Greens proposal for renewable energy: nothing new
Press release: Greens proposal for renewable energy: nothing new
The Greens’ proposal to support small-scale renewable energy makes use of well-tried mechanisms to overcome a proven failure of the electricity market.
A number of small wind farms and a marine electricity project have fallen over because they could not get a commercially realistic power purchase agreement. Rooftop solar electric systems can no longer sell back their surplus electricity at the retail price – much less at a higher price that had been typical through European “feed-in tariffs”
Small-scale renewable energy projects at or near where electricity is used are desirable for several reasons. They reduce transmission losses, they add resilience to local supply, and importantly for today’s regulatory philosophy, they provide a competitive lid on the prices that large-scale gentailers can charge.
The regulator, the Electricity Authority, is required by statute to facilitate competition and provide efficient incentive for investment and innovation.
The proposed renewable energy bill would give the regulator power to set a pricing methodology (not the price itself, as reported on Radio NZ Sunday morning), for small-scale renewable energy. It suggests a ten-year term for a power purchase agreement. Nothing new here – the Huntly gas-fired power station built in 2007 had a government-guaranteed gas price for a similar period.
Nothing new either in the mechanism proposed to overcome the commercial failure of small-scale energy. The Authority is to propose a model agreement in consultation with the industry and other stakeholders. The Authority would monitor the effectiveness of the resulting agreement in actually enabling small-scale renewable energy to compete in the electricity market.
If these moves do not make at least some such innovative projects commercially viable, then the Minister steps in as provided for in Section 43 of the 2010 Electricity Industry Act.
This proposal is a laudable first step - to use existing regulatory mechanisms to overcome a commercial failure. There are other early steps that could make the existing electricity market more consumer-friendly. The full-scale New Zealand Power proposal could then remain as a “threat of regulation” in case the more market-friendly steps did not meet the desired objectives.