Two inquiries aim to throw light on power blackout – but a switched-on govt should see it’s more than market failure

The  blame-game over  the  Monday  night   power  blackout   has  deepened.

Ministers initially  talked  of  “market  failure” – National accused the government of  being  asleep  at the  wheel

Then ACT said the  government’s energy  policy  was  “flawed”  because  it  puts  carbon emissions  ahead  of  affordable and  secure electricity,  through the ban  on  natural  gas  exploration.

The   Green Party,  for its  part,  contends the  “gentailers” are  more focused on chasing  profits than providing   more affordable,  more  renewable, and  more  secure  electricity  generation.   

Meanwhile  two small players in the electricity market have made a formal complaint to the Electricity Authority following Monday’s rolling blackouts.

Retailer Electric Kiwi and wholesale energy trading firm Haast Energy Trading are accusing large gentailers of abusing their market power by withholding generation capacity.

They say there was an ‘Undesirable Trading Situation’ (UTS) on Monday night when around 20,000 homes had their power cut.

Kiwi and Haast Energy Trading allege Genesis and Contact caused this UTS and breached trading conduct rules in the Electric Electricity Participation Code.

Haast Energy Trading managing director Phillip Anderson didn’t buy Genesis CEO Marc England’s line that the blackouts saw Genesis lose money.  

He said that looking beyond Monday night, less generation capacity creates scarcity, which ultimately makes wholesale electricity more expensive. What’s more, outages see a risk premium built into the price.

Haast Energy Trading and Electric Kiwi ultimately want the electricity generators to be broken up and the market to be structurally reformed.

In direct response to their formal complaint, they want the Electricity Authority to ensure the wholesale electricity price for Monday night is reset to assume the generation they accuse Genesis and Contact of withholding was offered to the market. This, they believe, would prevent generators from being rewarded for withholding capacity.

In  Parliament  Environment Minister  David Parker (standing   in  for  the  absent Energy Minister Megan Woods)  said  he  “absolutely agreed”  the  issue  ought to  be  inquired  into properly.  He insists the  blackout  ought  not  to  have occurred.

It is  “unacceptable”, he said. Two inquiries   would  seek  to “get  to  the  bottom of  what’s  gone  wrong  here”.

Infrastructure Minister  Grant  Robertson asserted  ministers were  “not happy” with the  lack of  communication from  Transpower. 

The  issue for  Robertson, however, is  what  to  do  in the  face  of  market  failure.  He  is  convinced  the  market-based system  put in  place  by the  National Party  shouldn’t be  allowed  to  run  rampant. 

As    the  National  Opposition  saw  things, it  wasn’t hard to find the  culprit   for  the  Monday  night blackout. Gerry Brownlee summed it  up:

“The minister  ( of  Energy) has the  responsibility for security of  supply, the minister  has  responsibility for the direction of investment  that occurs in the electricity sector, and the  minister  overall  has a  responsibility   for the consumers  who expect the system to always  keep them supplied with electricity”.

Brownlee  found it  hard to believe a  minister’s  office  stocked full  of  advisers  could be so far off the ball, as  was  on Monday.

He  rubbed  the  open  wound even  harder:

“It is  ironic  on  the  day that  the Intergovernmental Panel on Climate Change  comes out  with new predictions  about    global temperature rising due to carbon  emissions,   this  government has   an  electricity  shortage  entirely due  to  the fact we  are so dependent on fossil fuels to keep the  system alive”.

In  the  NZ  Herald,  one  of  the  country’s  most respected   commentators, Brian  Fallow,  labelled  it   “scandalous”  that  power  was abruptly  cut off . 

He  notes  Genesis  has  said  in a  submission to  the  Climate Change  Commission that  in a  typical  winter NZ  needs    2000GWh more  stored  energy than our hydro lakes  can provide and in dry years an additional 5000GWh  or more  can be  needed.

“Thermal   plant  at  Huntly power station  fills  most  of that  storage gap  today  and  we  expect it will  meet the entire gap within  the  next  few  years,” it said.

Fallow  adds a “translation”:  forget about banning  coal if you want the lights  kept on.

So  what  the  whole  shemozzle  over  the  power  blackout  throws  into  stark  relief  is  this:   NZ  has  to stop  emitting  greenhouse gases,  but  how does it do this while  keeping the lights on?

New  Zealanders  will  be  unforgiving  if  they  find the  energy they depend on –  besides being affordable and sustainable – is not reliable.

 

 

2 thoughts on “Two inquiries aim to throw light on power blackout – but a switched-on govt should see it’s more than market failure

  1. Electric Kiwi make a lot of noise but they have a parasitic business model and got caught out big time. Why don’t they have their own generation or hedges? And note they didn’t say what generation was withheld. That’s because there wasn’t any available at short notice. There is a lot of ongoing maintenance with machines dismantled or waiting for parts.. That is why some MW were down on station rating, but everything that could be on, was on, or was held back as reserves in the South Island on Transpower’s instruction.

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  2. We want electricity that’s cheap, reliable and green, but if we’re going to rule out nuclear power then we cannot have all three; we have to pick two.

    Like

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