The chief executive of the New Zealand Manufacturers and Exporters Association supports the Labour / Green electricity proposals. Well worth clicking through to read the whole thing…
Since the release of the NZ Power proposal there has not been a solid, logical debate about what NZ Power might mean, and the current problems inherent in the electricity market.
What we witnessed this month in New Zealand politics reminded me of a line from Bob Edlin inManagement magazine a few weeks ago, Bob said “If scorn is better than robust debate at shaping good policy, we are in good hands”.
That pretty well summed up the government’s response to the NZ Power proposal from Labour and the Greens. Business New Zealand and other organisations urged Labour and the Greens to revoke the policy in an open letter.
The letter reads to say that higher electricity prices would better serve New Zealand businesses incentives to innovate. Would this really be the case? These are echoes of the comments made by the same group before the unbundling the local loop.
Sadly, scorn, distortions and exaggerated characterisations heaped on ideas and individuals seem to be an ingrained response from many; dismissing any new ideas at odds with the status quo.
Not very different
Take a look at Wikipedia’s entry on the New Zealand electricity market and you don’t have to read very far to see there is already a single regulator that balances supply, demand and price. Not very different than NZ Power as we read the proposal.
The key difference is the pricing mechanism, not the entire system. …
LRMC introduces some perverse incentives, bid less volume and make more money by ensuring the highest cost generators remain in the market and over time tend to run the market towards a supply deficit. These are gaming opportunities (ship less make more) that tends to bias incentives away from new large-scale low-cost electricity generation. These are perverse outcomes that have the opportunity to damage the rest of the economy because electricity costs more than might otherwise be the case. …
… It is about balancing the trade-offs between a tendency to support the expensive generators and pass windfalls to the lower cost generators, or introducing a system bias to ship the lowest cost watts available to the benefit of the wider economy.
John Walley is chief executive of the New Zealand Manufacturers and Exporters Association.