by frog
One of the biggest arguments in favour of our failed electricity market reforms was the assertion that it was run by bureaucrats and engineers, and was thus gold plated. Flowing from that was the assertion that thus, we were paying far too much for our energy and that breaking it all up and letting business people run it would be more efficient and much, much cheaper for consumers. What a load of crap that turned out to be.
First, let me say that back in the day, we had the second most efficient electricity system in the world. Power was cheap and abundant. We got away with being one of the least energy efficient economies in the OECD because of this wealth. Not long after the market reforms, prices rose sharply and Jeanette explained what was happening. Her words are just as valid today as they were in May 1996, when she wrote:
“That act corporatised power companies, required them to make a profit, forced them to compete … and required them to charge separately for the use of their lines”, Fitzsimons said.
“The government has deliberately unleashed a pack of wild dogs into a fenced paddock. No-one should be surprised that they are now eating the lambs.
“The issue is not whether prices have gone up or down overall, but who is paying more, for what and to whom. Domestic users are paying too much because they are the only captive market, and companies are forced to use them to subsidise competitive business consumers.”
The sad drama is still playing out, despite the efforts of successive National and Labour governments tweaking around the edges of the market, both hounded by a fear of the free market ideologues. (For the record, if we had a truly free electricity market, it might work better than the horrible hybrid we have today. But I do not believe that with its size and isolation that NZ could ever have a proper free electricity market.) A BNZ economist wrote last year:
Figures showing the cost of domestic electricity has gone up five percent faster than inflation come as no surprise to a leading economist.
The Government’s Energy Data File shows residential users have had to fork out for an average 4.8% price increase, every year since 2000.’
That’s well ahead of the 1.4% increase for commercial users each year, and 2.8% for industrial users.
The reasons for the continued price rises were the same ones that Jeanette outlined above. So has anything really changed since the reforms, except that we are paying more?
I contend that there is one more significant change. Reliability. It’s gone to the dogs. Ever since we “deliberately unleashed a pack of wild dogs into a fenced paddock”, as Jeanette said, the corporate hierarchies that replaced the ECNZ bureaucracy have been eating up the lambs of our infrastructure investment.
Instead of one government department, staffed mainly with engineers with a mandate to provide safe and secure electricity to all, (paid at public service salaries), we now have five boards, CEO’s and corporate bureaucrats, mostly overpaid business people with a mandate to wring as much cash as they can out of our public assets, customers be damned. At the risk of high-jacking my own thread, is this any way to run a railroad?
Ever since the so called reforms we have had virtually no investment in our infrastructure; neither transmission nor generation. The overpaid corporocrats were too busy stripping the gold plate off of all our existing assets, admittedly giving most of it back to the taxpayer in the form of dividends, but much of it lining the pockets of the bloated management structure of the electricity market.
The stripping out of our public assets has had a devastating affect on the reliability of our electricity system, as evidenced by the failures we have experienced continually since the reforms took place. The Herald’s article on Auckland’s current power crisis catalogues just a few of the problems we’ve had over time. There have been many more.
Isn’t it time we admit that the market reforms of the 1990s were not reforms at all but were a complete, unadulterated cock-up? I would need to see a proper case made before I call for the reconstitution of ECNZ, but I will say that further tinkering just won’t do.
Some good honest engineering, not ideologically driven reform, is definitely in order.
It’s time to put the gold plate back into our electricity system.
Published in Economy, Work, & Welfare | Environment & Resource Management by frog on Thu, February 5th, 2009
Tags: Auckland, ECNZ, electricity, failure, Frog, frogblog, green, market, new zealand, party, politics, reform
on the trolls and those who are unable to keep on topic
Sadly for you this so called gold plated system failed far more often than it does now. retail consumers paid less but that’s because commercial and industrial consumers (which use 2/3 of the power) subsidised them. If you look at the raw cost of power NZ is about 3rd cheapest in the world. In retail we are in the middle of the pack. Most of the energy options favoured by the greens would significantly drive up the cost of power.
To say there has been virtually no investment in infrastructure since the reforms is just utter ignorance. For a start, transmission investment is lumpy – you tend to invest only every 20 or 30 years. Secondly there have been significant and regular investements in generation – you must have slept through the >1300MW that have been added in the last 15 years.
Ironically much of the blame for transmission underinvestment has been aimed at the previously held belief that the green’s much loved distributed generation would negate the need for new transmission. Of course it never actually happened.
Centralised planning tends to lead to grand centralised plans involving building lots of big things (because that’s what engineers like to do). This would be an anathema to a green if a private company proposed it. You don’t even like relatively small and unobtrusive dams built such as Arnold.
Your post is bizarre and rather kneejerk. If anything is ideological it is your fact ignoring post harking back to some golden age that didn’t exist – a sort of radicalist-conservative nostalgia.
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There is a story to be told about design flaws in the energy market, but judging by this post the Greens don’t have the first grasp of the issue; preferring instead to indulge in some feel-good capitalist bashing.
Isn’t it time the Greens grew up a bit?
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Frog: Do you have any idea why there are people posting their ideas here on what a ‘Green’ is? Do they not have a life, or better still a Party they can identify with?
