We don't need the fast track to kill fossil fuels

RNZ has a story this morning about the expansion of solar farms in Aotearoa, driven by today's ground-breaking ceremony at the Tauhei solar farm in Te Aroha:

From starting out as a tiny player in the electricity system, solar power generated more electricity than coal and gas combined for the first time over summer, albeit only for a few days, according to the Electricity Authority.

Overall, solar farms generate just 2 per cent of the country's power now, but by 2030 Meridian Energy thinks it will be 7 to 8 per cent.

Which is roughly what we generate with wind ATM. Or gas. In fact, solar will overtake gas in terms of generation capacity within two years. Here's MBIE's breakdown of generation capacity to 2023 (excludes hydro):

Source: MBIE, Energy in New Zealand 2024, p24.

Look at that beautiful exponential curve for solar! And it gets better: total solar capacity in December 2024 was 573MW. There's another 463MW currently under construction, and 130MW which will start building in August, all of which will be built by the end of 2027. Throw in a couple of hundred MW of distributed generation, and there will be more solar than gas. The same is also true of wind, which has 262MW under construction and scheduled for completion by the end of 2027, and there's 300MW of batteries under construction to remove the need for peaking power. All of which means that we're going to be burning a lot less gas in a couple of years.

And the kicker: this has all been done without National's fast-track bill. The government has claimed that its corrupt, Muldoonist, anti-environment law is necessary to boost renewable energy, but clearly it is not. So when big generators claim that the world will end because their latest big stupid project has been rightly refused resource consent, they are lying. We don't need to allow corruption or compromise the rule of law in Aotearoa to get a green future; the market is pushing that perfectly well. Instead, Contact is fighting over who gets the money from that revolution: them or someone else. And none of us should really give a single wet shit about that. There's plenty of other wind projects waiting to be built, and we'll just build them instead.

Not a solution

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:

1. a thing which won't lower electricity prices at all (but will please donors);
2. a thing which will guarantee they remain high; and
3. 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?

The power cartel's nightmare

Aotearoa is currently suffering from one of its regular electricity crises, thanks to systematic underinvestment by the power cartel. Meanwhile, in Europe, electricity prices have gone negative:

European power markets are experiencing a notable shift as renewable energy sources, particularly wind and solar, become a larger part of the energy mix. On Wednesday, power prices in several European markets, including Germany, dipped below zero due to a surge in green electricity production.

In Germany, wind generation is expected to hit 22.7 gigawatts, the highest level in four months. This spike in renewable output has overwhelmed the grid, leading to negative prices during six separate hours on Tuesday, as recorded by Epex Spot SE. Negative pricing occurs when there is more electricity supply than demand, a scenario becoming more frequent as Europe continues its aggressive push toward renewable energy.

Why? Because energy companies have invested in renewable generation, driving expensive fossil generation out of the market and producing an oversupply. And its a similar story in California.

This is the power cartel's nightmare: free power! Which means no profits for them. And with more renewables and batteries being installed, its only going to get worse (though likely become merely very cheap, rather than negative).

So while NZ businesses are shutting down because power is too expensive, and National talking about expensive imported LNG as a "solution" (a "solution" which means a permanent rise in electricity prices for both industrial and residential users), think about the future we could have: a future where the government uses its control of the power cartel (or just a new SOE) to rapidly roll out solar panels and batteries to permanently lower power prices and bring cheap power to everyone. A future where it builds energy storage to end the dry year problem. A future where instead of shutting down, companies can use that power to make cheap, clean, goods. But there's no lobbyists for that future, and plenty of lobbyists for shortages and energy poverty. So we won't be getting it from National.

Stranded assets are not the answer

The power cartel's systematic underinvestment in generation has given us another electricity crisis, and the climate-denying government is using this to push its dirty solutions: new fossil generation, with an LNG import terminal to ensure there is enough gas. Which probably looks very attractive as a temporary stopgap measure. The problem is that once the current crisis is over, the investment in that stopgap measure will effectively be a stranded asset - making it a hugely expensive "solution" to a temporary problem.

