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NZWEA Chief Executive’s introduction

Tuesday 30 August

NZWEA Chief Executive’s introduction - New Zealand Wind Energy Conference 2005

Good morning

It gives me great pleasure to welcome you to this year’s annual conference of the New Zealand Wind Energy Association. I am delighted to see so many of you here today.

At last year’s conference we had 154 registered delegates, and 10 exhibitors. This year, despite doubling our delegate rates in order to cover significantly increased costs, the number of delegates has increased 50 per cent and the number of organizations exhibiting at this conference by 180 per cent.

I am obviously delighted with the strong support that is being shown by so many different sectors of the economy for wind energy in New Zealand. While I am delighted with this support, I am not really surprised.

To some extent at least, the strong support for this conference and the strong numbers attending it, is simply a reflection of what has been happening in New Zealand’s wind energy industry over the last 12 – 18 months.

At last year’s conference at the end of July in Palmerston North, we were just celebrating the May 2004 commissioning of Tararua Stage II. The addition of this 36.3 MW development exactly doubled New Zealand’s total installed capacity of wind energy to 72.6 MW.

However, things have moved on rapidly since then: By the end of 2004 the 90 MW Te Apiti wind farm was commissioned and, just after it, the 4.8 MW Hau Nui extension. 2004 saw the installed capacity of wind energy increase by well over 300 per cent from 36.3 MW at the beginning of the year to 170 MW at the year’s end.

This 170 MW is generating enough clean, reliable and sustainably produced electricity to meet the needs of 75,000 average New Zealand homes annually.

And that is really just the beginning of the process – since then a further eight projects have submitted their resource consent applications. The total capacity of those submissions - 806.5 MW.

Of this 800 MW figure, four wind farm projects (White Hill, Te Rere Hau, Tararua Stage III and, most recently, Titiokura) have already been consented, with a total capacity of 247 MW.

Not bad going for a year! Especially when you consider that the wind industry has had its fair share of battles to fight. As I said last year: We are now a major industry and as a result we have had our fair share of doubters and detractors, from the thermal generation industry in particular.

This is not surprising since they are now our competition in the electricity generation market. They have criticised wind energy and sought to cast doubt upon its potential for New Zealand.

Despite what others may say and think, it is clear that the wind industry has come of age in New Zealand. As we will hear over this conference, wind has enormous potential in this country AND it is also the nation’s preferred form of electricity generation with overwhelming support amongst the general public.

The wind energy industry in New Zealand has surpassed all expectations and I firmly believe we will continue to match or outperform all other forms of generation when it comes to price – both now and into the future – and also when it comes to considering the impact of our industry on the natural environment.

But I think it is important to underscore that renewable energy is about more than the ‘warm and fuzzies’ of combating climate change.

The real issue, and I say that because it is the one that most consumers relate to, is the fact that we are moving to a new energy paradigm in which hydrocarbons will no longer offer the cheap prices and stability which have been their hallmark for more than 100 years.

Inexorably increasing demand and peaking non-OPEC supply, have seen the price of LNG and Crude Oil double in the last 18 months. This should be a wake up call for those who are pushing increased reliance on internationally traded hydrocarbons (principally LNG but also CNG, crude oil and coal).

In a situation of declining domestic natural gas production, rising crude, coal and LNG prices, increasing concern about global warming and rising carbon prices, are new renewables something which we can continue to be complacent about? I would have said not and yet it would seem that their benefit is being ignored – in part if not completely.

In this new energy paradigm all countries have to stop treating new renewables as a poor second cousin and have to start committing serious financial resources towards developing these indigenous energy reserves in a judicious manner.

Renewables already represent a very substantial resource for New Zealand. They annually provide us with 30 per cent of our primary energy needs and 70 per cent of our electricity. In doing so, renewables annually save this country billions of dollars in energy imports.

That reduces our demand for foreign currency which in turn reduces our net external debt. As any Government knows: Reduced indebtedness leads to lower interest rates and this has substantial benefits for the entire economy.

And if we are to get more specific about the financial benefits of renewables: a ‘back of the envelope’ calculation indicates that 1,000 MW of installed wind capacity would obviate the need for about $250 million worth of annual imports of LNG (at today’s prices).