For mine – if you’re not voting Green you should take your ball and go home.
Anyway, buying back the electricity Farm may be desirable but not necessary.
Just one Government Department devoted to supplying cost-related power (in the way that Kiwibank is related to local conditions) is all that is needed – people vote with their fiscal feet no?
O’Bama is being pilloried by the extreme right for signing a Health Reform bill this morning (something desparately needed in the US).
Calling him, (shock, horror) a SOCIALIST!!!(read Commie Muslim unamerican blah blah blah).
But he had a great quote “Lets not have Perfection be the enemy of Necessity” – or much like.
Never thought he’d touch off so much anger by doing this – maybe it has more to do with his capping executive bonus’ at 500k – guess that really hurts.
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insider – so you are saying that John Key and Nick Smith are liars? They waxed poetic about the failure of investment in both generation and transmission as the main reason for the new RMA reforms.
Meanwhile, we have a visiting delegation from the UK telling us that our failure to invest is not unique to NZ, but is symptomatic worldwide as a result of the market reforms of the 90s.
The system is a mess. Sure it’s about average compared with the rest of the OECD – but they did the same stupid things we did and we are all in a pickle.
MEDIA RELEASE
Auckland Power cut part of a World Problem
A visiting United Kingdom electrical infrastructure expert says power systems all over the world are in a similar state to New Zealand’s system .
Dr Donald Hepburn from Glasgow University says most country’s power grids were set up around the same time in the 1950s and 60 ‘s . He says Britain’s power infrastructure is up to 40 years old and could take up to 110 years to update.
Dr Hepburn says blackouts like the one in Auckland yesterday also happen in London .
He is currently in New Zealand as part of a trade delegation of renewable energy experts hosted by the BHC .
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Makes you wonder why you and Labour did nothing about it for nine years, then.
Except block new generation, of course….
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Frog
John Key and Nick Smith are politicians – they will say what is convenient. Patrick Strange said the current problems are not due to lack of money. He too said there was a trend to not invest like we had in the past.
But it made sense. Why build overcapacity when there were cheaper alternatives to make better use of existing infrastructure? Computer technology means you can better utilise and manage systems than when they were built. You’ve seen the same in telecoms.
The big issue you have to deal with is that the system, despite the increased stresses with increased demand – is MORE reliable today than it was in your golden age. Reliability data is freely available.
Hepburn’s comments should put all the ‘third world power system’ coments in perspective, as should last weeks rolling cuts in Melbourne.
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Which begs the question, “Why can they not tell us the truth?
Melbourne (for one) is out of water.
Gone nada nil – no electricity – we have an abundance of same.
Since the US mafia has lost the power to buy legal business’ – it may well be time to make them an offer they can’t refuse.
To say that ‘it’s not a lack of money’ is a bit like saying the US/UK economies have crashed, but their policies and practices were always sound???
“The vagabond who’s rapping at your door
is standing in the clothes you once wore.
Strike another match, go start anew
and it’s all over now Baby Blue” – Bob Dylan.
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I was under the impression that the reason we are running out of electricity is because the Maui gas field is about dry. I thought Maui gas was slotted to run out in 2007 but they found a few extra pockets here and there and that extended it’s useful life for a few more years. Also i think depending on who you listen too maui gas supplied somewhere between 40 and 60% of our electricity and the bulk of the rest is hydro. Now since everybody hates coal we have a choice – coal or no electricity but we could be bringing in some new technologies like micro turbines and thermal. Right now is a good time to start spending big on new infrastructure with the country heading for depression and oil being so cheap.
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BluePeter and paranoid peter – we are not “running out of electricity”. This is not about generation capacity, it is about transmission infrastructure (the inadequacy of which is causing the current outages), pricing, and the structure of the electricity ‘market’.
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toad,
I agree a significant part of the problem lies with the grid, which has not received the investment it should have. Since Transpower is a government office, that fault must lie with the Labour/Green government of the last decade.
And since the Greens would force everyone to use absurdly expensive alternative energy, their crocodile tears concerning the price of electricity is nothing short of offensive to people like me struggling to pay the bills.
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toad – it is in part about somewhat inadequate investment in generation since the reforms, although I agree that we are not running out of electricity.
paranoid peter – your figures are inverted. 65% of NZ’s electricity is renewable, the vast majority of that is hydro. Coal and gas share the balance, with coal’s percentage of capacity falling overall, but it’s use spiking during the dry years.
BP – Don’t lump us in with Labour on this. We were never part of their governments and only had limited influence, obviously. I hold Labour and National equally accountable on this one. They are as bad as each other.
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>>Don’t lump us in with Labour on this.
I can see why you’d want to separate the Green brand, but your actions enabling the previous Labour government at just about every turn told a different story.
So why this concern for cheap energy all of sudden, anyway? You’ve been advocating the more expensive generation methods for years. New positioning for the recession?
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Gas-fired plants may once have been a cheap form of generation but that’s no longer the case. The long term costs of even the most efficient CCGT plant are now the same as wind, geothermal and hydro. Marine and bio-mass generation would cost as much as a CCGT plant if gas cost $13/Gj and a carbon charge of $50/t is lumped in. (p.92-95 Elec. Commission 2008 Statement of Opportunities).