Even the polluter lobby seems to understand this, with Energy Resources Aotearoa demanding an "investment guarantee" - otherwise known as a subsidy - for a new thermal power plant. Meaning they know such a plant would have no future; that even if it could secure a supply of gas to keep it operating, the pipeline of consented wind and solar being built will rapidly drive it out of the market, meaning it won't have the usual payback period required for such an investment. Its basically not a commercially viable proposition, even allowing for fossil generation's role as the price-maker and the resulting windfall profits to the power cartel.

The equation for LNG is even worse. Imported LNG is roughly twice as expensive as domestic gas (US$12.37/MBTU = NZ$19.63/GJ, vs NZ$10.97/GJ for industrial users).Methanex, which uses 45% of all our gas, won't want to pay that. Neither will anyone else. The exception being electricity companies, who can pass on those prices and (due to the broken market pricing model) generate windfall profits from them. So it will drive up electricity prices for everyone, but because electricity is more efficient than gas for most uses, will also further drive electrification as well. So, an expensive import terminal to supply fuel to a dying industry, which will increase the speed of death of that industry. Only a fool would pay for it. Unfortunately, as their whole conversation around energy and climate change shows, we are currently governed by fools.

If the government is going to subsidise or promote things to fix the underlying problems in the electricity industry, it could at least subsidise good things: renewables and batteries, or even baseload geothermal. These would increase electricity supply, lower electricity prices by driving fossil generation out of the market, and do so while not cooking the planet. But I guess none of that benefits the government's donors and cronies, so they'll be wasting money subsidising a polluting dying industry instead. But if they so so, the next government can and should repudiate their bullshit, and legislate to recover any wasted money.

Reaping what they sowed

Wholesale power prices are high at the moment, factories are shutting down, and big users are whining to the Minister to intervene and lower prices. And unsurprisingly, Shane Jones, who never saw a donation he didn't like, seems receptive:

"The gentailers no longer operate in New Zealand in a way that enhances competitiveness number one. Number two, the gentailers no longer operate in a vein that boosts or gives greater primacy to the greater interests. Therefore there are provisions under the existing electricity legislation that enables the Crown to use a code of conduct which has legal force to change their behaviour," he said.

But since the Bolger government sold Contact Energy and the Key government part-privatised Meridian, Mercury, and Genesis, they have had no obligation at all to care about "the greater interest". Their sole legal duty is to make a profit for their shareholders, by gouging as much money as they can from their customers. If Jones doesn't like that, and wants an electricity system that works for us, rather than being a price-gouging cartel, he knows the answer: re-nationalise it, and take back what National stole.

Meanwhile, its a bit rich for the major energy users group to be complaining. They've known that the market works like this for 25 years. They are large, well-capitalised companies. If they wanted lower prices, they've had 25 years to build cheap, renewable generation to drive the expensive, price-setting fossil stations out of the market. But they haven't, because that would be investment, as opposed to mere rent-seeking. They're simply reaping what they sowed. And if the leopards are now eating their faces, I see no reason not to have some popcorn while they scream.

The wrong direction

Some good news on climate change today: the energy transition away from fossil fuels is picking up speed, and renewables now make up 30% of global electricity supply. Meanwhile, in Aotearoa, we're moving in the opposite direction, with Genesis Energy announcing that it will resume importing Indonesian coal.

Their official reason is to "keep the lights on" in a context of declining gas supply. But its worth noting that Gensis - one of our worst fossil polluters - is directly invested in the gas industry, and therefore has an interest in supporting the governments narrative that our options are basically coal or gas. That simply wasn't true. So they've decided to try and make it true.

(An interesting point: Genesis had consent for an 858 MW wind farm, big enough to replace Huntly, and they sat on it for a decade and then just let it expire. They could have solved this problem and made Huntly redundant a decade ago, but they'd rather burn coal and destroy the planet).

