Brownlee destroys a free market choice. Shut Whirinaki to get it back.

Written By: - Date published: 10:30 am, December 10th, 2009 - 26 comments
Categories: energy - Tags: , ,

From the Meridian Energy web site.

Meridian Energy Limited has confirmed it has suspended offering new Renewable Energy Notes under the investment statement dated 29 October 2009 following the decision from the Ministerial Review into the Electricity Market to transfer ownership of two of its South Island hydro stations to its sister SOE Genesis.

Energy Minister Gerry Brownlee today announced that the Tekapo A and Tekapo B hydro stations – the first two of the eight-station chain operated by Meridian on the Waitaki – will transfer to Genesis.

Meridian has ceased to accept all new applications for the Notes and maturing Notes will be unable to be rolled over. Existing Notes are unaffected by this suspension.

The suspension will be in place while Meridian studies the detail of the announcement and considers the effect of the announcement on the offer documentation.

Brownlee, one of the major impediments to the operation of democracy in NZ, is now interfering with market signals. He says that the reason for this change is to increase competition by..

…the larger purpose of the reforms is to stimulate more retail electricity competition in the North and South Islands by giving the state-owned power companies a greater mix of northern and southern assets.

He also makes it clear that he doesn’t like Meridian Energy, apparently because they don’t pay him enough of a dividend. This is unadulterated crap.

In my opinion, the main reason that Brownlee doesn’t like the Meridian is because he is an advocate of using fossil-fuel powered stations.  He has made it quite clear over the years that he’d prefer the rapid introduction of polluting fossil fuel fired power stations for a quick unsustainable short-term fix. It appears he is too impatient or lazy to wait for the slower buildup of renewable energy.

The reason that Meridian Energy has been gaining customers in the North Island away from its base generation facilities is because it doesn’t use fossil fueled power stations. Lyn and I deliberately switched to Meridian Energy purely because it was the only way to encourage the generation of renewable energy.

We are relatively price insensitive about power (unlike DPF) and deliberately selected a company that was generating the types of power we wanted to encourage. The table over the page makes it clear what those power sources are. We are also keenly aware of, and understand (unlike DPF) the long-term costs of running fossil fuel power plants and are highly sensitive about paying for them. I understand the science. Lyn has been documenting the effects.

Brownlee has just arbitrarily interfered in our ‘free-market’ choices, which is a perfect example of the difference between the rhetoric of the NACT government and what it actually does. The NACT state is one of arbitrary nanny state decisions made for purely personal reasons – just look at Double Dipton..

The diesel-fired Whirinaki power station is the dirtiest and most expensive occasionally operating in the country. I think that Brownlee wants to remove the ability of customers to use market signals about the sources of power generation so he can get the more of his polluting fossil-fuel stations running. This is something that many environmentally aware customers do not want, and is why there has been the flood of customers to Meridian over the last few years.

We will shift away from Meridian Energy if they fire up that station. If Meridian wants to retain our account, then they should take this opportunity to decommission the Whirinaki  immediately. It fits the profile of their sunk money in their marketing campaigns. Such a strong statement of intent would probably win them more customers.

If this reduces the dividends to the government, then that is the price of Brownlee decisions, effectively from a result of a unexplained decision by its shareholders that directly undercuts the companies marketing. The shareholder should take the cost. Meridian should suspend all dividends and put the money into investing in the renewable projects that are shown over the page. If they need more generating capacity than they have, then they are big enough to ensure that they can purchase renewable power from other generators.

In other words Brownlee and the NACTs should get by on  a reduced income while we increase our renewable power sources.

In the meantime there is an opportunity for a broking power company to start up that only offers power generated from renewable energy sources. When someone can convince me that they have achieved it, we’ll switch our account if Whirinaki is still operational.

If anyone lives near Whirinaki power station, I’d be interested in getting a few people to observe if the station is turned on. This is for publicity reasons.

The clock is ticking for Meridian Energy.