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The problems with our electricity infrastructure are also evident in rail, road and water infrasturcture. Privatisation is not a feature common to them all. But the political responses to the balance of payment/foreign currency crisis of the 1970s and 1980s are common to them all. So too are the fact that infrastructure construction booms of the ’20s/30s and 50s/60s created a maintenance ‘holiday’ during ’70s/80s. The generation that enjoyed the lower price for these services during that period punished any government that increased prices to cover the growing maintenance costs during. The consequence is a maintenance ‘bomb’ caused by the combination of the boom in infrastructure leaving a legacy of a boom in replacement/rehabilitation and a decade of politics denying that fact creating a backlog of deferred.
Privatisation is a red herring thrown in by politicians and voters to shift the blame to someone else.
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EXPLAIN EXPLAIN EXPLAIN
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Kevyn – very interesting point about the maintenance bomb. This does in fact point towards privatisation as a secondary issue, and more towards unfettered growth as the underlying problem, without foresight concerning the resulting OPEX. One of the huge problems in the US is the massive roading infrastructure that they have built and their inability (sometimes unwillingness) to maintain it, leading to fatal bridge collapses every year, etc. I shall think about this more…
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Toad
A single transformer failed. It was not old, it was not highly loaded. Unless you think that nothing can ever ever happen ever, then conflating a single failure in equipment as symptomatic of a wider failure is just over free range egging the organic pudding, and strikes me of using a convenient event to push a political barrow.
Things break. Things stop working when things break. This is not a new or unexpected phenomenen. Unless you are suggesting so much redundancy in the system regardless of cost.
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insider Says:
February 5th, 2009 at 4:22 pm
> A single transformer failed. It was not old, it was not highly loaded. Unless you think that nothing can ever ever happen ever, then conflating a single failure in equipment as symptomatic of a wider failure is just over free range egging the organic pudding, and strikes me of using a convenient event to push a political barrow.
If Auckland had had one suck power-cut, we could put it down to bad luck. But it has happened twice in recent years (last time it was due to a faulty bracket that held up a cord in a substation). Two power cuts to a large area of Auckland (without an extreme weather event, vandalism or a truck hitting a substation) seems to me like evidence that there isn’t enough redundancy.
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# andrew Says:
February 5th, 2009 at 3:43 pm
> we had the second most efficient electricity system in the world… We got away with being one of the least energy efficient economies in the OECD because of this
> EXPLAIN EXPLAIN EXPLAIN
New Zealand has a lot of inefficient appliances and poorly insulated homes because low electricity prices lead people not to put a high priority on efficiency when buying houses or appliances.
It’s basically the same as the reason why cars in the United States are less fuel-efficient than in other OECD countries.
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kahikitea
The 2006 one was due to a lightning strike – that is fairly extreme – and poor management practices. It wasn’t a faulty bracket, it was a corroded shackle. One which should never had been in that condition. If they had done the job they were paid to do, there would not have been a problem. But they didn’t and ironically, instead of TP suffering, it has ended up costing consumers $100m as Transpower are given lots of money to completely rebuild the site. Is that really a good outcome? Talk about moral hazard. And I thought the shackles in yachting were expensive.
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The 2006 event was a chain-reaction failure. The expensive rebuild is to separate the various circuits to avoid the possibility of the type of chain reaction failure occuring.
But yes, the coroded shackle should have been found and replaced much earlier. It wasn’t, due to a demarcation misunderstanding. It corroded because it was carrying current that should have been routed around it.
The recent transformer failure was unexpected. The system didn’t handle it because of a temporary lack of space capacity as a third transformer was out for maintenance. I don’t know if it would have been possible to schedule the maintenance for a period when the loads would have been within the capacity of one transformer. Not knowing the area, I don’t know if it would be practical to have a different substation able to supply some of the power into the affected area. Perhaps they didn’t do a very good FMEA (failure modes and effects analysis) before scheduling the maintenance.
Trevor.
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There were far more frequent power cuts in the 70s and 80s than there are today. Let’s start by not pretending that there has been widespread privatisation, as most retail and generation is state owned. Secondly, NZ does have an active real time market in electricity that balances demand with supply. It is only right that the largest consumers are able to negotiate discounts, as without them there wouldn’t be the cash flow to justify investing in new capacity. Sadly, with mostly state and local quango ownership of generation, retail and the lines networks, they are starved of capital investment – not a situation you see in telecommunications networks.
Beyond capital investment (which has enormous initial costs, primarily due to delays, because of the RMA), there are few problems with the electricity sector. Of course, with 3 SOEs dominating retail none are likely to be innovative on pricing for consumers, when they have the same shareholder – a better solution would be to privatise at least two of them, even if it was done by giving shares away to the general public (true public ownership).
In the “good old days”, electricity was vastly overpriced for businesses, consumers faced power cuts far more frequently than today, and hundreds of millions were poured into gradious power plants that were built over the odds by the state. The Electricity Division of the Ministry of Energy was interested in building dams, not interested in servicing customers (it had none as it was the monopoly supplier to the local monopolies, which equally has little interest servicing the captive market).