Meanwhile, in reality: we have 1.1 GW of consented and under construction solar, and 1.3 GW of consented and under construction wind, plus huge pipelines of both in the preliminary stages. We should build them. We also added 150MW of rooftop solar in the last year - a decent-sized power station. We should build more of that too. We can fix this problem with wind and solar and batteries, and every MW of renewables we build means less coal and gas burned. Every MW we build means less profits for the ecocidaires in the fossil fuel industry. And the government should be making it a holy fucking mission to drive those murderers into bankruptcy. Instead, it seems that National prefers complicity.

Labour lectures rather than acts

Yesterday EECA launched its usual winter energy-saving campaign. Normally this is aimed at reducing energy usage, to reduce the risk of a blackout. If successful, it also reduces spot-market prices, so also reducing whining at the government from big corporate users. But this year, someone had the brilliant idea of linking it to the cost-of-living, so we have a campaign to "find money in weird places", which even the government thinks is "a bit off".

No shit. It smacks of Jenny Shipley lecturing people about budgeting. And a Labour government basicly telling people to be cold and dirty, essentially to keep spot-prices low for big corporate users, is utterly tone-deaf. Especially when they have repeatedly refused opportunities to raise incomes so people can live in dignity, rather than having to huddle under a blanket at home.

EECA's campaign is all about saving $500 from your power bill. Another way of doing this of course would be to reduce the bills at source, by lowering power prices. And this is absolutely possible: according to its most recent annual report, Meridian Energy made $664 million last year from 365,000 customers - an average of over $1800 per customer. That's simply obscene. And there seems to be plenty of space there to lower power bills, while still making more than enough money to fund future investment. So rather than lecturing us about how we should all be having cold showers so Tiwai doesn't have to shut down a pot-line, and being miserable to save money, maybe the government could actually govern, regulate this industry's obscene profits down to something reasonable, so we don't have to pay so much in the first place?

Which illustrates a wider problem. The electricity market is dominated by an oligopoly of big players - Mercury, Contact, Genesis, and Meridian - and is not a competitive market. And its the same in virtually any other major sector of the economy you care to name: supermarkets, petrol, banks, building supplies. Our economy is infected with oligopolies, who use their anti-competitive power to screw us and rort us, and siphon our money to their foreign owners. And then we wonder why we're poor. Oligopolies are why. If the government wants to actually reduce the cost-of-living, it needs to smash those oligopolies: regulate them, break them up, restore (or create) competition in the market. Or, where that can't be done, nationalise them and run them at cost, putting any monopoly profits to public purposes.

But that would be change. It would upset the status quo. It would offend rich people. So Labour would rather lecture us about cold showers than do anything like that. Chickenshits.

Privatisation screws the future

There's a major report out today from 350 Aotearoa, First Union and the CTU about how National's privatisation of the electricity sector has led to entirely predictable outcomes of price gouging and underinvestment:

Meridian, Mercury, Genesis and Contact Energy paid out $8.7b in dividends to shareholders between 2014 and 2021, which was more than the $5.35b they earned in profits over the period, their report said.

The former three companies had achieved that by increasing the book value of their assets by more than $10b to reflect “high and rising electricity prices” while taking on extra debt, they said.

“What we are seeing here is asset-stripping that delivers disproportionate benefits to a privileged few at the cost of residential consumers and global warming.

“It’s doubly ironic that this is possible because of the investments made over decades by the taxpayer, yet it's the poorest New Zealanders who are paying the price in higher energy prices.”

Essentially, the big gentailers borrow to pay dividends, while deliberately under-investing in new generation, ensuring both ongoing scarcity and that fossil generation remains part of the mix, keeping prices high. Because the thing we want from our electricity system - cheap, reliable, renewable electricity - just isn't as profitable as expensive, unreliable, and dirty generation. Its a perfect example of how markets don't care about social outcomes, and why the electricity system needs to be fully in government hands.

And if anyone is in doubt about the underinvestment, just look at who is building the big new solar power projects, or the big offshore wind projects that are going to power us in the 2030's. Hint: it isn't the established players. Instead, its all startups, foreign companies, or big consortia backed by the Cullen Fund. The power companies you'd expect to be building these things just aren't. Instead, they're getting projects consented, and then sitting on them and letting them expire, specifically to ensure that no-one else can build them and disrupt their supply. Because they have no interest in lower prices or a cleaner, cheaper electricity supply.

