Simon Bridges

6 March, 2013

New Zealand Downstream 2013 - Energy Sector Forum

Good morning and welcome everyone. It’s a pleasure to be here.

As many of you would appreciate, this is my first substantive address as Minister of Energy and Resources.

I’ve been looking forward to this opportunity, as I am quickly coming to the view that this is one of the most exciting and challenging portfolios in Government.

Let me be candid.

I don’t have the same level of expertise that many of you here have.

But you can be very clear that I will inject significant dedication and enthusiasm into this important area. And I intend to come to grips with it quickly, and thoroughly.

This is an exciting sector. This is because it is important to everyone and it has the ability to have a transformational effect on the New Zealand economy, for New Zealanders.

In terms of the portfolio and its different areas, I want to tell you where I am at with it. What my sense of it is.

It’s called Energy and Resources. And that’s actually a convenient, conceptual dividing line.

In energy – or the downstream side – from what I am seeing so far, the Brownlee reforms are working exceptionally well.

Here’s the thing about that. As a politician you know something is working well when no one in the real, ordinary world knows what it is, let alone talks about it.

Take me as an example. I probably had only a vague idea prior to being Minister what the Brownlee reforms represented. Now I’ve looked into them and I can see their worth.

I want to be political for a moment – we as a Government deserve more credit for them than we get.

In short, people today are getting what they want, when they want it, at a competitive price. That’s the measure of success.

As a country we’ve had higher switch rates – now amongst the highest in the world – and we’ve seen steady improvements in things such as hedge market liquidity as well as a significant fall in futures prices in recent months.

As you well know, electricity futures prices are a key indicator of forward wholesale price expectations, and I will be looking to see how the recent downward trend in futures prices may be reflected in retail prices in due course.

The Electricity Authority and the Gas Industry Company are, I think, working very well.

I appreciate some rub between such regulating bodies and the industry can exist and I will continue to watch this interaction with interest.

I expect industry to submit to these bodies on matters and concerns thoroughly and thoughtfully.

While the regulators won’t, and shouldn’t always agree, I do expect them to listen to market participants with equal thoughtfulness.

I also want to say how impressed I am with the way, under a National-led Government at least, our industry has shown the world that a secure supply of electricity and a high share of renewable electricity generation are compatible.

A practical example of this resilience is the way the system coped last year while inflows into the South Island hydro lakes were the lowest-recorded in the first six months of any year since records began.

I also want to tell you how proud I am at international fora that we have such a unique competitive advantage with our high renewable electricity supply – 77 percent in 2011.

This is the highest since the mid-1990s.

While other countries struggle, through various subsidies and the like, to move to renewable energy, I feel confident that our percentage of renewables will continue to rise over time.

What I’ve heard already from some of you both as suppliers and users is that you invest in renewables because it makes economic sense. That is probably the best reason to do it.

Since 2008, there has been a steady flow of investment in renewable geothermal and wind generation capacity.

A recent slowing in electricity demand has impacted some generators’ investment plans, and we’ve seen some delays or cancellations of generation projects.

But as demand picks up in the future – as it always does – it’s likely that renewables which are currently cost-competitive with fossil fuels as a source of electricity generation will fuel the majority of electricity generating capacity to be built over the next decade.

With our mix of renewables and petroleum and mineral resources we, as I’ve said, are in an internationally enviable position.

I believe we should utilise these resources and view them as great opportunities.

Turning to the other side of the portfolio, the Resources or upstream side of the equation, the prospects for New Zealand are very strong.

The regulatory regime is currently being significantly improved and strengthened through changes to the Crown Minerals Act, the Resource Management Act, Exclusive Economic Zone (EEZ) law and more.

The changes will provide a more streamlined and certain investment environment, while also ensuring stronger environmental and health and safety safeguards, which are non-negotiable for all of us.

I said to you earlier that one of the reasons this is an exceptional portfolio is because of its potential to have a transformational effect on our economy, for New Zealanders.

Let me provide you with a couple of real life metaphors for what I am saying.

I paid my first visit to Taranaki as Energy and Resources Minister two weeks ago. I went to a gas operation. A couple of hundred or so people worked there.

What sort of people? Young men, mostly, that I could see. I asked what the average wage there was. I expected about 65k. Not on your life. 120k.

Tomorrow, Economic Development Minister Steven Joyce and I will launch the East Coast Oil and Gas Development Study. I won’t go into the details today but it unemotionally looks at a range of scenarios on the East Coast of
the North Island, were oil and gas to be explored and prospected.

The truth is, without further work we don’t know with any precision what is there. But we do know from the limited data we have, there is a real potential for East Coast communities to benefit from oil and gas exploration.

Just take a look at the Taranaki region – the most productive and with one of the highest wages in the country. A second Taranaki could be very significant.

This coming season will be a big one with more minerals and petroleum activity than we have seen for some time.

But I want to emphasise what a long-term game this is.

Energy efficiency, of course, is also an important part of the equation. I know later in this conference, Mike Underhill of EECA will be speaking. I have been fascinated to learn about the work his team does.

Some of it is high profile, such as the Warm Up New Zealand home insulation programme where, by later this year, 230,000 homes will have been insulated.

Families have benefited hugely through this government-driven programme and it has delivered $4 of benefits for every $1 spent.

A phenomenal cost/benefit ratio by any measure.

But some of EECA’s work flies under the radar at least politically speaking.

I think, for example, of the great work it does helping business to operate more efficiently.

In the broadest of terms, there are real gains to be had in areas such as commercial buildings, the electric motors and process heat used in industry, and in regard to transport.

This work interests me not just in terms of my Energy and Resources portfolio, but also as Associate Climate Change Minister.

Indeed, the energy sector accounts for half our greenhouse gas emissions and, more importantly, energy-related emissions represent most of our economic greenhouse gas abatement opportunities.

Taking this further, the transport sector provides the single greatest opportunity for reducing energy sector emissions. The use of alternative transport fuels, particularly biofuels and electric vehicles can play a real role. EECA is doing good work on both.

My Energy and Resources portfolio has an important part to play across a number of parts of government.

As well as climate change, policies towards resource management reform, water allocation, and Māori economic development have a material impact on, and are impacted by, businesses in the energy and resources sector.

Engaging and communicating with stakeholders is essential, and a key priority of mine will be to further strengthen engagement with iwi, with councils and, of course, with business.

Today is a great step in that direction.

Your forum provides me with a fantastic opportunity to meet, and mix with, a large number of industry representatives.

I look forward to having more detailed discussions with many of you in coming months, to better understand the opportunities you see, as well as the challenges you face.

Thank you for the opportunity to be here today.

ENDS

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