From wikipedia

Operating

Meridian Energy operates nine hydroelectric power stations and three wind farms. It also operates the 230 kW Wellington Wind Turbine in Brooklyn, Wellington

Name   Type   Location   No. turbines   Max. capacity (MW)   Annual generation (average GWh)   Built Notes  
Aviemore Hydroelectric Waitaki River 4 220 942 1968
Benmore Hydroelectric Waitaki River 6 540 2215 1965
Manapouri Hydroelectric Lake Manapouri, Fiordland National Park 7 730 4800 1969
Ohau A Hydroelectric Waitaki River 4 264 1140 1979
Ohau B Hydroelectric Waitaki River 4 212 958 1983
Ohau C Hydroelectric Waitaki River 4 212 958 1985
Te Āpiti Wind Ruahine Ranges 55 91 320 2004
Tekapo A Hydroelectric Waitaki River 1 26 160 1951
Tekapo B Hydroelectric Waitaki River 2 160 833 1977
Waitaki Hydroelectric Waitaki River 7 105 496 1934
West Wind Wind west of Wellington 15 34 2009 Under construction
15 turbines currently generating, full wind farm (62 turbines, 143 MW) due for completion late 2009[10]
White Hill Wind near Mossburn, Southland 29 58 230 2007

Proposed

Projects being developed by Meridian Energy include the following [11].

Meridian Energy Development Projects
Name Type Capacity Location Status
Project Gumfields Wind near Ahipara, Northland
Rototuna Wind 500 MW Northland west coast
Te Uku Wind 84 MW near Raglan, Waikato
Mohaka Hydro 44 MW Mohaka River, south of Wairoa
Project Central Wind Wind 130 MW between Waiouru and Taihape, North Island
Martinborough[12] Wind 8km SE of Martinborough
Mill Creek Wind 71 MW Ohariu Valley, north-west of Wellington
West Wind Wind 143 MW west of Wellington Under construction
Completion due late 2009
Mokihinui Hydro 60 MW Mokihinui, north of Westport
North Bank tunnel Hydro 280 MW on the Waitaki River water rights granted 2009
Hunter Downs Irrigation Waitaki River, South Canterbury
Project Hayes Wind 630 MW central Otago
Ross Island Wind Energy[13] Wind 1 MW Ross Island, Antarctica
Manapouri amended discharge project Hydro


26 comments on “Brownlee destroys a free market choice. Shut Whirinaki to get it back. ”

  • Comments are now closed

  1. ieuan 1
    10 December 2009 at 11:01 am

    The whole Meridian renewable energy thing is a total have.

    They own the ‘Dunedin Energy Centre’ which uses fossil fuels to provide steam to the local hospital board. To get around the ‘renewable energy’ issue they just created a new company (Energy for Industry) which they own.

    You never had a ‘free market choice’ you just bought into some clever marketing.

    • lprent 1.1
      10 December 2009 at 11:19 am

      So? That generation doesn’t generate electricity.

      Basically you are as full of crap as Brownlee. If you read the post then you will realize I was talking about the power I consume. Not the steam that is in Dunedin.

      • ghostwhowalksnz 1.1.1
        10 December 2009 at 11:36 am

        Im sure you realise the energy doesnt come from the South Island to your Auckland Home? no matter who your ‘generator’ is. Most likely due to supply constraints it doesnt get past Stratford. And yes Whirinaki , when it gets fired up may be the difference between blackouts for the central north Island, does that come into your choice

        • lprent 1.1.1.1
          10 December 2009 at 11:41 am

          Sure I realize that. So what?

          Read the post with more care. What I said was that I was interested in supporting the generation of power from renewables. Therefore we picked a company that only generates from renewables. This is our choice. Not yours.

          Whirinaki has now been shifted to a company that really cannot afford to use it and keep its customers. I’m expecting it to not get fired up. There is no way that Meridian would have brought or built that generating plant.