We have moved from an engineering focus to a supply/demand customer focus, one that defies those with an instinct to plan and control.
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“they are starved of capital investment – not a situation you see in telecommunications networks”
Yes Scott, we saw investment in the telecommunications network that was allowed to gather dust when the competitor went out of business. At least National learnt from Labour’s mistake, and realised that it wasn’t a good idea to allow a big monopolistic organisation be privatised as such, and split up ECNZ.
Given the political environment of 1993-1998, it was unfortunate that the other generators were not privatised.
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thanks kahikitea i see it now. efficient production, inefficient consumption.
isn’t it more to do with the fact that the rapidly growing population is putting pressure on the country’s ability to keep providing cheap power enough to go around?
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The reason that the corroded shackle wasn’t found was due to Transpower subcontracting out some of the maintenance, and two groups carrying out inspections of the lines and the support structure each assumed that the shackle was part of the other group’s responsibility. Just one of the less obvious costs of privatisation.
The lack of a bonding wire which caused the shackle to corrode in the first place is probably also due to privatising the work, as the contractor probably lacked experience in that specific area and the people dealing with the contractor probably lacked experience in managing contractors and giving detailed enough instructions and didn’t specify that a bonding wire was needed.
It wasn’t a lack of investment. Neither was the big Auckland CBD outage during hot weather a few years ago. That was due to incorrect filling of the trenches holding high voltage cables, which overheated.
Trevor.
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Trevor29,
A lot of “probables” in your blurb.
Anything based on facts?
If Transpower had subcontracted the maintenance work to an outside (or even an internal party for that matter) the scope of the contract would have ALL the items to be regularly checked PLUS a level of corrosion that was exceptable and at what time a replacement shackle would be required.
That is what contracts specify and if the contract was so loosly worded that the check was not carried out, Transpoer have contract writing and auditing problems.
It has absolutely NOTHING to do with privitisation.
But everything to do with auditing to see if the contract work was specified and fulfilled to meet the demands for maintenance work required.
I think you are totally wrong on the overheating powerlines (placed in the ground BEFORE privatisation by the way) caused by incorrect backfill.
Overheating and failure caused by overloading above the contracted specifications of the lines when laid in the tenches the first time.
Still why let the facts get in the way of a good story!
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I was commenting from memory. However a quick search found:
http://nzsm.webcentre.co.nz/article1864.htm
Backfill material used in 1959 did not meet the cable manufacturer’s specification causing the cable to overheat.
http://www.med.govt.nz/templates/Page____12156.aspx paragraph marked “ix” says:
“Cable manufacturers supplied, and AEPB accepted, cables which were in accordance with AEPB specifications. Both the gas and oil cables were installed in soil conditions which did not allow the cables to achieve their specified rating.”
I mention this failure as an example where lack of investment was not the issue, although more investment in investigations would have reduced the likelyhood.
Trevor.
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Trevor29,
Rather proves the point that both the state and private enterprise have the ability to take shortcuts and take expediency to the highest level.
Only difference is that the AEPB (a democratically elected state/public entity) decision making “manager” never got a bonus for saving the state/public money, whilst the private enterpriser “manager” did for saving investor money.
So you agree it is not the privitisation that was the problem, No?
Good, thats cleared that up then.
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To me it proves the point that change costs, and not just the obvious monetary costs either.
A decision to save money by subcontracting work previously done in house is likely to be passed on to someone who is either skilled in managing subcontractors, or to someone who previously oversaw the work, but not to someone who has both backgrounds. Quite possibly it is given to someone who has neither skills. When the work is done in house, the workers get to know the job and take pride in the overall operation. They then start to look out for things beyond their job description. When the “same job” is given to a contractor, they will do only what they think they are being paid to do. There is scope for misunderstanding. There is no reward for going beyond the bare description of the task. Sure a detailed contract can be written. This can take more effort than the job to be done, and if the person writing it up doesn’t have the necessary background information, they can still miss important details.
The failures of the underground cables appear to me to be a different issue. Rather than taking shortcuts, it seems to be a lack of understanding of some details due to the company being too small to have enough experience in the relevant area. It could even be due to New Zealand being too small to have enough experience with underground high voltage cables.
Trevor.
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See http://www.med.govt.nz/templates/MultipageDocumentPage____20953.aspx
Point 3 in the box near the start mentions the lack of electrical bonding (around the shackle that failed) predisposing them to accelerated failure.
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The above report also considers that the locations of the equipment failures and discovery of other worn equipment being at the contract boundaries was significant.
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Trevor29
Glad to see that you agree it was a badly written contract.
Same with the underground cabbling. If they were laid to manufacturers specification, there would not be a problem (unless the cables were loaded beyond their carrying capacity).
Again it has nothing to do with privitisation.
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Gerrit said:
“Glad to see that you agree it was a badly written contract.”
I stated no such agreement! I have not seen the contract. I do not know if the contractor met the terms of the contract (seems quite likely they did not.) Have you seen the contract. As far as I know, the contract itself was fine.
