Infrastructure resilience important but balance is needed
The BusinessNZ Energy Council (BEC) welcomes a Government inquiry into Auckland fuel supply disruption following the Marsden Point Oil Refinery pipeline rupture in 2017.
One recommendation is that the Government enacts new legislation to put in place regulatory options that would enable it to step in should the fuel sector not be able to consider the public interest in resilience adequately when making investment decisions relating to fuel infrastructure.
Business Energy Council Chair Hon David Caygill says it is unclear who will pay for additional security from added resilience or how much it might cost. Mr Caygill says suggestions of strong regulatory interventions are relatively easy to make in this context.
"The inquiry has acknowledged that cost-benefit analysis of resilience spending is still necessary. And this should be undertaken by the fuel industry.
The inquiry also suggests that the fuel industry has under-invested in Auckland airport facilities. No doubt the companies will urgently consider that conclusion.
"Infrastructure owners need to weigh the costs of duplication, storage or other forms of risk minimisation against the cost of disruption.
"This is all set against a highly uncertain future regarding forecast economic growth, demand and the pace of the transition to a low emissions economy. At a time that the Government is investigating aggressive interventions to lower transport emissions, is it also going to legislate for the fuel companies to spend against future higher demand?
"Perhaps their investment plans should be more transparent, but forcing private companies to provide infrastructure is fraught with problems.
"Similarly, the risks associated with government funding infrastructure if poorly executed could leave taxpayers picking up demand risk that should be borne by market participants.
"The public is potentially being encouraged yet again to ignore the costs of resilience or security and the government needs to be cautious in its response."
The BEC recommends the Government weighs all three dimensions of the ‘Energy Trilemma’ framework.
While security is extremely important so is affordability and sustainability and at a time when fuel prices are at an all-time high.