The lessons NZ can learn from Australia to guide energy policy and keep prices down

As  consumers  receive their winter  power  bills,  many  are puzzled  and  some are incensed that they are  so  high.

There  is a  simple answer:  wholesale  prices are elevated (they have  been   very  high for  some time and reached $215 a  megawatt/hour last week).

And  there’s a  not-so-simple answer:

The  latter relates  to   New Zealand’s complicated  generating  system which –  to  the  casual  observer  looking at   the  power  stations – inspires admiration at  their  construction, as  for  example  on  the  Waikato river  or  at  Benmore in  the  south.

NZ’s system generates more  than 80 per cent of its power output  from renewable  sources, but under  the  Ardern  government  aims  to  get  to 100 per cent to  minimise  carbon emissions.

As  Australian consumers are  finding out, however, closing down fossil fuel plants,  and relying  on  renewable sources can send prices  soaring and  brings  another  set  of  headaches.

NZ has  relied on  the  Huntly power  station with its  fossil-fuelled  generators  as  a  back-up  to  its  renewable  system, but as long  ago as  2016 its  operator, Genesis,  signalled  the coal-fired generators would  be  phased out  by 2025.

New Zealand’s management of its strategic assets: just right or in need of recalibration (and in learning from Canberrra)?

This article has been contributed by CHRISTIAN NOVAK, who has undergraduate and postgraduate degrees in history from the University of Sydney.  He currently works for a Wellington based communications company. 

With the global economy already massively disrupted after two years of a global pandemic and now, high inflation, the Russia-Ukraine conflict demonstrates the need for sovereign governments to protect and manage their strategic assets – in this case, energy supply and the risks associated with them.

Amid soaring fuel prices and cost-of living pressures, the closure of our sole oil refinery at Marsden Point calls into question New Zealand’s approach to energy security. Considering the Government struck a deal with Rio Tinto to keep the Tiwai Point Aluminum Smelter open, it puts the spotlight on the government’s decision not to underwrite the refinery. This is because the smelter is not a ‘lifeline utility,’ as defined under New Zealand’s Civil Defence Emergency Management Act 2002.

Compare our policy on Marsden to Australia, which is subsidising its two oil refineries on both strategic and national security grounds. The question posed, therefore, is: how does our government view security of supply of a strategic resource?

Australia, like New Zealand, faced similar problems with its refineries – scale and distance, therefore cost.

How pain at the pump is exacerbated by the govt’s imposts on petrol prices

New Zealanders   are suffering  a  fresh bout  of  “pump pain”,  as  the  price  of  petrol surges past  the $3 mark.  It  has  climbed  40c in  the  last four weeks.

The pump  pain (as  the  NZ  Herald  calls  it)  brings  a glow  to  climate  change  warriors, but  not  to Kiwis who use  their cars  to get to and from work every  day. What makes that  pain worse  is  the  prospect  that it won’t  be eased any  time  soon.

International crude  oil prices  have  risen  steeply  because of Russia’s war   on the  Ukraine,  and  are  now  above $NZ150 a  barrel. The  price  of  Brent crude jumped  from $153  a  barrel last Wednesday to $168  on Thursday.

For the  motorist, the pain  at  the  pump  is  compounded  by  the  knowledge that  more than  half the  cost, 52%, is  creamed off   by  the government, supposedly  for roading improvements.

Genesis expects to play key role in wind and geothermal generation while expanding into grid-scale solar power

In what   it  sees  as  a pivotal year  for  the  electricity  sector and New Zealand’s climate agenda, Genesis Energy says there is significant investment in renewables being made, the Emissions Reduction Plan is due from government and Budget 2022 will allocate capital to the climate response.

Genesis believes it has a key role to play with agreements for wind and geothermal generation, expanding its portfolio into grid-scale solar, and continuing  work to ensure back-up generation at Huntly supports the transition.

Reporting its  half-year result  (a 63% rise  in  net profit of $84.7m), Genesis said the result underlines the company’s momentum as it invests for future growth in new renewable generation and enhanced customer experiences.

Chief Executive Marc England said Genesis has delivered another strong result while building capability for the future.

Contact Energy shareholders get a positive jolt from company’s latest results and renewable power prospects

Contact  Energy, New Zealand’s  largest power  company, is  also among  its  most enterprising. Currently it  is building a  168MW  geothermal plant  at Tauhara as  market demand for  renewable energy strengthens.  

The company reports  its project to investigate the world’s first-large-scale green hydrogen plant in Southland with Meridian Energy is also progressing well, with potential development partners shortlisted.

Only last week PM Jacinda Ardern said developing a “shared plan with businesses and investors” to establish a new green hydrogen industry in NZ was  one of the government’s primary economic development objectives.

Contact Energy’s shareholders  could be  understandably excited, therefore,  when the  company  this week reported a  70% rise in net profit to $134m  (from $78m  in the corresponding half),  just  as  CEO  Mike  Fuge   said the company was excited about the role its renewable generation was set to play in the decarbonisation of the country over the next decade.

Sometimes cleverness can’t get you out of a hole

Kwasi Kwarteng – Britain’s top business minister – is smart. 

King’s Scholar at Eton; Double first from Cambridge; University Challenge winner; Kennedy Scholarship and a PhD in Economic History – from Cambridge.  With prizes along the way.

Whew!

Isn’t it good, Norwegian soot

Just keep reminding yourself that things need to get worse before they get better.

Norway – a grand profiteer from blood carbon, according to the puritanical wing of the climate church – has come up with a very old and very bad answer to Europe’s energy price crisis.

According to the Times, the government is going to help pay Norwegians’ electricity bills:

“Each household is expected to save hundreds of pounds through state subsidies to cover half of power costs above a price floor over the coming months.”

Energy markets: the more they change, the more they stay the same

Insanity is doing the same thing over and over and expecting different results.

Which, with baroque variations, is the story from the UK domestic energy market.

As we’ve reported before, the market is suffering from the unfortunate conjunction of soaring input prices and a populist price cap.  As suppliers collapse into the consumer-funded government safety net, the regulator is thrashing around trying to cobble together a fix which might avoid prices rising to their true level too fast, without offending voters or damaging long-term supply.

And trouble in the East as well …

Tyrants prefer to move when their enemies are weak, divided or both.  So no surprise to see Russia’s Vladimir Putin fresh from his triumph in coercing Moldova, to stirring up trouble in the Balkans, supporting Belarus’s migrant-based diplomacy, blackmailing the EU over energy supplies this winter, and ratcheting up the threat of military action against Ukraine.

Well, that’s the view from the London-based Daily Telegraph, which points out that Putin has been sending clear and consistent messages, (punctuated by use of force in Georgia, Crimea and Eastern Ukraine):

It will be a good day when Judith Curry is better known than Greta Thunberg

The world climate revival meeting in Glasgow ended with Alok Sharma (the UK’s minister to COP26, as well as the presiding chief priest) in tears over a last minute word change.  The countries which have built more coal fired capacity, more quickly, than just about anyone else in history (that’s you China and India) would only agree to phase its use “down”, rather than “out”.

Despite the (quite literal) imprecations of hellfire, the only truly substantive outcome of the conference may be the Chinese government’s practical suggestion that the world should aim for a global temperature increase of 2°.  (Bill Gates also chipped in some climate realism, noting that 1.5° was probably unachievable.)