350 and the unions are calling for the government to use its majority ownership of the major gentailers to cut dividends and force investment into renewables. However, in echoes of Contact Energy's proposed "ThermalCo", they're proposing the government buy all the old fossil generation and ringfence it for security of supply purposes - essentially a public bailout of Genesis and Contact (both of whom have invested heavily in new thermal generation since the Kyoto Protocol was signed, and who therefore deserve to lose their money). Instead of that, I'd rather see the government just invest directly in renewables, and drive the dirty generation out of business, rather than "compensating" dirty generators for their poor business decisions. If Genesis and Contact want to try and split off their liability generation to prevent it from dragging down the clean, then let them. But we shouldn't be spending a cent on fossil fuels.

Solar panels on car parks are a no-brainer

The Guardian reports that France is going to require all large car-parks to be covered by solar panels:

All large car parks in France will be covered by solar panels under new legislation approved as part of president Emmanuel Macron’s renewable energy drive.

Legislation approved by the French Senate this week requires existing and new car parks with space for at least 80 vehicles to be covered by solar panels.

The owners of car parks with between 80 and 400 spaces have five years to comply with the measures, while operators of those with more than 400 will have just three years. At least half of the area of the larger sites must be covered by solar panels.

The French government believes the measure could generate up to 11 gigawatts of power.

This seems like a total no-brainer. At the moment car parks are big, empty spaces which just turn solar energy into heat. Solar panels will provide shade for users, while turning that energy into usable, zero-emissions electricity.

Its an obvious measure to adopt here. But we should also be going further and requiring solar panels to be installed on all large buildings which receive decent sunlight. Malls and warehouses are obvious targets, since they have large roof areas. But ultimately we should be amending the building code to require them to be installed on new homes, and retrofitted to old ones (starting with rental properties). We're going to need a lot more power to decarbonise industry and transport, and to kick fossil fuels from our electricity network. This is one obvious way to do it.

More wind

If Aotearoa is going to decarbonise, we're going to need a lot more renewable electricity. And it looks like the industry is stepping up, with the announcement of Aotearoa's first offshore wind farm:

New Zealand’s first offshore wind farm will be built 22km off the coast of South Taranaki by the end of the decade, the $4billion project’s backers say.

The 65-turbine scheme is the first of four offshore wind projects in three regions – Taranaki, Waikato and Southland – planned by a consortium comprising BlueFloat Energy, Energy Estate and Elemental Group.

The offshore South Taranaki site, to the west of Beach Energy’s Kupe platform, will be just visible from shore in Patea, Ohawe Beach and Opunake on a clear day.

The turbines, fixed to the sea floor, will generate 900 megawatts (MW) of electricity – enough to power nearly 440,000 homes, it was announced in Hāwera on Wednesday.

900MW would make this the largest wind farm proposed in Aotearoa (Castle Hill was 858 MW, Project Hayes 630 MW, and Hauauru ma raki 540 MW. None of them were ever built). It will be the second-largest power station in New Zealand history, with only Huntly being bigger. Its almost as much generating capacity as every wind farm currently operating in New Zealand. And its going to be one of four.

...which should set us up nicely to hit that target of a 360% increase in wind generation capacity by 2035. We're perfectly capable of generating the renewable electricity required to decarbonise industry and transport. The problem for our climate transition is cows.

More solar

Newsroom reports that Nova Energy is planning Aotearoa's biggest solar farm, and its truly massive:

A 400 megawatt solar farm planned for the Taupō region could produce 190 times more electricity than New Zealand's current largest grid-connected solar facility, Newsroom can reveal.

Nova Energy, owned by the Todd Corporation, has applied for two resource consents from Taupō District Council to construct the project in three stages over six or seven years. When completed, it will involve more than 750,000 individual solar panels and could power 100,000 homes – more than one in every 20 houses across New Zealand.

To put that in context, 400MW is the size of a standard gas power station (like Stratford, or Huntly 5), and just under the size of the Clyde Dam. So its a massive chunk of generation which will make a real difference. But it gets better, because there's mention of another 300MW farm in the South Island buried in the article. And just like that, the entire pipeline of solar projects has doubled.

