Electricity Proposal Represents Regulatory Instability
Opposition Electricity Proposal Represents
Regulatory Instability, UC Expert Says
April 30,
2013
A University of Canterbury (UC)
electricity expert says the Labour and the Green Party
electricity proposal risks regulatory instability and it
would be preferable to deal with any problems the
parties have identified by improvements to the existing
market structure.
The Opposition parties have
said that, if elected next year, Labour will establish a new
agency to act as a single buyer of wholesale
electricity, which will have the power to set
prices.
UC electrical engineering researcher Dr
Allan Miller says the Opposition proposal is a huge change
to the electricity industry which would take a great deal of
resource which would not go into the productive economy.
``It makes New Zealand look like an unstable
country and less desirable to invest in. Companies who
invest here require some certainty over electricity price
and reliability and this promotes neither.
``If
there is something wrong with the current market - and I
tend to agree with recent reports that generators have too
much market power - it would be better to improve the market
structure we have at present rather than embark on another
huge and expensive change and one that is highly
experimental.
`` The Opposition’s proposed New
Zealand Power would not only be a single buyer of
electricity, but would by default effectively be a single
seller of electricity and therefore would be a monopoly. New
Zealand consumers will essentially have no choice of
supplier, making them worse off than they are now, under a
regime where a single company knows better.
``The monopoly would extract monopoly rents,
because it would not have the discipline placed on it of a
strongly elastic demand, created by consumer choice. A
purchasing body or collective model may work well where New
Zealand is competing internationally with numerous other
buyers, where the price is set
internationally.
``However in the proposed New
Zealand Power case there is only one buyer, with no
competitive price setting arrangement. It would likely be
inefficient to set up such a company.
``Furthermore
there is no evidence, as claimed in the policy document,
that a “cost based price pool enables the use of smart
grids which allow New Zealanders to make real-time decisions
about the best way to use energy should they so
choose.’’
Dr Miller has received $6.3
million of Ministry of Business, Innovation and Employment
funding to investigate renewable energy and smart
grids.
His project will contribute to a future New
Zealand with greater renewable generation and improved
energy security through development of a smarter, efficient,
cost-effective and robust renewable electricity generation
system. It proposes to do this within the existing
electricity market structure.
``We will provide
government and industry with methods for managing and
balancing supply and demand variability and delivering a
functional and safe distribution network in which
intermittent renewable generation is a growing part of the
energy supply.
``The result will be an efficient,
cost-effective and robust electricity network meeting the
ongoing and changing power supply and demand needs of New
Zealanders,’’ Dr Miller says.
New Zealand
currently generates about 75 percent of its electricity from
renewable generation, making it a world-wide leader in this
area.
Photo
: Dr Allan MillerENDS