Scrapping the thermal moratorium is a bad idea

by frog

The NBR reports that the Nats are doing a deal with Labour to scrap the moratorium on new thermal generation in exchange for supporting the ETS through the House. In truth, only a grand coalition could possibly get an ETS through the House. However, I still think that the moratorium, (it’s not a ban, just a pause), is the right way to go.

I don’t often make predictions here on frog, but I feel inclined to do so today. I predict that if the Nats succeed in killing the moratorium in any meaningful way, we will end up with the Contact/Genesis LNG plant in New Plymouth and all kiwi consumers will be screwed by exposure to the international price of gas. Most kiwis will not be aware that natural gas prices are as out of control as oil prices are. We are not exposed to that because our own gas market is insulated from the world market.

Genesis will build their Rodney gas fired plant, (480 MW), while the gas is still cheap and local. This will displace the geothermal baseload plant that is scheduled to come online during the same time frame but which takes longer to build. Then Genesis will demand that the LNG terminal gets built in order to feed the Rodney plant, calling it security of supply for both Rodney and e3p. Once that happens, the huge volume of LNG available will swamp the market, enable the Motonui methanol plant to reopen, (not that this is bad, just unnecessary), and we poor homeowners will pay the full international retail price for our gas. Oh, and of course our electricity costs will skyrocket because our marginal electricity generation will be tied to the international gas price.

The moratorium, (not a ban, remember?), will allow geothermal baseload generation to be developed which is as cost effective in the short term as gas fired plant, but in the long term is much, much cheaper. No one can argue that geothermal will not be the cheaper and more secure baseload generation in the medium to long term. It is only greed and short-sightedness that is driving the current frenzy surrounding the ETS. The Nats are making a move because they sense that the Minister is on the back foot.

I beg the Minister to stand strong and keep the thermal moratorium intact within the legislation.

frog says