Monday, July 12, 2004

"Positive Energy" is corporate spin

You may have noticed the ads for the "Positive Energy" site on TV or the web. The site purports to be a balanced presentation of information about New Zealand's future energy needs and how we might solve them. But on closer inspection, it's nothing of the sort.

The first warning that something is up is the "see-saw" metaphor used on the TV ads - that it's a matter of trading off price and environmental impact to achieve a balance. While this is true to some extent - you can cut costs by using "dirty" generation, and taking steps to preserve the environment will usually cost more money - it's not an absolute relationship, and doesn't really hold in New Zealand. To see why, just look at the Ministry of Economic Development's current estimates for generation costs:

Generation optionUnit Price (c/kWh)
Gas5.7 - 7.7 (+0.8 for Carbon Charge)
SI Coal6.1 - 7.1 (+1.5 for Carbon Charge)
Geothermal6.2 - 8.5
Wind6.2 - 8.5
Hydro7.0 - 8.5
NI Coal8.3 - 9.4 (+1.5 for Carbon Charge)
LNG8.5 - 10.6 (+1.0 for Carbon Charge)

Our cheapest generation option, gas, is one of the cleanest - all we really have to worry about there is carbon dioxide. Our most expensive, LNG, is exactly the same - it's just the same gas, burned in the same power stations, but with a premium added for transportation costs. The filthiest, coal, is actually only marginally cheaper than the most environmentally friendly options, wind and geothermal, and the second most expensive if sourced from the North Island. The see-saw doesn't seem to hold on current energy prices; when the government's planned carbon charges are added in, it looks even less useful. So why is Positive Energy using it? To define the terms of the debate, and make us think that there is a tradeoff when there is not.

The second warning is that Positive Energy positively hates wind power, characterising it as "expensive" and "highly variable", and claiming that it does not boost security of supply. This is more than a little misleading. As can be seen from the above, the price of wind compares favourably with that of coal, especially when you consider carbon charges and the fact that we've only just begun to exploit the resource (meaning that prices are going to be at the low end of the range). With regards to variability, it's true, the wind doesn't blow all the time. However, both long- and short-term fluctuations can be forecast sufficiently far in advance to allow other generation to be scheduled or pick up the spot load, and variability can be balanced somewhat by spreading generation capacity across multiple sites. As for security of supply, there is a definite synergy between wind and hydro, in that hydro lakes effectively act as a storage mechanism; when the wind is blowing, you generate less with hydro, and leave that much more water in the lakes for a windless (or dry) day.

This is not to say that wind is the answer to our electricity problems; we're always going to need a mix of different generation types, including some thermal generation. But it's a much more desirable component of that mix than the Positive Energy site would suggest.

But the real kicker is with their interactive "create your own solution" game. Playing around with this gives some remarkably strange results: wind is the most expensive option available, while imported LNG seems to be priced cheaper than domestic gas, hydro, and even coal. Energy efficiency - a solution which has the potential to substantially eliminate our demand growth for some years - doesn't really get a look in. From tinkering, it is clear that the game is heavily tilted towards a gas/LNG solution, primarily by massively understating the cost of LNG and overstating the cost of other options.

Why would it be stacked in this way? Well, the "Positive Energy" site was set up by Contact Energy - a generation company with a large sunk cost in gas power plants and a significant chunk of the natural gas retail sector. Their future profitability depends on our continuing to burn gas; if we meet our future energy needs primarily from a green mix of wind, hydro and efficiency gains, Contact's assets will be "stranded", and they'll lose a lot of market share. Instead, they'd like to tie us into their preferred technology, even if it means importing fuel at huge cost to meet our basic energy needs.

Unfortunately, the facts don't really support their case, and so they have to fudge a bit. Rather than being a useful source of information for New Zealanders contemplating energy policy, Positive Energy is nothing but corporate spin.

(Contact's response is that it depends what end of the price range you use, and that the Ministry of Economic Development has been "unduly optimistic" about renewables and "unduly pessimistic" about thermal generation. Which is fair enough - everything is contestable - but if they want to argue that, then they should show us their figures, so we can judge for ourselves...)