This is obviously great news for emissions. While solar only generates during the day, every GWh it generates is one that won't be generated by coal or gas. Which means it will help push dirty fossil generation out of the market, and push it further into the cold winter peak load and backup roles. Daytime summer load will also allow more water to be held in the dams, rather than used to generate power, which will help smooth our seasonality. And since they can be built quickly, we'll start seeing the benefits in a year or two.

Climate Change: Ending Tiwai's subsidies

The Tiwai Point aluminium smelter is one of New Zealand's biggest climate scammers. Under the ETS's industrial allocation provisions, it receives far more carbon credits than it actually emits, which it can then sell to other polluters for profit. The core of its scam is a thing called the "electricity allocation factor" (EAF), which is meant to compensate heavy electricity users for the effects of the ETS on the electricity price. Tiwai receives over 900,000 tons of carbon credits free every year under this scheme, despite paying below-market prices for power, and being subsidised $350 million a year by the rest of us. But now, that scam is over. back in December, Climate Change Minister James Shaw took a paper to Cabinet arguing that Tiwai's EAF be reduced to zero:

I recommend setting NZAS’s EAF for the main contract at zero. This means there are no emissions costs passed on to NZAS under this contract. Should Cabinet agree to this recommendation, NZAS will not receive emission units for its electricity consumption under this contract.

While there's no corresponding cabinet minute in today's proactive release, Shaw clearly got his way, because the regulations have now been changed, reducing Tiwai's allocation by 60%. The emissions impact is 934,000 tons per year - over 1% of our entire national emissions. And because industrial allocation is accounted for before ETS auction volumes are set, that will be a real reduction: polluters won't have access to these permits anymore, so they'll either have to pollute less now, or use stockpiled credits (meaning they pollute less later).

The paper notes that there's a wider review of the EAF and industrial allocation, as well as of ETS volume settings, so hopefully this will become a permanent reduction. And it would certainly be one way of compensating for both past CCR releases and the massive stockpile of carbon credits built up by past government stupidity. If we don't want that stockpile to threaten our future targets, we need to force it to be used by ratcheting down annual supply. And cracking down on pollution subsidies is a great way of doing this.

The decision will also apply more pressure on Tiwai's decision on whether to stay after 2024. This has a significant impact on renewable electricity supplies, and the government's plan for decarbonising industry depends on them leaving. Cutting their subsidies will send a message that the free ride is over, and force them to make that decision on the basis of actual costs, rather than what they can milk out of the government. And that can only be a good thing long-term.

End Tiwai's subsidies

So, having blackmailed us for BluffGeld with the threat of closure in 2020, foreign polluter Rio Tinto now wants to keep the Tiwai Point aluminium smelter open, and has started a public campaign for another subsidy (which naturally will peak around the 2023 election for maximum political blackmail). Aluminium production has got a lot more profitable, and they're eager to talk up the environmental benefits of making it from NZ hydro power rather than dirty Chinese or Australian coal. But those environmental benefits are overstated, as Rio Tinto ignores a huge part of the environmental cost of its smelter - namely that by using 13% of our total electricity supply, Tiwai forces us to rely on the coal-burning Huntly power station. In 2020, that meant an extra 700,000 tons of coal being burned, and an extra 1.4 million tons of CO2 (basicly doubling Tiwai's stated emissions per unit of production). In 2021 it was worse.

And it doesn't pay for any of that damage. Instead, Tiwai receives a massive subsidy of 1.55 million tons of carbon a year, about 900,000 tons more than it actually emits. The "justification" for this over-subsidisation is "compensation" for higher electricity prices caused by the ETS. But Tiwai doesn't actually pay those prices, instead being subsidised $350 million a year by the rest of us, at a cost of ~$200 per household.