Stop putting words into my mouth!
Trevor.
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The other day I came across a fascinating proposal for the world’s largest pump storage scheme near Ranfurly. The proposal comes from about four years ago, from Prof Bardsley, Waikato University, a professional hydrologist and engineer.
http://www.erth.waikato.ac.nz/staff/bardsley/download/pumped_storage_n ote.pdf
This would involve flooding land in the Onslow-Manorburn depression to make a storage lake 25 km long. There are presently two Dunedin City reservoirs there. This proposal would TRIPLE our hydro energy reserves – one of the real problems for NZ is that our hydro resources are productive, but that the storage of power is not that great. You can read about the background to all this on the site link above. You can also read a presentation about this proposal here. Because it would mostly prevent spillage of water from our existing dams, Prof Bardsley claims this facility would run at 100% efficiency!!
http://www.earth.waikato.ac.nz/staff/bardsley/download/EEA_conference_ pumped_storage.pdf
The last comment on this presentation is “but would it fit into the market?”
I sent Prof Bardsley this letter
Dear Prof Bardsley,
I am sorry to take up a bit of your time and clutter your in-box. However I came across your proposal for a pump storage scheme in the Onslow-Manorburn depression in central Otago, when I googled “pump storage nz” the other day.
Almost four years ago I added to my blog a proposal to see New Zealand’s entire generation capacity accommodated by renewables by 2025, or earlier. You can, if you are interested, read it here
http://homepage.mac.com/j.monro/SustainableElectGenNZ/APlanForElectric ityNZ.html
The main thrust of my proposals were a greatly increased role for windpower, perhaps 30% or more of our entire generation capacity, but also solar power was examined. ( I should explain I have absolutely no expertise on energy matters, but my amateur interest comes about from a strong ethical environmentalism, and the realisation that energy and environmental concerns are going to define the first half of this new century.)
I realised that at that level of windpower generation there would have to be some sort of storage mechanism for storing excess windpower when it wasn’t needed, and releasing it when it was. (We are geographically unable to export electricity directly, we do it by making aluminium, though I don’t think the country gets anything like its due return from this facility). I examined a number of pump storage schemes around the world, though as you know the majority are small schemes designed to provide temporary boosts of power at times of high demand. I wasn’t aware of the Norwegian scheme at the time. But I proposed a pump storage scheme that would allow sufficient power to be stored to meet a good amount of electricity demand on windless days. It would have to be very much larger than other pump storage schemes.
Indeed, I have sometimes persused the New Zealand atlas and Google Earth looking for possible sites, one in the North Island, and one in the South. I wasn’t sure I’d found any. I even wondered about the feasibility of using sea water and a coastal location for pump storage.
So I was most intrigued by your plan for Otago, this seemed to be exactly the sort of thing I was thinking of. Although you mention wind power in your article, there isn’t much in the way of detailed examination, it seems to be proposed so as to provide a more secure hydro storage for dry seasons, which of course is fine. Your scheme, unlike most others, doesn’t involve a lower lake, which would have been an important part of my proposal.
Have you thought more about how such a scheme could be incorporated into a power system with a much higher proportion of wind power? I would be very interested to hear your thoughts. Also, what interest, if any, has anyone from government or the power sector shown?
We now have a major financial and economic crisis and our leadership are running around like headless chickens and infrastructure is now the mantra, as if it were something new and wonderful and how clever they all are to think of this. That infrastructure renewal and devlopment should be a reasoned and continued and strategic part of any functioning society appears to have escaped most of our leadership and their economic advisors for quite some years. It seems to me that examining something like your proposal would be infinitely more productive, valuable and sustainable than spending billions of dollars on new roading, as they say here, which is the most appalling waste of money and resources at this time, and when oil depletion is well on its way to destroying our present economic system in any case.
Anyway, as I say, sorry to take up your time but I would really value your thoughts about your scheme and a much bigger role for windpower, and I would like to examine this on my internet site again. Are you thinking yourself of pushing for a greater interest generally?
Thank you for your time
Yours sincerely,
He replied
Dear John
My thanks for your comments and blog reference.
I regret that because I receive so many e-mails that I can spare limited time.
A pumped storage scheme at Onslow could certainly be large enough to accommodate wind energy. We did simulations on the basis of a release/take up of power up of 1,300 MW, and 10,000 GWh of achievable energy storage. Efficiency was 100% because pumping inefficiency is offset by reduced spillage in the existing power schemes.
The Electricity Commission is aware of the possibility of the scheme, as are the main generators – I have presented the scheme at a number of energy and hydrology conferences. It would never be built, however, in the present electricity market as it would yield no economic return to the builder because the seasonal electricity price variation would no longer exist.
On the positive side, last winter’s power scare has prompted the suggestion of seasonal security of power supply being built into the market – which would favour pumped storage. If you go to the Electricity Commission web page and go to available documents, you will see a document reviewing the 2008 winter. Comments on this review are open until Feb 20. You might wish send the EC your own comment, supporting the establishment of a revised electricity market incorporating security of supply with penalty for failure to deliver electricity.
