Aotearoa is currently suffering from one of its regular electricity crises, thanks to systematic underinvestment by the power cartel. Today. driven by business outrage over high power prices, the government announced its response to this, consisting of:
- a thing which won't lower electricity prices at all (but will please donors);
- a thing which will guarantee they remain high; and
- a thing which might actually help, but probably won't.
And together, its hard to see how these are much of a solution. Looking at each of them in turn:
Reversing the offshore fossil exploration ban: this isn't going to lower power prices, because there isn't any gas to find (if there was, it would have been found already), and because of the ten to fifteen year lag between exploration and exploitation. So in the unlikely event that the fossil companies find gas, it might come to market in, oh, 2040 or so. Which is, coincidentally, well after the time by which we should have stopped using it altogether. If the government is worried about gas supply, it should shut down Methanex and free up their gas for other users. Sure, this would cost 300 jobs, but they're jobs we're already subsidising to the tue of $200,000 a year each, and the power crisis has probably cost us that many already (Winstone Pulp plus Oji recycling balances it). Shut down this pack of foreign exploitative polluters, and the problem goes away.
Importing LNG: the government is on-record as saying that imported LNG means an electricity price of $260 / MWh - lower than current crisis levels, but over twice the "normal" price that industry expects. And that's only based on fuel prices; once you factor in the costs of the terminal, and the profit margin for whoever builds it, it'll be much higher. So, building a terminal and importing LNG will mean sustained high electricity prices every winter. Great for the power cartel, but terrible for electricity users (including us retail peasants, who pay significantly over the average spot price as an effective hedge for the cartel). About the only good thing you can say about the government's plan is that at least they're refusing to pay for it. Instead, we will be - and through the nose. On the plus side, leaving it in the hands of Genesis, Contact, and Todd Energy will mean that it will take years, even if fast-tracked - which means there should be time for the next government to say "nope" and shut down the whole stupid idea.
Reviewing the electricity market: could do something useful, if allowed to look at the pricing model, but probably won't. Really just a way of appearing to do something while not really doing anything at all.
So what should the government do instead? The things which will help this year - a temporary Methanex shutdown and allowing the hydro lakes to dip into their contingency - have already been done. As for next year, the government needs to make that Methanex shutdown permanent to free up gas supply (in case we need it), then do some serious public investment in renewable generation and battery storage. The power cartel won't invest, so the government will have to do it itself. Rooftop solar is a useful part of this, because it doesn't need resource consent and can be built quickly - so a subsidy scheme to roll out an extra 50MW a year of that (on top of the 70 - 100 MW that is expected to be built) will help. As for grid-scale generation, the government doesn't need to build it itself: there's over a GW of solar generation and another GW of wind consented but unbuilt, and spending some money on pushing those projects forward so they get built next year rather than in 2026 or 2027 would help. But longer-term, setting up an SOE with the specific purpose of building renewables, flooding the market, and crashing the power price so we get negative electricity prices in summer would seem to be a Very Good Idea. And if in the process it burns all those thieves who bought into the public assets National part-privatised last time it was in office, all the better.
Alternatively, the government could use its ownership interest in three quarters of the power cartel to demand investment rather than dividends. But how likely is that?