If Tiwai wants to stick around, then we should end those subsidies. Meridian doesn't sound eager to continue subsidising its electricity costs (having used the last two years to start building alternative demand in the South Island), and that's good. But we should also eliminate its carbon subsidy. In theory that just means removing "aluminium smelting" from the relevant regulation, but to be certain, Parliament should add a clarifying clause to the appropriate section of the Climate Change Response Act specifying that "Aluminium smelting is not an eligible industrial activity". This one clause would reduce emissions by 1.5 million tons a year, saving us $225 million a year in social cost.

If Tiwai really is as clean as they say they are, they should have no problem paying the full cost of their emissions. And if they're not profitable when they do that, then they were never really profitable at all, and we really are better off without them.

Climate Change: We can do it!

RNZ reports on the other story to come out of the government's emissions budget Cabinet paper: the scale of the changes we need to make:

The massive scale of the nationwide changes needed quickly to cut climate gas emissions is laid bare in newly-released government documents.

[...]

The number of cyclists needs to increase by half in three years and by 340 percent by 2035, while public transport use needs to go up 60 percent and 210 percent over the same timeframes.

In three years, the amount of electricity generated from wind and solar needs to increase 106 percent and 180 percent respectively.

By 2035, wind will have to have increased 360 percent, while solar will need to increase 2200 percent to make up the 6 percent share of total energy needed.

While I can't talk about cyclists (which sounds like a job for the transport experts at Greater Auckland), I can run the numbers on renewable energy. And they're quite promising.

First, solar. According to MBIE's electricity statistics, this is estimated to generate 159 GWh a year (estimate because they don't actually know how many rooftop solar installations there are). 180% of that is 286 GWh, which is about 70% of the 400 GWh of new solar plants announced earlier this year by Lodestone Energy. All of which are meant to be up and running by the end of 2023. So, we'll beat the expected first budget target, and if the industry can sustain that pace, then we might make the 2035 one (and on that front, its only likely to get cheaper and easier).

As for wind, according to Wikipedia we have 817.7 MW of installed generation (this excludes Turitea, which is half-built; including the northern half would take it to 936.7). So we basicly need another GW of new generation installed by 2025, which is a big ask. The good news is that there's already 416 MW (including the unbuilt part of Turitea) of that in the construction pipeline for the next two years. So the market is already going to provide about 40% of what we need. What about the other 60%?

The good news is that there's plenty of projects consented and waiting to go. And one of them - Castle Hill - would solve the whole problem in one hit (for the next budget period). But Genesis doesn't want to build it, because it would reduce the need for Huntly and so drive power prices and profits down. The government could solve that by using its majority ownership of Genesis to force them to do, by paying them to do it, or just by buying the project and doing it themselves. The latter option would cost ~$1.6 billion, which is a hell of a lot of money. But its less than three years of the social cost of the 4 million tons of carbon the electricity industry emits every year. In other words, if the government took its own $150/ton carbon price seriously, it would spend that money directly to reduce emissions and avoid incurring it.

In the longer term, we need to quadruple the amount of wind power in Aotearoa. The market clearly is not going to provide that by itself. But the government can, and should, step in to address this market failure, using tax and ETS revenues to pay for it. At its own social cost, its cost-effective to do so.

As for the how, until recently New Zealand had a publicly-listed company whose sole purpose was to build more windfarms (ironicly, it got bought by one of the big gentailers to add to its portfolio). The government should establish a new SOE for this purpose. This would also give it direct leverage on the electricity market, letting it counteract the more sociopathic impulses of the major gentailers. The problem, as with so many other things, is to get them to start seeing it as an investment, which saves them money in the long-term, rather than as a short-term cost.

Climate Change: We need to actually act on coal

Yesterday at COP in Glasgow, Aotearoa joined an international alliance to phase out coal-powered electricity generation. Which is obviously a great headline, which is what the government was after, but raises the obvious question: are we actually going to act on it?

The Global Coal to Clean Power Transition Statement commits its parties to "transition away from unabated coal power generation in the 2030s (or as soon as possible thereafter)". Which is an easy, business-as-usual pledge as far as New Zealand is concerned, given that Genesis, owners of the only coal-fired power station in New Zealand, have said they plan to transition Huntly to dry-year backup from 2025 and shut it down by 2030. It also commits us to immediately cease issuing permits for new coal-fired power plants, which the government has been promising to do (but hasn't done yet) for four years already. So if the government is actually serious about this, we'll hopefully see thermal ban legislation reintroduced and passed rapidly.