Regards
Earl Bardsley
to which I sent this reply
Dear Earl,
Thank you for your prompt reply, it is appreciated. Your comments just go to show how absurd the electricity “market” is. It really is Alice in Wonderland stuff. May I post your reply to my blog?
I may send a comment to the Electricity Commission’s web site, but as I have an implacable antipathy to the whole stupid idea of an electricity market in New Zealand in the first place, and would only suggest the whole lot should be nationalised and re-integrated and all the directors sacked, equally I may not bother, but thanks for the suggestion.
Regards,
John Monro
Out of all this correspondence, note Prof Bardsley’s comment ” I have presented the scheme at a number of energy and hydrology conferences. It would never be built, however, in the present electricity market as it would yield no economic return to the builder because the seasonal electricity price variation would no longer exist.”
If this an accurate observation, and I have no reason to doubt his expertise and experience, then this is literally absurd. The market was set up, supposedly, to enable us to have a more efficient electrical network, and lower prices, that is exactly what Max Bradford promised for his reforms and what they have manifestly failed to deliver. I won’t go into my arguments against these reforms here, but anyone interested can search my own blog. Here we have a proposal that could, at one stroke, solve all our electricity security problems, and additionally be incorporated into a much greater output from renewable wind energy resources. Yet we won’t consider it because it won’t fit into the market!!! Because the proposal would at a stroke stop the absurdity of “spot prices” and wildly swinging electricity prices, so there would be nothing to trade and there would be no need for a market. Businesses and farmers and consumers would actually get a reliable flow of reasonably priced electricity that would allow them to make long term plans and investment, and isn’t that exactly what we need? At some point someone at the top is going to have to ask the question “isn’t the market supposed to serve the community, and not the opposite, the community serving the market?” I have been asking this question since the electricity reforms, and I have known from the very beginning what the answer is.
John Monro
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The Onslow-Manorburn Clutha pumped storage system has been mentioned here on other threads, but thanks for sharing your correspondence.
Another South Island idea was Lake Benmore/Lake Aviemore, which doesn’t add to our storage capability but does allow excess generation from wind, wave and run-of-river hydro to be stored for later use. Since Benmore is already one of our major generators, most of the infrastructure is there.
I haven’t heard of any North Island locations. However the existing geothermal generation in the North Island has scope for expansion into a load-following more rather than running at high capacity factors.
Trevor.
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That should be “mode” rather than “more”.
How come the typo’s only become visible when you click on “Post”?
Trevor.
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Just can’t hear Bureaucrats can be good or engineers decision makers but since rules don’t apply when protectionism is turned on and we can see the urgency to get doing things that are yet not applied by those who made them.. Privatisation is spelled wrong mostwhere and only becomomig a way to put cash in the capital regime by selling public property..
And lets do it half wrong so they do it all wrong!
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I searched Manorburn and pump storage on this blog site, but can’t find any other threads. But I suppose my point in posting is not so much about the scheme itself, though I think it’s fascinating, and is just the sort of thing I’ve been looking at myself and, after all even Prof. Bardsley admits the scheme needs a thorough examination for its feasibility, but it is the true absurdity of the market preventing examination of the merits of the proposal in the first place; it is, as I say, literally crazy. I mean, here is the opportunity to treble our energy storage capacity and have a constant source of electrical energy at a reasonable and fixed price. What more could a country desire? What massive competitive advantage could accrue to having such a system in New Zealand? Yet apparently we won’t even consider it because we’ve set up this delusional market system and voluntarily tied ourselves up in an ideological straight-jacket.? What sort of cloud-cuckoo-land country is this? This bizarre thinking will bring us all down, indeed, it is doing so already.
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http://blog.greens.org.nz/2009/01/20/fdr-and-the-unscrupulous-money-ch angers/
http://blog.greens.org.nz/2008/05/24/ken-deffeyes-on-brisbane-radio/
http://blog.greens.org.nz/2008/04/26/to-save-or-not-to-save-that-is-th e-question/
http://blog.greens.org.nz/2008/04/16/pq-mokihinui-river-hydro-plan/
http://blog.greens.org.nz/2007/10/18/big-wind-to-the-rescue/
You might be interested in this discussion:
http://blog.greens.org.nz/2008/12/01/the-writings-on-the-dam-wall/
Incidentally, the Onslow scheme would add about 3 times our existing storage, so it would actually quadruple our total storage (12,000 GWH vs 4000 GWH)
Trevor.
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jock
the Onslow scheme wouldn’t work in the current market because it would cost $1b to build for very little relative benefit.
All markets have incentives in them that encourage people to balance opportunity with cost, recognising that money is a limited commodity and has a value. There is nothing stopping anyone building Onslow. The fact it doesn’t feature anywhere in any investment plans for the next 20 years should tell you that it might not be quite the dream investment it is claimed. Bardsley himself says he is unsure if it is feasible from an engineering perspective.
It’s unlikely to be a constant source of power – it can only deliver the energy potential in the water stored. Despite popular perception, there are not massive water surpluses available to build up a significant level of storage and it is only those short term surpluses that will generate power.
