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100% renewable electricity has a fatal flaw

Molly Melhuish

25 Nov 2019

A fatal flaw in Government’s promise of 100% renewable electricity has been revealed in an Official Information release by MBIE. Their electricity supply scenarios require continuing gas production, and even exploration to assure long term supply.

All MBIE’s scenarios require at least six new gas peaking stations to supply winter peaks, dry years, and when the wind doesn’t blow. So the promise of 100% renewable only applies to normal hydro years.

Importantly, these peaking stations cannot get their gas unless there is a continuing substantial flow of gas to another user, probably a petrochemical such as the transnational-owned Methanex plant. Our gas supply is limited so as it dwindles, continuing exploration would be required to support the long-term contracts which support these capital-intensive projects.

Thus, 100% green electricity is a fake promise, and worse, it locks in fossil fuel development long-term.

There is an alternative absolutely 100% renewable option, never mentioned by Government or our business-friendly press – that is, local energy supply. This uses solar and batteries, with clean wood burning for winter peaks. The problem is, it competes with the bulk electricity supplied by the power companies, which are half-owned by Government.

Investment in energy efficiency is important to support local energy. If you move off the grid and order a solar, battery, and generator system, your installer will first recommend changing your stove, fridge, heating and lighting and appliances to the most energy-efficient possible. Then they will design the most affordable energy system for your own property. Our national energy supply should do exactly the same.

Power companies consider solar “disruptive”, and plan to change their pricing to make solar uneconomic for most consumers. That is what is behind the proposal to remove the Low Fixed Charge pricing – 30 cents per day (plus GST) now enjoyed by well over half today’s householders. They want to move progressively towards $2.00 per day, with Government supporting any householders put into hardship. This plan has been accepted by the Electricity Price Review team

High daily fixed charges provide guaranteed revenues to all power companies, both generators and network companies. This supports the asset values of the companies, maintaining their share values. High fixed charges allow per-unit charges to be reduced, so consumer investments in solar or energy efficiency take longer to pay back.

Local energy supported by energy efficiency has already cut growth in electricity demand. Household demand was flat for over a decade despite population growth. The power companies are desperate for a return to growth, to maintain their share market values.

Government-owned Transpower has fought back with a bold plan to double our generation, to supply electric vehicles and process heat for industry. They would fill our landscapes with wind farms and increase our geothermal power (which is not 100% renewable).

This bold plan is already underway, with the first new peaking station being built in Taranaki, a new wind farm being built near Palmerston North and another about to be built in central Manawatu.

The new power demand is to come from electric vehicles and from industrial process heat – an “electrode boiler” was just built by Synlait in Canterbury, despite its horrifying inefficiency which has doubled its running cost compared to that of fossil fuels.

Growth in demand is essential to maintain the asset values of the power companies. Values have more than doubled since privatisation in 1999. Residential prices increased accordingly. The proposed growth plan will prop up the value of the whole share market and help the return to economic growth that the business community so urgently desires. It will save off the possibility of recession that lurks in the minds of business and Government.

But this electricity growth must be funded largely by residential consumers. Industrial consumers already negotiate very generous discounts – the latest smelter potline pays 5.5 c/kWh compared to the average residential price of 29c.

Residential power prices are already as high as the market will bear – many householders are cutting their electricity use just to keep food on the table.

Government is therefore subsidising many householders via the Winter Energy Payment, which is costing the taxpayer over $400 million per year. Such subsidies will have to increase if the Low Fixed Charges legislation is repealed, as power bills of the lowest electricity users stand to increase by hundreds of dollars each year.

High fixed charges are essentially an electricity tax – a tax on an essential service. The most famous example of taxes on essential commodities was the salt tax levied by France, a profitable means of generating revenue for their military, and a contributing factor to the French Revolution.

The Electricity Authority supports tax-like electricity pricing – it no longer claims to support consumer interests. Its definition of “long-term benefit of consumers” considers monopoly profits to be a consumer benefit, because they promote growth in electricity demand which in turn supports economic growth.

In conclusion, it must be recognised that Government’s spin on so-called “100% renewable electricity” is a smoke-screen over its support of a massive increase in its investment in electricity generation and transmission. It seems clear that economic growth via the sharemarket trumps any benefits from growth of solar, or energy efficiency, which supply demand at much lower cost.

Yet local energy and energy efficiency employ far, far more people, and are distributed throughout urban areas and the regions. They greatly improve New Zealand’s resilience in the face of climate change impacts.

In contrast, the electricity industry’s growth plan requires continuing use of gas for peaking and dry hydro years, which in turn require a substantial base-load gas industry to maintain the flow of gas through the reservoirs and the necessary gas-processing facilities.

New Zealanders must reject the industry’s growth plan, and invest instead in energy efficiency, solar with batteries to extend its energy into evening hours, and clean wood burning for industry and some households. This is truly 100% renewable, and far lower cost than the bold industry growth plan that is so well publicised in the business press.

We must insist that electricity scenarios that focus on local energy and energy efficiency are fully incorporated into all new analysis of low-carbon policies. I specifically requested the Interim Climate Change Committee to do so – they declined. The new Climate Change Commission must not repeat that mistake.

Instead, Government must support local energy projects, for example through a greatly expanded Green Energy initiative. And the Resource Management Act and the Electricity Industry Act must both put reduction of carbon emissions as their primary objective.


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