Tue, 1 Jun 2004

Address at opening of Whirinaki power station

"This power station is an insurance policy ..."

[Onsite at Whirinaki, near Napier, Hawkes Bay]

Two weeks ago today I pushed a couple of keys on a laptop to start 55 new wind turbines turning.

That was at TrustPower's Tararua wind farm in the Manawatu - now the largest in the southern hemisphere.

Today I get to start up 155 megawatts of diesel generation.

There's a stark contrast for you.

Yet both projects make sense for New Zealand.

Both will add to the security of the nation's electricity supply.

And both are in important ways the result of government energy policies that drive, overall, towards an electricity system that is both secure and sustainable.

TrustPower's windfarm was expanded this year, rather than some years down the track, because it received carbon credits from the government.

Electricity from those wind turbines will displace generation that otherwise would have come from gas or coal, so they will reduce New Zealand's future greenhouse gas emissions.

That reduces the number of carbon credits the government needs to cover future emissions, so we pass on that saving.

The value of those credits on the international carbon market made the project viable for TrustPower.

We all win from that.

TrustPower grows its business. New Zealand gains some more clean, renewable energy. Electricity consumers get a more secure supply of power.

This power station is complementary to those wind turbines in the Manawatu.

The wind doesn't always blow. The rain doesn't always fall.

We've been reminded, all too painfully, of how vulnerable New Zealand is to the effect that a very dry period can have on our electricity system.

The power shortages of 2001 and 2003 were not just inconvenient, they were expensive, damaging to the economy and damaging to New Zealanders' confidence in the security of their electricity supply.

This government decided that the problems in those two years went deeper than the weather, to the structure of the industry.

We decided that New Zealand needed an electricity system that copes better with extremes.

And part of the solution is to have more reserve generation to run in very dry years.

This power station is an insurance policy.

We hope we won't have to run it too much. We'll switch it on today, but it won't stay on.

And I'll be happy if we don't have to switch it on for the rest of the year, because that will mean the electricity system isn't under stress.

This station will run only when the limits of the electricity system are tested by problems like low inflows to the hydro lakes, or perhaps a major generation or transmission breakdown.

It's like the torch you have handy in case of a power cut - except that it's the station that could stop that power cut happening.

The government has paid for this plant to be built precisely because we do not expect it to run often.

Electricity generators are in business, and it is not part of their normal business to build plant that will not run often enough to pay for itself - even if the country needs it.

This was one of the failures of the electricity market.

I said before that building more reserve generation was part of the solution.

That's a very important point.

Every now and then I am confronted by people who insist it is a mistake to think that reserve generation capacity by itself is the answer to dry year risk.

They are quite right.

We need better management of existing generation assets, to get the most out of them.

We need new investment in baseload generation.

And we need more opportunities for electricity users, large and small, to shift or moderate their consumption in ways that make economic sense for them and for the system.

New Zealand needs all of these things to happen, and that is what Government electricity policy is designed to deliver.

The agency charged with putting that policy into action is the Electricity Commission.

The Commission's basic role is the unglamorous but essential work of day-to-day governance of the electricity industry.

It also has a rather long and specific list of improvements to make to the way the industry operates, set out in a Government Policy Statement on Electricity.

These include providing reserve energy for dry years - perhaps through commissioning more plants like this, but by other means as it sees fit.

This part of the Commission's work, because of its novelty, is often mistaken for its only role, or its most important.

In due course though, I think it will be understood as no more nor less important than many of its other tasks.

The problems that have emerged with the national grid in the upper South Island in the past week have shown, for example, how important the Commission's role in decisions on transmission investment will be.

The Commission has the difficult challenge of dealing with the smallest details of the electricity industry while keeping sight of the big picture.

For the government the big picture is sustainable development and what that means for the energy sector.

We have a Sustainable Development Programme of Action, published early last year, which identifies energy as a central issue.

The Ministry of Economic Development - currently the owner of this plant - is leading some very useful policy work, across government, on a framework to guide our thinking on sustainable energy into the future.

You don't have to go far into questions about what a sustainable energy future looks like before you find questions multiplying in front of you, reaching into all corners of our lives.

We consume energy like we breathe air, and the results range from global climate change to the smog of a cold night in Christchurch.

A framework for thinking about sustainable energy policy issues will help us integrate energy policies more effectively.

The work is going well and I look forward to having something more to say about it later in the year.

For today, we have a bit of concrete and steel reality to deal with, and I want to thank all those who have helped put it in place.

This plant is a real credit to the project team, who have worked to a very tight schedule. Most plants of this size would take at least a year to complete. To have got to opening day in only eight months is a highly impressive achievement.

I particularly want to acknowledge the constructive approach taken by Contact, which has been positive and flexible through the whole process. Thanks in particular to Steve Barrett and project manager Tom Zink who has put in long hours to make today possible.

Thanks also to the Ministry of Economic Development who have managed construction on behalf of the Crown. Particular thanks go to David Smol and Roger Fairclough for their fine efforts.

And providing the Crown with technical support has been Sinclair Knight Merz, in particular Eamonn Morrisey. Thank you for that.

Finally I thank Pratt and Whitney, who have been the principle contractor for the supply and installation of this power station that you will see more of on your tour shortly. In particular I acknowledge the fine work of Peter Christman, Chuck Levey and Larry Pitts.

You can all take great pride in what you have achieved today.

As for myself, I think today is probably the closest I will ever get to firing up a jumbo jet.

ENDS

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