          This violates the logic of having a free market in electricity generation and supply. So I guess you should talk to Brownlee if the power gets cut. He is the person screwing with the ‘free’-market.

          Incidentially, you realise that you’re really arguing on the basis of a single state enterprise. Perhaps you should think through your logic more clearly.

          • ieuan 1.1.1.1.1
            10 December 2009 at 11:52 am

            But you really don’t have a choice you are just buying into marketing!

            Your electricity may be ‘supplied’ by Meridian but in reality it is generated by another company (probably from fossil fuels) with Meridian adding a margin so they can afford all those expensive TV ads that show flowers floating down rivers.

            • lprent 1.1.1.1.1.1
              10 December 2009 at 12:00 pm

              Point to anywhere that Meridian generates electricity from non-renewable sources. I checked it pretty thoroughly before I switched

              As I said before – you are full of crap. Why don’t you try and say something of interest. I know that you can – I’ve seen you do it before.

              Sitting here generating spin lines is just pathetic bullshit. Are you proud of yourself doing it?

              Brought to you from the same source as Paul Henrys alleged ‘humor’

            • Clarke 1.1.1.1.1.2
              10 December 2009 at 1:03 pm

              Buying certified carbon-neutral electricity from Meridian does not result in magic non-carboinised electrons whizzing out of your electrical sockets, as anyone with a basic understanding of Third Form physics knows. However it does send an important market signal.

              Market signals are a mechanism for consumers to indicate their preferences to suppliers, and are an essential part of a functioning capitalist economy – and clearly, something that Brownlee doesn’t approve of.

              Or maybe Contact Energy simply paid the National Party a chunk of campaign contributions to stuff up Meridian’s increasingly successful marketing to the section of New Zealand that is intent on taking action over climate change … nothing would surprise me from a party that’s already given us Richard Worth. Melissa Lee and Double Dipton.

          • ben 1.1.1.1.2
            10 December 2009 at 12:50 pm

            Lyn, this last comment contains almost no personal insults. Please try harder.

            • lprent 1.1.1.1.2.1
              10 December 2009 at 1:31 pm

              Ummm I will try harder. I’m trying to emulate the basic stupidity level of the Paul Henry ‘humor’

              You do seem to have some comprehension issues though. Lyn hasn’t commented on the site in a long time. She is too busy with the doco. I do comment frequently and wrote the comment that you’re replying to – but my name is Lynn.

              BTW: Have you been giving some pretty lousy ‘science’ to that credulous poster over at KiwiBlog. 1.5C is the maximum that CO2 can increase the average tempature? From what ppms to what ppms? Even you must be aware of how stupid that statement sounds to anyone that knows what they are talking about.

              I notice that he was somewhat light on linking his assertions…

  2. Peter Wilson 2
    10 December 2009 at 11:11 am

    Yes, Meridian do own the Dunedin Energy Centre – it’s a “business unit” of Meridian Energy, but doesn’t produce retail electricity. When Meridian got certified as carbon neutral, this information was fully available to the certifiers, but it didn’t seem to worry them.

    I actually think the Dunedin Energy Centre is a good use of a non-renewable resource. The thing was built by the hospital board in the 1960s, and was under-utilised. It now supplies steam to Cadbury Confectionary, Taylors Cleaning, a fair percentage of Otago University, as well as the hospital.

    District heating schemes like this are common in Europe, and whilst still dirty (Meridian did clean up the emissions somewhat recently in an upgrade), it’s a better use than individual boilers at each installation.

  3. jen 3
    10 December 2009 at 11:19 am

    The huge lignite deposits in Southland and the Great South Basin oil fields might be making fossil fuels a particularly attractive proposition at this point. Especially for those who don’t really believe that climate change is a dangerous reality or who do, but think they’ll be dead by the time it gets really bad. I don’t know but I wonder whether the Nacts intentions in relation to these potential energy sources are why they are happy to step back from claiming to be climate changes leaders ( not that we ever were in any real sense). I suspect that where there is big money to be made it won’t matter whether its from fossil fuel. Maybe the thinking is that NZ will be so rich from its oil that it will be able to afford to pay whatever it costs to continue to emit. Hence their careless abandon about committing to pay billions of dollars compensating emitters . Just a crazy thought….