There are a lot of other things you can do for the same money that will deliver a lot more to the power system. Personally I favour spending money on things that can be more immediately useful than some dream scheme.
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“relative benefit” means that the people siphoning money from the current scheme are saying “cui bono” and the country of New Zealand and its citizens can p!ss in the lake if they want to add to their reliable power supplies and stabilize costs.
I’d be interested in where the water is to come from though. That’s an easier problem than it looks though. A lower lake, rather than dumping the water into the river and back to the sea.
“New Zealand syndrome” – as soon as any negative information is found be sure to abandon the idea promptly. Don’t allow yourself to be perceived as supporting a doomed measure… you can be SURE it is doomed because every real New Zealander will drop it just as fast as you do. Do a little song and dance so nobody notices it was your idea and nothing lands on your toes.
BJ
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The problem with the idea is that it says it will store 10kGWh of energy when full. It doesn’t state what the excess water value is for the Clutha. If that is only 100GWh per annum that means it would take 100 years to fill the lake. Even at 1000GWh (which is a lot) that is 10 years to fill AFTER construction (probably a 5-10 year project itself). And to prevent the reservoir falling you can only ever use the amount of water coming in. SO hardly unlimited and certainly not a short term response.
So let’s park it and save the money, or spend it on other energy forms.
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Insider, look, that’s all fair enough if what you say is true, this pump storage scheme is only a proposal, and won’t have had full engineering studies, costing etc. But why do you say “in the current market”? Isn’t the whole problem that the “current market” isn’t working, so why should one defer to it?
We are told that every year we will need an extra 1.5% energy generation capacity. This means a doubling of our energy resources within about 45 years, if this rate of increase were to continue. Even now there is a very destructive proposal for a dam in conservation land at the Mokihinui River, if I’ve spelt it correctly. This dam, costing at least $250 million, will provide only six months of our increased power generation needs. We need urgently to consider how we can utilise the resources we have already invested in, rather than drowning yet more pristine valleys and installing windmills on every ridge and hill in the country.
This proposal offers a possible way out of this problem. Of course it isn’t a constant source of power, pump storage schemes aren’t supposed to be. It’s a way of evening out electricity output with demand. Most pump storage schemes are designed to do this only for a few hours at the most. But if we wish to see a high proportion of wind power in our renewable sector, we may be looking to a proportion higher than 20-30% – after all even now we produce nearly 40% of our power from fossil fuels, and we are spilling water over dams – though that’s partly due to the scandal related to the transmission lines in Cook Strait. An isolated electricity system like ours, with no capacity to import or export electricity, will have to consider how we can store windpower, and a large pump storage scheme like this may be ideal. I don’t know, it needs to be worked through.
But what really makes me peeved is, according to what you are writing and to what Prof Bardsley has stated, we won’t even look at this proposal because ultimately it makes our “electricity market” redundant. Never mind that this market isn’t working anyway, this is, as I have stated, an absurd ideological straight-jacket.
You also say it would cost $1 billion for very little benefit. How do you know:? Of course no company has invested in this, even if they were free to do so, just like they haven’t invested in productive assets for years. We live on a knife edge of shortages, engineered by these companies, in a form of loose cartel, so as to maximise profits. Contact Energy shares you know have more than quadrupled in less than eight years. Meridian has paid massive sums to the government in excess profits. It suits the companies to run our electricity supplies like this. But does it suit the country? Tiwai Point had to close some pots because of inordinately high spot prices, and it is likely that Meridian, and therefore us, have had to compensate Rio Tinto for this, though we won’t know by how much because all the agreements between Meridian, (ie us) and Rio Tinto are secret. It could have been tens of millions of dollars, who knows? The cost to the country in excessive electricity prices must, over the last few years, amount to many billions of dollars.
So why are you saying that $1 billion wouldn’t produce any benefit? If it does what it is claimed to do, it could reduce electricity prices to the basic minimum, the cost of production, which for many hydro schemes is almost zero (they were paid for years ago) plus say 10% profit, and even more to the point this minimum wouldn’t change. The benefit to the country would be enormous, to the power companies not at all. But who runs the country, us, or the power companies?
Cheers,
John
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The Clutha apparently averages 790 Cubic Meters per Second.
How much of this is “excess” I’d be loathe to guess.
Once again… once it is filled you can let the water flow into a lower lake and re-use it. To adapt an old green cliche’ “Re-use is better than re-cycle”.
.