But that still leaves the question of the speed of the phase out. 2030 is a long way away, and every year we let Huntly keep burning coal means another 2 - 4 million tons of carbon in the atmosphere. At which stage its worth highlighting the first, and most important, commitment: "to rapidly scale up our deployment of clean power generation and energy efficiency measures in our economies". If the government took this seriously, it would mean a crash program of building wind and solar generation to allow a quicker shutdown of Huntly and to displace other fossil generation from the market. Will they do it?

I think they'd be stupid not to. As I've argued here, the government's internal carbon price of $150/ton means it is cost-effective to build new generation to replace Huntly and other fossil generation on carbon grounds alone. There are also wider social benefits in the form of lower electricity prices for all, as fossil generation currently sets the electricity price, so displacing it out of the market will see that price set by cheaper renewables. And its not like we can rely on the market to solve this - a recent analysis from the Electricity Authority found that the big gentailers are refusing to build in order to "maximis[e] returns on their existing assets" - that is, keep prices high. This is an obvious market failure, and clear grounds for the government to step in build what the market won't. And if it hurts the existing dirty generators, then good.

The cost of Tiwai Point

Two years ago, foreign polluters Rio Tinto blackmailed Aotearoa into giving them lower electricity prices again. And they got away with it, getting themselves a rate nearly ten times lower than what us plebs pay. So how much does that cost us? $200 a year per household, according to the Electricity Commission:

Households may be paying an extra $200 a year for electricity on average because Meridian and Contact had an incentive to provide cheap electricity to the Tiwai Point aluminium smelter, the Electricity Authority says.

[...]

The authority said it was concerned Meridian and Contact were in effect subsidising the smelter to the tune of $500 million by selling it power at a cost of between 3 and 4 cents a kilowatt-hour that could have been more efficiently used elsewhere.

The cost of that subsidy was offset for them by the fact that demand from the smelter increased prices overall elsewhere by an estimated $850m a year, he said.

So Tiwai gets cheap power, and the rest of us get screwed. But not just financially. The additional demand from Tiwai means we need to keep Huntly running, which means spewing out millions of tons a year of extra carbon, while the constant threats of closure to blackmail lower prices deter the investments in renewables we need to decarbonise. This dirty foreign polluter is screwing our entire society. Either they need to pay their way, or fuck off.

The real cost of Huntly

What's the real cost of the Huntly power station? 4 million tons of carbon dioxide a year:

Genesis Energy emitted more carbon dioxide in generating electricity last year than any year in the last decade, as it used more coal to make up for a lack of hydropower and gas.

[...]

The energy generator and retailer put out 4029 kilotonnes of carbon dioxide emissions in the last financial year, 82.5 percent more than the average of 2207 kilotonnes between 2016 and 2020, and more than any year dating back to at least 2010, as far as Genesis' publicly available statistics go.

This is about 5 percent of the country's total emissions.

At the government's internal valuation of $150 a ton, the social cost of those emissions is $600 million a year. Which makes it economic to spend that much a year on killing it to eliminate those emissions. At current costs, it is worthwhile for the government to do that with just three and a half years of emissions (versus 5 in my previous estimate).

Genesis could be part of this solution itself, but it refuses to be (wouldn't want that price to drop!) And their announcement today of large investments in grid connected solar is welcome, but also essentially PR window-dressing: a tiny fraction of what is needed to put Huntly out of business, and so clearly designed to keep it - and the windfall profits it generates - around for as long as possible. And again, if the market is not going to fix this problem, then it is clearly time for the government to step in and fix it for them.

Market failure

Aotearoa needs to rapidly decarbonise its electricity infrastructure and replace old fossil fuel generation with renewables. Aotearoa also needs to increase its total generation to cover the expected load from the electrification of industrial and process heat, and from EVs. The proposed Castle Hill wind farm could be a core part of the solution to both problems, generating 860 MW of clean power. So you'd expect the big, state-controlled gentailer behind it to be eager to build it, right? Of course not:

Genesis Energy has sat on a granted resource consent for what would be the biggest wind farm in the country for the last eight years, and has no plans to build it.

