Thursday, October 11, 2007

Rediscovering regulation

The government released the final version of the New Zealand Energy Strategy [PDF] this morning, setting out a plan to meet the ambitious goals set in the recent climate change discussion documents. Many of the initiatives - for example the biofuels obligation, emissions trading scheme, and funding for tidal energy development - have already been announced elsewhere or were present in the draft (the NZES being more about putting it all in one place and looking at the overall effects than doing new stuff), but there was one big announcement: the government has rediscovered regulation as a policy tool, and will be banning new thermal generation for the next ten years via an instruction to SOEs and regulation under the Electricity Act.

This is good news for two reasons. Firstly, as I argued yesterday when advocating for use of the RMA, we need some interim policy to limit the growth in greenhouse gas emissions before emissions trading is fully implemented, and some backup in case the government backs off. This ban effectively does that for the electricity sector (the RMA would be a wider policy tool, though, and also apply to industrial emissions). And secondly, regulation has been neglected as a policy tool for the past two decades, in favour of a rigid ideological approach favouring deregulation and market instruments. In the case of climate change, this approach has seen successive governments ignore or even remove pragmatic and workable solutions in favour of a fruitless quest for a perfect market instrument. So it's good to see the balance shifting back the other way.

(The government's planned regulation to improve vehicle fuel efficiency is another example of this new balance, and likewise a good idea)

Banning new thermal generation will get electricity companies clearly focused on renewables just at the time we want to massively increase them. It will also buy us some breathing space around gas supplies, lowering the demand curve and allowing us to eke out existing reserves for that much longer, allowing more time before we have to think seriously about importing LNG. However, it also has a big loophole around security of supply. What it means in practice for the proposed thermal stations at Otahuhu C and Rodney is unknown, but we'll no doubt be confronted with the unseemly sight of Genesis and Contact squealing that their project (but no-one else's) is vital for security of supply as they struggle to build the last gas-fired power station for a decade.

The other big announcement was around the RMA. The draft NZES had proposed some quite radical solutions in this area, such as grouping all renewable projects into a "basket' and approving some portion of them (incidentally removing those troublesome local concerns). Now the government is proposing a National Policy Statement to give better guidance to local bodies on renewable energy, and hinting heavily at greater use of its call-in powers. The first has been promised before - its been a standard feature of climate change policy documents since we started writing them back in 1990 (the RMA was a draft then, but the idea of an NPS was already present) - and the government has never delivered on it. OTOH, this government has made more use of the RMA's national-level instruments than any previous one (National just pretended they didn't exist, so as not to upset the market), so we might get one this time. As for call-ins, as I've said before, I think this is a mistake. The beauty of the RMA is the focus on local involvement and participation, things which call-ins short-circuit and prevent. They also raise the spectre of favouritism and corruption, of wealthy interests with the ear of the Minister getting special treatment and a fast-track to steam-roller local concerns. That's simply not acceptable in a democracy, and we shouldn't be doing it.