it in. But it's still wrong to say they're doing nothing.
I claimed nothing of the kind.
In fact this government has introduced substantial changes tot he functioning of our electricity markets in 2019.
A run down on the Government power plan | Stuff.co.nz
It's just that they just didn't work.
Many Kiwis struggling to pay power bills as prices rise (1news.co.nz)
The battery project, should it eventuate, will not deliver power until about 2026-7. That's a decade after Labour came to power.
There is no firm view on who will own it, who will fund it, or who will operate it. Let alone whether it is fundable, feasible, or consentable, or constructible. So it's entirely moot to the post.
Should the next election give it a mandate I'll post on it then.
Until then it's one of those projects this government just talks about.
You said this:
"The outstanding exception to increased direct state control is in electricity. Why?"
Should the NZ Battery Project go ahead (and I think it will), it's very likely the government will want to own it themselves, in some capacity. It's highly unlikely it would be 100% private, is it?
So there would be "increased direct state control in electricity". And so the answer to your final question “Why” is “because the government is putting all its eggs into the NZ Battery Project”.
Well there is that. However I also think we should look at what happens when rio ..tinto eventually blows the gap from NZ . I really hope that when this happens they have to FULLY remediate their mess..before they leave ! (No more Mataura disgraces : (
And the Electricity surplus we will then have.
I have linked Prof Susan Krumdieck before….and her Innovative Ideas. Particularly electrifying the South Island rail network. This also gets HEAVY trucks off the roads. (def still a place for smaller trucks)
Great link there.
Oh thankyou. : )
“ renationalised the whole health system “ Really, I had no idea all our hospitals were secretly privately owned but have recently been secretly taken over by the Gummint.
If you are going to make ridiculous claims like that, how can anything else be believed?
And the most important part of the electricity system, Transpower, is also wholly government owned on our behalf, no business in their right mind would want to own something as capital intensive and so exposed to huge risk as that. Also almost 50% of each of the major producers are controlled by Government shareholding, . It is probably only cost that prevents the other half being nationalised.
The District Health Boards and their democratic representation have been abolished after 20 years. There is now – as there was not before – one single commissioning agent for service, and one funder. The entire health system is now accountable to one Board. This is how it is described by the government themselves.
Government announces radical plan to centralise healthcare, will abolish DHBs | Stuff.co.nz
That's renationalisation.
Transpower is consistently not up to the task of shifting from petroleum to total electricity reliance. Otherwise there would not be repeated blackouts and system failure warnings propped up by peak generators.
Cost of re-nationalising the 49% of generators that National sold is clearly not an issue if the government is quite prepared without warning or rationale to buy back Kiwiback at $2.1b.
Would that it was the entire system. There are some large private providers – perhaps easy to dismiss as providing cosmetic services that should not be paid for by government, but they clearly do more than that. At times they lead the public sector – MRI machines were purchased early on by private hospitals, meeting a need that could not always be met by public hospitals. Not surprisingly they were used in some areas to help the public system cope with operations that could not be handled by a public system overloaded by Covid – a friend of mine had a hip operation booked in a public hospital – it was deferred twice, so the surgeon arranged for it to be done by him at a private hospital at public cost. What has been done is re-arranged the management structures of public hospitals to eliminate some of the waste put in in the name of 'competition' that led to increasing ignored budgets, lack of cooperation and funding for patient movements to enable national services for some specialist areas, local boards that in many cases had no idea what they could or should be doing who were treated with contempt by the hospitals they 'governed'. The public system competes with private companies for nurses and doctors – and that includes aged care facilities of various types as well as hospitals. Views will differ as to whether we have the balance between private and public right, but we do not have a totally nationalised health system.
Great post Ad, bring it on. The lines companies need sorting also, the largesse of bloated managements and trusts isn't getting the delivery network anywhere near resilient enough
Transpower does what it is allowed with a managed return of 4.5% and a real return of 20% to the government on revenue (dividend 147m,tax 35m).
The large capex programs 30% of revenue would not be seen in any other sector.There is also a large undertaking with local line companies as they have local FF boilers replace with high tech heat pump HW injection.
Ashburton for example has an ungrade for an additional 25 mw to replace 8 boilers.In the south island for example replacement of 350 FF boilers,will need 1.5 gw of generation capacity.
There is little additional generation capacity for EV etc.which is being offset by increased domestic solar generation ( 50000 installs with 250 mw output).
The Carbon removal capital projects from the C tax,also need a lot of local distributed projects (small scale) which should be in use in government buildings such as schools,hospitals,and councils on every pump station etc.
Yes agree Poisson and I don't want to have too much of a crack at Transpower. Made of good people in a hard job.
Not enough specialist engineers to do the work, let alone be so oddly regulated. Imagine if Auckland Airport had serious Commerce Commission regulation on its CAPEX programme as tough as that, and they don't have a pylon set from the 1960s.
If I get enthused I'll do something on globally distributed power, with the UK-Norway link, UK-Morocco link proposed, and Australia-Singapore link underway. Our offshore wind capacity has currently 6 proposals going.
Selling energy from here, like selling bottled water, can be good with its local impact. If Australia can do it so can we.
The necessary capital required by transpower can be from the dividend paid to the government.The retained earnings (used as expanded capital) will keep the cost within the CC requirements.
