Friday, May 28, 2004

Exploiting the crisis

I see the threat of another electricity crisis has the loonies coming out of the woodwork again, with Holmes giving a lot of airtime to Brian Leyland's suggestion that we go nuclear. Regular readers will know that we think that's a dumb idea; New Zealand simply has too many earthquakes and too many active volcanos for it to be safe. And even if we look past that fact, it still makes no sense whatsoever simply on economic grounds. The capital cost is enormous and (unless we spend vast amounts of money seriously developing local industry) would require much of the equipment and expertise to be imported. Ditto fuel - while we have uranium, we have no local means of enriching it, which again means either serious investment to develop an industry or importing it from Australia (or worse, Britain). And then there's the cost of decontamination, waste disposal and storage. Simply put, there are much cheaper options. It's a telling indicator that even at the height of its "Think Big" madness, the Muldoon government didn't build nuclear - it built the (still ludicrously expensive) Clyde Dam.

Quite apart from that, we simply have no need for nuclear power in this country. We have 1000 - 2000 MW of additional hydro capacity waiting to be tapped (and possibly more), as well as one of the best wind resources in the world. We can easily aim for - and achieve - a green mix of hydro, wind and geothermal for baseload, with a small amount of coal or gas for peak load and "firming" - and all at a cheaper cost than nuclear.

Meanwhile, Fighting Talk's Lyndon Hood speculates that the impending South Island power crisis is a con. While I admire his healthy sense of cynicism, I think he's probably wrong. Potential supply problems in Marlborough were highlighted in Transpower's system security forecast (see Ch. 4, "South island issues"), though from the figures there it was not expected to be a problem until 2007. Unfortunately the SSF does not include similar data for Canterbury.

The February 2003 update presentation briefly mentions that "South Island load growth appears higher than SSF assumptions", but unfortunately does not provide further details. So it seems that the possibility for a problem was known over a year ago. What's interesting is that Transpower seems to have sat on it until the last minute, rather than warning generators or retailers (who could have shipped in temporary generation capacity or encouraged conservation measures given sufficient warning).

As for how to solve this, one obvious solution is to build more lines or otherwise improve infrastructure. Transpower hasn't done this becuse it's not profitable enough, and I'm unaware of any price feedback mechanism which can send them a signal to do it significantly in advance (meaning that it doesn't get built until after the fact). The other solution is to add more generation capacity in these areas, thus removing the need to transfer power in via the national grid. There are already plans for a 70 MW hydro scheme in the Wairau valley, which should be online by 2006 - 2007 (unlike Aqua, it seems popular with the local community, so the RMA shouldn't cause too many delays), and while I don't know of any concrete plans, Canterbury is likely to get a windfarm at some stage. As Transpower isn't talking about upgrading their lines until 2009 or so, it's likely that this sort of mid-size, local generation will end up filling the gap.