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New policy approach needed in electricity trading


Media release

2 May 2008



New policy approach needed in electricity and emissions trading

Looming brownouts and emissions trading pose similar dangers, says Business NZ.

Chief Executive Phil O’Reilly says in both cases there’s the danger of companies having to reduce production or even having to relocate overseas.

“Both are top of mind at the moment.  Transpower as System Operator has advised a potentially serious problem with hydro lake levels that have been relatively unaffected by the recent rainfall.  With the NIWA forecast of below average rainfall, it is time for the industry to start work on contingency plans.

“As usual, the crisis will be tackled by negotiating with major companies to reduce their electricity consumption and by making the spot price of electricity high enough to force reduced production.  In previous situations this has resulted in the Tiwai Point Smelter closing down a pot-line for several months, and pulp mills transferring production to other countries with more secure electricity supply.

“This kind of outcome is also possible if we approach emissions trading in the wrong way.  If we rush into an ETS system ahead of other countries, the result will simply be high electricity prices for our businesses and the possibility of them moving offshore.

 “In both instances the danger arises as a result of policy decisions.

“The policy decision not to build any new base load thermal generation for the next ten years just makes us more vulnerable to losing our businesses.

“And the possibility of a policy decision to rush into an emissions trading system ahead of other countries could have exactly the same outcome.

“A new policy approach is needed in both cases,” Mr O’Reilly said.


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