Security of supply is a particular issue in New Zealand at the moment where the Maui field, which until a year or so ago provided this country with 80 per cent of its natural gas, is fast declining and at a time when demand for energy and fuel is experiencing sustained growth against a backdrop of rapidly increasing energy costs.

Nobody wants to see the lights go out – politicians least of all since they know what that means! Those decision makers are therefore under enormous political pressure to maintain the status quo – and often this means pressure to subsidise traditional generation industries.

However decision makers must not give in to such pressure which, ultimately, is damaging to the economy. They must give due recognition to the prodigious benefits of our renewable resources.

In short – what we (and almost all other countries) urgently require is a long-term, cross-party, stable energy policy that minimises political risk, reduces uncertainty in the investment community and thereby leads to an improved investment climate.

It is a fundamental concern of mine that, in ensuring a reliable supply of electricity, the level playing field is not disturbed to favour one form of generation over another.

The issue of subsidies for generation projects is not a popular topic but it is one which cannot be ignored.

In the first instance I would like to pay tribute to this Government which, in the face of vigorous opposition from those who would rather bury their heads in the sand over the extremely complex issue of global climate change, has had the courage of its convictions to stand by its commitments and beliefs on this issue.

But this Government has moved beyond empty promises. This Government has also introduced innovative mechanisms that seek to put a cost on the negative externalities associated with the release of carbon dioxide into the atmosphere.

One can argue about the cost of carbon dioxide and clearly those who are substantial emitters will argue long and hard, but it is increasingly hard to argue against the fact that there is a cost.

Generation using wind turbines does not release carbon dioxide into the atmosphere. The wind industry therefore avoids the hidden costs, or negative externalities, associated with electricity generation using hydrocarbons. It is therefore eminently logical that the wind industry should consequently receive something that recognises this avoided cost.

This is an important point and I make it because the Projects to Reduce Emissions (PRE) programme is not a subsidy – it is an entirely logical mechanism which seeks to recognise the fact that the wind industry avoids the negative externalities associated with the release of large amounts of carbon dioxide.

The PRE is clearly not a perfect mechanism – but it is a start and one for which this Government deserves credit.

However, and even if we ignore the cost of carbon for a moment, wind energy has shown that it is fully cost competitive with all other forms of electricity generation. However, what wind energy cannot do is compete with substantial Government subsidies for thermal generation that we have seen in the recent past.

It is now, more than ever, absolutely critical that energy generation options stand on their own merits and, consequently, that the market not be distorted by arbitrary Government intervention.

Clean, renewable electricity generation will never reach its potential if Government underwrites non renewable projects on a non transparent basis. This risk is, I believe, the biggest threat to a thriving wind industry providing 20 per cent of New Zealand’s electricity.

And for those who are keen to denigrate new renewables – I would say that arbitrary Government intervention in electricity markets does not just damage the renewables industry – it also creates even more risk and uncertainty for potential investors in all areas of the electricity generation market. This ultimately results in less investment, reduced security of supply and higher prices for consumers.

But let us move on: This conference is a celebration of all that the New Zealand wind energy industry has achieved over the last year and, indeed, over the years before that. It is also a look ahead to what we need to do in order to build on the success of the recent past.

Our industry is already making a strong and tangible contribution to meeting this country’s energy needs and the very real promise is that wind energy will play a rapidly increasingly role in the years to come.

We have many outstanding speakers lined up to cover some critical topics regarding the New Zealand wind industry and I very much look forward to hearing from them over the next two days.

I would particularly like to thank our three international speakers who have travelled so far to be with us today; specifically: the Deputy Speaker of the Danish Parliament, Svend Aucken; the President of the European Wind Energy Association, Professor Arthouros Zervos; and Paul Gipe.

I also wish to extend my thanks to New Zealand’s Energy Minister, the Hon Trevor Mallard, for joining us this morning and sharing the Government’s perspective on wind energy in New Zealand.

Please enjoy this conference and celebrate our remarkable successes. I look forward to catching up with you over the following two days.

It gives me great pleasure to hand over to the first speaker of this 2005 conference – the Hon Trevor Mallard.


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