    • Peter Wilson 3.1
      10 December 2009 at 11:24 am

      The tories equate energy with progress and living standards, and take such a shallow view of the public that they think they will be rewarded if the coal and oil they dig up gives people a few more gadgets and lower fuel prices and thus allows them to believe that they are getting “ahead”.

      Their whole world-view is based around ever expanding energy supplies, so, they will probably stop at nothing to fulfil this. Of course, geology doesn’t work that way, and as geology hits up against ideology, the debate will probably get ever more shrill as people cry out for “solutions”.

      I don’t know what way the public of New Zealand will jump. Will it be preserving happy motoring at all costs, or will other movements and ideas slowly take force.

    • lprent 3.2
      10 December 2009 at 11:25 am

      The oil and natural gas fields around NZ are too fragmented and small to ever be more than a very high cost short-term resource.

      While we have a lot of coal. So does virtually every other country. Most have more accessible coal fields than we do. Why import apart from specialized uses like making steel, when you can develop your own fields.

      However we have a major agricultural export industry that will affected badly by losing its major marketing tool offshore to sell into higher return markets by pushing the clean image.

      • ben 3.2.1
        10 December 2009 at 12:54 pm

        The oil and natural gas fields around NZ are too fragmented and small to ever be more than a very high cost short-term resource.

        I don’t know why multinationals are sinking millions in searching anyway – Lyn ALREADY KNOWS THE ANSWER.

        Talk is cheap. I’ll trust their millions over your opinion any day.

        • lprent 3.2.1.1
          10 December 2009 at 1:36 pm

          Read insder below. They are interested in supplying the local gas market, not exporting – that was what jen was suggesting, and what I answered.

          You really do have comprehension issues. You have me concerned now. Is it a reading deficit? Or perhaps you should do some basic business courses as well as learning some basic science

    • Rob 3.3
      10 December 2009 at 12:59 pm

      Even if climate change is false I have to say I still wouldn’t want coal/oil plants anywhere near when I was living. Perfectly happy to have any of the renewable methods though since they don’t pump out nearly as much poison.

  4. Peter Wilson 4
    10 December 2009 at 11:19 am

    Lynne – that’s a good summation of Whirinaki. If you like geekery, as I believe you do, Transpower are currently required to publicly notify whenever Whirinaki is turned on as per the Electricity Regulations. Lots of detail here – http://www.systemoperator.co.nz. It basically has to be a Grid Emergency (i.e. not enough generation in the North Island) before it can be turned on. If Whirinaki can’t be turned on then the only remaining step is to fire up Pole 1 of the HVDC (commonly known as the Cook Strait cable) before things start turning off.

    What is interesting is that there is no business logic in handing Whirinaki to Meridian *unless* the rules governing its usage are going to change. I mean, why hand a station that barely runs to a major electricity company unless it’s been tacitly acknowledged that they will be able to run it whenever they like?

    • lprent 4.1
      10 December 2009 at 11:31 am

      Yeah, that is what I suspect as well. However I also suspect from the tone of the statement at the top of the post that Meridian are as unhappy about it as I am.

      It destroys the marketing theme that they have setup for many years.

      This plus the way that Brownlee was hiding decisions in the energy field from Fitzsimmons make me think that this is pretty much Brownlee. I suspect that it is largely for the reasons I’m attributing to him.

      I suspect that ripping renewable capacity from Meridian and giving it a fossil plant has far more to do with Brownlee wanting to destroy a market in renewables for ideological reasons than for any rational reason. He has given the capacity (and income) to Genesis because he figures that they are more likely to do what he wants than Meridian.

      Basically Brownlee has all of the hallmarks of being a petty small-minded and pretty incompetent autocrat. Just look at how he mismanages the house.

