Economist is always right

The best editorials in The Economist are timeless. Traditionally they germinate in a Monday morning editorial conference run on the lines of an Oxbridge tutorial; Tuesday for a sometimes leisurely write up; Wednesday for editing; last minute tweaks on Thursday; giving a quality product with a life span longer than yesterday’s fish.

The latest on the global energy shock fits the bill.  Structured on the classical editorial tripos of “ … three problems loom[ing] large”.  Magisterial, incisive, combining sound economics with a global sweep of history.

But perhaps ten years too late.

Big boost for NZ’s gas supply – and a setback for the climate-change warriors

Here’s   a  bit of good  news  on the  energy  front to  mitigate some  of the  gloom  created by soaring costs, potential  black-outs and rising  carbon emissions.

Genesis  Energy  reported this week  New Zealand’s gas supply has been boosted  after a $72m project at the Kupe gas production station near New Plymouth has been  finished.

The inlet compression project, undertaken by Genesis and its Kupe Joint Venture partners, operator Beach Energy and NZ Oil & Gas, increases production back to the plant’s full capacity of 77TJs a day, the equivalent of supplying around 15% of NZ’s natural gas demand.

Genesis’ group manager Kupe JV Craig Brown said despite some Covid-19 supply chain delays, the project was delivered within budget and with no lost-time injuries from 170,000 person-hours on site – a testament to the strong safety focus of the team on the ground.

Emergency measures introduced in UK as energy bills soar – and NZ should brace for rising prices, too, thanks to exploration ban

Soaring energy  bills are a  problem for  firms,  households,  and  the  government. This  was  a  headline  in  The Economist last week – but it  can’t  happen here, can it?

After  all,  NZ has   plenty    of energy.  Unlike Europe, 80%  of  its electricity is  from renewable  sources. And  according  to oil industry  authorities, NZ is  surrounded  by a massive  continental  shelf — the fifth  largest in the  world, beneath  which  lie  vast  quantities  of  undiscovered  natural gas and, probably, some light oil.

So  surely  NZ  can face  the  future  with confidence?

Well,  no:  let’s not forget Prime Minister  Jacinda  Ardern had her “non-nuclear” moment and  placed a ban on new offshore exploration permits  for  oil  and  gas.  Since  then,  as  international oil explorers gave  up  their  offshore   exploration  licences, supplies  from existing  producing  wells have begun to  diminish for several reasons.

Higher  costs  are  starting  to  flow  into  household and  business  gas  bills. Vector  is  increasing  Ongas LPG  cylinders  from  $115.026  to  $125.82.

The Greens may never have a better opportunity to tackle climate change

In Germany that is.

Age before beauty they say.  But after last week’s inconclusive election in Germany it’s the forty-something leader of the Green party, Annalena Baerbock, and her generational compatriot, Christian Lindner of the market liberal Free Democrats (FDP), who are making the running in coalition negotiations, leaving the sexagenarians who head the Christian and Social Democrats out in the cold – for now.

Correction: Britain’s gas crisis means Europe’s gas crisis

Remember the 1970s?  We were going to run out of oil and everything revolved around energy prices.

America got into wars because of it and built an enormous strategic stockpile; NZ had carless days and the hydrocarbon developments of Think Big, the last of the great state-directed development projects (well … until the renewables project, national fibre broadband and the distortions of the Resource Management Act that is).

Europe’s natural gas crisis has the potential to head in a similarly dominating direction.

Energy chaos – coming to a market near you

If the great Russian novelist, Leo Tolstoy, had been an economist he might have written: “All happy market outcomes are alike, but each policy error is disastrous in its own way”.

Certainly the implosion of the UK’s energy market manages to combine many familiar bad policy interventions, while nonetheless contriving its own unique set of outcomes.

If recriminations could be turned into energy and stored, maybe the next power blackout could be avoided

Recriminations  flew  after  the  power blackout   on  Monday,  one  of the coldest  nights in  New Zealand.

Energy Minister  Megan  Woods blamed  a  market  failure  and “commercial decisions”. According  to  the  Dominion-Post,  she  pointed  the  finger  at  Genesis  Energy, which had not  turned on one of the  Huntly power station’s units.

The  government is  said to be  demanding  answers  from the industry.

Genesis chief executive Mark England said the company had been made a scapegoat and he will be asking the minister why.

Transpower has apologised after it asked lines companies to cut power in some areas to handle all-time-high demand for electricity, combined with insufficient generation, on one of the coldest nights of the year.

 Transpower CEO Alison Andrew said there was  enough generation to cover predicted demand on Monday evening.

How the govt’s ban on oil and gas exploration has tightened supplies – and resulted in NZ importing 2m tonnes of coal

New Zealand  has   been   facing some of the most challenging energy market conditions in over a decade, with simultaneous shortages in natural gas and hydro-electric generation. The  consequence  has  been  sustained  high  wholesale electricity  prices,   creating issues for  electricity retailers without their  own  generating  capacity, to the point  where Electric  Kiwi – for  example – says it  is turning to  focus on  the Australian market.

Some  market-watchers  contend the  problems  trace  back  to  the  decision  of  the  Ardern  government to  ban  any  further  offshore exploration for oil  and gas.  That  drove  away   not  only  oil exploration companies   but also  the offshore  rigs   needed   to  complete  planned drilling  programmes.

Whether  that  is the  case  or  not, some  of  the  big generators  like  Contact  Energy  and  Genesis  are  said by  critics to  be  creaming  it – but  from  their  point of  view,  they  are   doing  their  utmost  to meet  the  high  demand  for  electricity.  Their  shareholders certainly  should be  happy   with the  healthy  margins  they are  reporting  while  wholesale  prices remain very  high.

Climate change crusaders press for a Budgetary assault on emissions and pests (but this might stall the Covid recovery)

Radio  NZ   is  reporting  that  climate  change  warriors have  low  expectations  the  budget  will  deliver what is  needed.  Climate lobby groups say that while the need for action to lower emissions and tackle climate change has never been greater, they doubt the government will step up.

It is being pitched as a Covid-19 recovery budget, as the world starts to emerge from 16 months focussed on battling the virus.

 Radio  NZ    quoted Victoria University climate scientist James Renwick as  saying the window for climate action was closing fast. 

“Forget 10 years to sort emissions it’s really only 18 months.  It’s this period last year and this year where governments are making investments, we’ve got to get that right – the pressure is on.”

Young eco-warriors press for change – if they get what they demand, they should brace for a lower standard of living

The latest  cohort of school students  took  to the  streets  last week  to  demand  climate  change action. In  Wellington, several thousand strikers marched to Parliament.

Izzy Cook, one of the organisers, said they had their own list of demands.

“Investing in a just transition to a sustainable future, reducing agricultural emissions, prohibiting the use of fossil fuels nationwide so phasing them out, getting climate education [and] honouring our neighbours in the Pacific Islands.” 

 The demands were handed over to Climate Change Minister James Shaw.

But he said it’s not just him who needs to be listening.