Large investment proposals such as the pump run the risk of substantive electricity price rises,and needs a constructive rethink,on the natural monopoly of grids.
Ho would the role of the EA change though?
Oversight on local distribution and generation pricing (both new and existing)
I think he is in his..'right..mind'
Li Ka-Shing wants more Kiwi assets | Stuff.co.nz
To regurgitate what I've said for years:
We're deeply reliant on hydro yet we lack the infrastructure to properly collect groundwater (the flow of which runs hydro).
Watching the rivers of Europe dry up leaves little confidence in the way we've ignored our most precious resource for so long. Three waters is a start. But catchment by catchment we need small works on a massive scale. That's required for water security. Water security in NZ is energy security.
A deep drought combined with a heatwave could overwhelm our system easily.
How much of our rivers need on snow melt to feed into our dams? Several rivers feeding into dams in the US all depend on snowmelt for replenishing. Without snow, no water, low rivers. See River Po in Italy, Isar, Iller, Lech, Donau, Inn and some more in Germany, Le Var in France.
That's a good question. I have no idea.
"The estimates show that of the large rivers that reach the sea, the Waitaki has the highest snowmelt contribution with 12%, while the Cook River on the West Coast is next highest with 11%.
Of the hydro-electricity lakes, Lake Pukaki has the highest snowmelt contribution of 18%, whereas Fraser Dam, an example of an irrigation storage dam in Otago, receives 14% of its inflows from snowmelt. Overall, it is estimated that 3.4%, or 1 litre in every 30, of the South Island's river flow originates from snowmelt."
https://niwa.co.nz/news/new-study-measures-snowmelt-into-south-island-rivers
On The Standard I have long called for “re-nationalisation (public ownership & control) of power generation and supply”, inclusive of booting Rio Tinto and developing the specific infrastructure to effectively utilise the power they have been using.
If power marketers from Bosco to Trustpower go quietly, compensate them, otherwise…
NZ Taxpayers and workers built hydro power generation capacity and it has always been the ultimate insult to have their efforts gifted to touts and bludgers like Genesis Energy & Meridian.
Not only leeching off public assets, but also exploiting our rivers and then overcharging Kiwi consumers for the privilege.
The purpose of floating 50% was to create a market value to the assets, one the government could borrow against (to lower government debt costs after the earthquake/GFC).
The assets are now more than double what they were then … (largely because they were sold too cheap, a form of CG bribe to the haves).
The government still has the rising value of the Cullen Fund (it's just a pity nothing was put in 2009-2017) and its land assets to borrow against – which is why the government signalled to those overseas it had a long term plan to sell off land.
The Onslow project, removing Rio Tinto and re-organising transmission (maybe SI transport etc) can be done without the expense of buying back shares (cheaper afterwards).
Like the rest of the world, NZ will face some massive climate-induced problems in the near, the very near future.
You'd be living in dreamland if you thought that the private sector would be able to respond in scale to attempt to tackle these problems.
The only answer is big government – so we need to nationalise not only our energy supplies, but also many of the users of those supplies – like public transport – all of which should be a government monopoly and free!
You'd think the electricity industry would have been one of the first things to be nationalised as a measure to address poverty.
Considering child poverty is the reason our PM went into politics and CC is their 'nuclear issue' it's beyond me why it hasn't been nationalized too.
Maybe the Mom and Pop shareholders are too closely linked to the Mom and Pop landlords to have their feathers ruffled.
electricity marketing was a very cruel joke played on an unsuspecting and daresay naive population. the nationals broke up the functioning system and and nearly buggered it beyond repair. forget about growth and innovation and blah de blah blah. it is time to retreat into population attrition and retain the things we value most at the same time. the old order is over. believe me.
We need a Government owned Supermarket and a Government owned fuel company as well
Advantage, you might be surprised, but I agree with you, even from a right-wing perspective.
We are just too small as a country to have multiple electricity generators. And the profit model simply doesn't work when it comes to long term issues such as future generation. That is because the time frame for new generation (say building a new dam) is often far outside the timeframe a commercial enterprise would find acceptable for generating a return.
So, though I am normally against the government owning businesses, I think there are times when it makes sense in the national interest for the government to own it on behalf of the country.
I thought it was a stupid decision to privatize as aspects of the system when National did it originally, and I still think it was a stupid decision.
Great to hear TSmithfield.
I don't like calling for it either.
We had a first-class integrated, efficient and collaborative energy system. This was replaced with a competitive and inefficient system with duplicated management systems. We are unable to plan for the future as the present energy companies are risk aversive. Now is the time to plan for future demands, even if the Tiwai Point Smelter closes, future planning is needed. And away with bonuses for senior employees– they are paid well without an extra reward for actually doing their job.
the best way to bring down power prices would be to insulate homes the govt could make it compulsory to have all homes fully insulated , by having cheap loans attached to your rates. Heat exchangers,Solar water heating, Solar panels and micro windmills,Thermal ground heat exchanges all in the mix . This would be cheaper than building a water battery in Central Otago for $8 billion dollars ,which as these projects rarely come in on budget could be many $billions more. Going to electric cars charging could also be used for a battery bank but cars would need huge numbers of connected chargers.Given most cars stay parked fo 90% + of the time it makes good sense.