The Castle Hill Wind Farm, consented on a site north of Masterton, could double Genesis Energy's current annual renewable electricity generation. The annual generation of the farm would be the equivalent of the power generated by at least 850,000 tonnes of coal.

[...]

In a response to RNZ, a spokesperson for Genesis Energy recently said: "No construction is currently planned at Castle Hill."

The reason? Genesis (and all the other power companies) make windfall profits from the marginal unit of electricity being generated by gas or coal. Displace those dirty fuels, and they make less money. So they prefer to keep the country perpetually on the edge of a supply crisis to maximise profits (and the closer it is to that crisis, the more money they make).

The government needs to put its foot down over this, and either exert the control of its majority shareholding to force state-controlled power companies to build what is needed, or just forcibly acquire the projects they are hoarding so they can build it themselves. But the current situation, where greedy gentailers effectively conspire to burn coal and create blackouts to maximise profit, is both unsustainable and morally unsupportable.

The electricity market screws us again

Last night there were blackouts across the country on the coldest night of the year, and there's a risk of more tonight. The immediate cause was record high demand - it was cold - plus Genesis deciding not to turn on an extra unit. But the real cause is the electricity market, which rewards shortages with windfall profits and so encourages our gentailer oligopoly to undersupply. We've known about that problem literally for decades, ever since Max Bradford first fucked things up. But the government has never bothered to do anything about it beyond minor tinkering because, well, that would be work, and generators (and their shareholders) would kick up a stink over being deprived of their "rightful" profits.

But what can we do about it? Re-nationalisation, so that the electricity system works as a system rather than as five big companies scrabbling for profit would help. But in the short term the most effective thing the government can do is simply to build the generating capacity the gentailers refuse to. And at the government's current internal carbon price, this is cost-effective simply to kill Huntly and stop it emitting any more carbon (and similar logic aplies to the Stratford gas turbines). As for the what, the generators are sitting on a huge portfolio of consented windfarm sites, which they are refusing to build (and which will expire soon if left unbuilt). If they refuse to build them, the government should nationalise them and build them themselves.

Climate Change: The other Tiwai scam

Newsroom has a good piece this morning about the government's consultation on industrial free allocations, revealing that Fletcher Building is getting an extra $5 million a year ($7 million at today's prices) due to miscalculated carbon subsidies. That's bad, and it needs to be stopped by resetting emissions baselines to a credible level. But while we're talking about industrial over-allocation, we should talk about the elephant in the room: Rio Tinto.

In 2019, New Zealand Aluminium Smelters received 1.7 million tons of carbon as a free allocation for being emissions intensive and trade exposed (EITE). But its actual emissions were only 663,000 tons. The difference - 150% of its actual emissions - was the Electricity Allocation Factor, basicly "compensation" for the effects of the ETS on electricity prices. Except Rio Tinto doesn't pay those higher prices like the rest of us peasants - they got themselves a sweetheart deal which sees them pay a fifth of what us peasants pay, and less than a quarter of what industrial users are paying now. So they're being "compensated" for nothing. The financial cost of this unnecessary "compensation" is $50 million a year at current carbon prices - and triple that on the government's books. (The real cost is that it allows a million tons a year of unnecessary pollution into the ETS, which neither we nor the planet can afford).

Meanwhile, at the same time it is getting this compensation for being a vulnerable, struggling industry, Rio Tinto is telling its shareholders that it is hugely profitable. It can't have it both ways. If they're that profitable, they clearly don't need any subsidies at all, and we should cut them off.

As for the Electricity Allocation Factor, this was apparently recently reviewed by the government. Hopefully this will result in it being cut, or in it not being given to polluters who pay less than the market price for electricity. Not that there's a lot of other polluters eligible for it - it really is a special purpose subsidy for Rio Tinto. So we might as well just phase it out entirely.