      • Peter Wilson 4.1.1
        10 December 2009 at 12:05 pm

        I’d like to think people would wake up, but then again we had another National politician with no small resemblance who behaved like that for 9 long years, and lost power in a snap election…

        The Greens should be seriously ruing their decision to work with this government on any matters. I don’t know which leader thought up that strategy, but right now, it doesn’t look good…

  5. mjanderson 5
    10 December 2009 at 11:49 am

    Seems to be a ridiculous thing for the Government to do, given the Meridian ‘green’ image. I will be making a submission on the bill as it comes to the Select Committee phase, and urge others to do the same – this ‘shake up’ has the potential to ruin any consumer choice in the market towards renewable generation.

    I am a Meridian customer for their renewable image, and hope not to see the Whirinaki station turned on!

  6. Draco T Bastard 6
    10 December 2009 at 12:10 pm

    The NACTS proving, again, that they shouldn’t be allowed anywhere near government because they make bad, ideological, decisions.

  7. ieuan 7
    10 December 2009 at 12:20 pm

    There is a suggestion in the Christchurch Press that Meridian might move Whirinaki to the top of the South Island, this would help with dry years when the hydro dams are empty and South Island power is being supplied from the North. This would also help reduce the load on the Cook Strait link, meaning a costly upgrade might be avoided.

    • lprent 7.1
      10 December 2009 at 12:34 pm

      Link?
      The rationale seems somewhat unlikely considering that (wikipedia)

      In New Zealand the company owns and operates nine hydroelectric generating stations in the South Island: eight on the Waitaki River, and the country’s largest hydroelectric station – Manapouri Power Station – on Lake Manapouri. Meridian sells power to approximately 183,000 customers[6], primarily in the South Island.

      The rationale for giving the south island dams to the north island polluting generators is to allow them to access the south island markets more easily.

      The converse rationale (unlikely as it seems) is that giving a north island power station to Meridian would allow it service a north island market. Moving the plant to the south island would seem to really be somewhat daft.

      It is better to just decommission the plant. That would be cheaper for Meridian than moving it and using it.

      I think that the ChCh Press is simply blowing smoke or being hopeful.

  8. insder 8
    10 December 2009 at 12:41 pm

    A few things

    Firstly Whirinaki, it is not the dirtiest power station in NZ. It is basically a jet engine and there are hundreds of them around on planes mainly but also ships. I doubt it is ‘dirtier’ than Huntly or Clandyboye or DEC or any other coal powered generation. It is bound to be a lot cleaner than most diesel standby generators. It may even be more efficient than SOuthdown gas plant (I’m sure the info is available). It IS expensive because diesel is expensive and because it hardly ever runs so needs to make a lot when it does run to cover its costs.

    The System Operator does not control Whirinaki, so quite why you raise their role in. It mainly doesn’t operate at all. WHen it does come on it does so mainly due to sustained high prices which are set out in its operating policy and everyone knows what those boundaries are. Grid emergencies are quite different and I’m not sure it has been used much if at all for that. They are primarily very short term events due to system failure, and if other cheaper generation is available then it probably wouldn’t be dispatched. One of the criticisms of Whrinaki is it is poorly placed to do its job as a reserve station because it is not on main grid links or close to major load centres.

    MED regularly produces data on its operation. In six years of existence it has been on for signficant periods only twice, one being for a large chunk of winter 08. Most years it has run for a few hours testing.

    Pole 1 has been gradually being put into service more and more. Surprising really given Transpower said it was so dangerous to operate… It’s arbitrary closure was a major issue in 08. If it had been operating normally there would have been far fewer problems. Transpower has never been fully held accountable for that disgraceful decision.

    Lynne – Meridian has been losing customers this year. Not quite sure where all these people changing to it are. Powershop’s gains has basically balanced out Meridian’s losses. Not a great return on their multimillion dollar launch.

    As for DEC, try finding any mention of it on Meridian’s website or annual report. Shows how they try to hide their involvement in it. I think they also run a couple of similar plants at dairy factories or wood processors. They run all the time so probably produce more of a footprint than Whirinaki.

    It has never been strong in the NI because it would be too exposed to risk as all its generation was in the SOuth, with a large chunk dedicated to Comalco. That’s one of the reasons it has been given a NI power station and also being forced into a hedge with Genesis. The other is that Meridian wasted water during the 08 dry winter and put the system at risk, and that is because it had no incentive to hedge and think beyoind its own needs. I think this asset swap is to broaden perspectives and risk to encourage a bit more attention to market risk as a whole.

    The other reason is to try and get more integration of Whirinaki into the power system so that the risk is spread and cost reduced. At present all the power companies sit back and wait for the govt to act and bail them out, while they also benefit from high wholesale prices that result. (Sounds like banking…. ) So I think you are being a wee bit paranoid in your assumptions.

    On gas fields, ironically it would be cheaper for NZ to continue to find relatively small fields. Large fields would end up being priced up to LNG and we would have to compete against Japanese and Chinese buyers for it. Small fields are captive to domestic demand and the cost of alternative local generation. They may be slightly more expensive to develop but would find it hard to charge a premium.

    That said, I totally agree on your conclusions re Brownlee. NAsty piece of work totally captured by Transpower (a monopoly – who trusts them?) and the power industry. One of the ironies no-one seems to have noticed is that for all his bluster about competition, Brownlee is actually handing more control of the industry to the powercos and monopolies. If they couldn’t be trusted before to get a decent market going, why give them even more power?

    PS moving Whiri to Chch is a genuine issue. Been around for years. Orion has plans for such a plant

    • lprent 8.1
      10 December 2009 at 1:08 pm

      It is basically a jet engine and there are hundreds of them around on planes mainly but also ships.

      Yeah. That is one of the main reasons that I don’t bother flying. The others are
      1. I hate being packed in an airborne cattle truck
      2. Why have the net if you don’t use it?

      I really have no problems with having an emergency generator. The location of it (from what I understand) is to do with the fact that it is off the main power trunks. Specifically if there is an major earthquake or volcanic event in the central NI or taranaki. That was raised back in the 80’s as an issue for civil defense when I was interested in that.

      I just don’t want it in the generating portfolio of my power company. In fact I don’t think it should be in ANY power companies portfolio. It should be held and operated by the state emergency services like civil defense or the army. It’d be a real pain if it didn’t have full tanks when it was really needed.

      The steam plant stuff I’m unconcerned about. I don’t buy steam.

      Lynne Meridian has been losing customers this year. Not quite sure where all these people changing to it are. Powershop’s gains has basically balanced out Meridian’s losses. Not a great return on their multimillion dollar launch.

      It is Lynn. Meridian have been moving themselves from being a local (ie south island) company to being the first fully NZ based company. You have to look at where they are losing and gaining customers rather than the total numbers. You also have to look at what type of customers they are chasing (ie getting a higher return). Powershop has a pretty small customer base, largely made up of the price sensitive. I’m not.

      On gas fields, ironically it would be cheaper for NZ to continue to find relatively small fields.

      I’d agree. But jen was suggesting them for export. Our fields just aren’t suited for it.

  9. BLiP 9
    10 December 2009 at 5:00 pm

    National Ltd® and their pet goons in ACT seems to be feasting when it comes to legislating to tilt the “market” in favour of its big business interests at the expense of the public it is supposed to be serving.

    Remember Wodney Hide and his call for more and more referenda to drive local body politicis? Well, this week the government has legislated to remove provisions for a referendum in the case of Auckland City selling its shares in Ports Of Auckland.

    While this new and stunning hypocrisy is progressing through the legislative process, another wee tweak, this time an unnecessary move to hobble the Takeovers Panel to prevent any problems resulting in the sale of shares in Auckland Airport.

    Thanks National Ltd®, I’m lovin’ it.