BJ
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Insider,
I have just read your follow up posting about the capacity of this facility and how long it would take to fill it. I don’t believe your figures are accurate, to me they are out by least a whole order of magnitude. The Clyde Dam for instance has enough water to produce 432 MW, which is likely to represent about 2000 GWh per annum (approximately you can multiply by around 5 to convert MW to annual GWh) . If there’s enough water going through the Clutha river to provide this amount of power, then your statement that only 100 GWh of power could be saved each year in this pump storage facility must be out by a factor of about 20? Even supposing you left half the water in the river, you could be out by a factor of 10. But then don’t forget the head of this lake would be over 700 metres, and the Clyde Dam produces its power from a head of 100 metres, so theoretically the same amount of water that flows through the Clutha river could provide seven times the power of the Clyde Dam, once it’s filled, which by my rough approximation from above might be about ten years. According to Prof Bardsley, he suggests a power output of this facility of about 1.5 GW. which is about 3.5 times the power output of the Clyde Dam, but because the head is seven times as high, only half the volume of water is required to produce this amount of power so if the river is flowing at half volume, that could easily be incorporated in the normal maximal flow rates for the Clyde river. . That sort of fits in with my calculations. But perhaps we should be checking all this with Prof Bardsley, he is a professional hydrologist after all, I can’t see how he wouldn’t have thought of all this before committing himself to pen and paper. I note his outline paper says he will be exploring this further, but as this was four years ago, and we don’t yet see the calculations, we don’t know whether this is because there is some query about the viability of the project, or because he feels it’s not worth it in the present way the electricity market is set up.
Another way to look at this would be to calculate how big the storage lake would be and work out how much water would be available to fill it. However Prof Bardsley gives no details as to the size of the proposed storage lake, except it could be up to 25 km long. Lake Dunstan, which is 25 square kilometres, took 18 months to fill, with the full flow of the Clutha river. If the proposed lake was 3 times the size of lake Dunstan, and it took half the flow of the retained flow of the river when it was filling, it would take nine years to fill.
Finally, according to Wikipedia, the average discharge of the Clutha river is 570 cum/sec = 570 x 60 x 60 x 24 x 365 = 1.8 x 10 power 10 cum/year. In one year the full flow of the river this river would approximately fill a lake 25 km long x 5 km wide x 100 metres deep.
I think all these calculations show that it would be quite feasible to fill this storage lake well within ten years.
John
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John
I would say the current market is largely working. we just got through the worst hydro sequence in 70 years without power cuts. Australia is having rolling power cuts because their system can’t cope at a time of high demand yet no-one is saying their system is broken. we do get overly precious and self flagellating at times. History and as Liberty says cuts were more likely in a centralised system.
The system is not always on a knife edge. The wholesale price of power and large interisland transfers shows that to be untrue. The high reliance on hydro means we sometimes have management issues but they are often perception of risk and system gaming IMO rather than real. Last year was real but it was extreme. The lesson is we should be less reliant on hydro.
The system is not bias against Onslow. It is bias against any project with high costs and huge uncertainties. That is not unique to this industry or this country. If people who are experts at building and running power stations don’t see any merit in Onslow why would you consider the taxpayer is better informed and placed to do it? We almost bankrupted the country in the 80s by doing that.
Using my $1bill and your own 10% profit number that one project alone would generate $100m profit, no matter how much power it generated. That is a brilliant investment – no risk, guaranteed profit. but imagine the cost to consumers if it never generated a MW because we had a sequence of good inflows into the other lakes – someone has to pay those guaranteed profits. Madness
I wouldn’t worry about growth – there are about 4000MW of gneration in progress. Ironically more wind may mean more spill as must run wind displaces hydro in the SI. But that will mean less efficiencies even if you capture the water. It will mean huge increases in cost as you double up assets.
No argument with your calculations but you have missed that I said surplus water – ie water not destined for another use including power generation by ohter dams. Anything you divert for storage is not available for generation. Therefore, unless you are willing to buy the water, it is unlikely you will be given it unless it is surplus to requirements, such as teh recent spills by Meridian and Contact because their lakes were too full. Those spills are very rare.
And you are right, Bardsley does not address this point so my numbers were purely hypothetical but they illustrate a significant weakness in the proposal no matter how large the numbers actually are.
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The Onslow-Manorburn storage system will not be economical for a number of years, simply because we have cheaper alternatives. While we are burning gas for peak generation and to cover winters, any project that can use off-peak electricity instead of gas (or coal) is likely to be more economical than this storage system. I am sure that there are a lot of industrial and commercial uses of gas that could use cheap electricity if it were available, at little additional cost.
One use of cheap excess electricity is hydrogen production via electrolysis. While this is often thought of in terms of a storage system with fuel cells to convert it back to electricity, the losses and costs make this very uneconomical. However there are applications for the direct use of hydrogen which are cheaper and more efficient than using it in fuel cells. It does not appear to be widely known that New Zealand has at least two sites where hydrogen is produced from steam reforming of natural gas – the oil refinery and Petrochem’s ammonia-urea plant in Taranaki. These sites could use any hydrogen produced from excess electricity. However I suspect that there are cheaper alternative uses of that surplus electricity.
I’m not saying that the large pumped-storage systems won’t work or won’t be needed, just that their time has not yet come.
Trevor.
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Hello,
We seem to be talking seriously past each other. I am proposing a 100% electricity generation by renewable resources. I am not accepting our present generation by gas or coal, or worse, increasing generation from either source. The government’s own projections see us producing 10% of our electricity by coal in 2035. I can’t accept this. To deal with global warming requires advanced nations to reduce their carbon emissions by 90% and the sooner the better.
So any resort to fossil fuels to generate electricity is not acceptable to me, nor to the planet. It is claimed fossil fuel use is “cheaper”, you cannot tell me this because you are not including the cost to our climate. i can’t prove what is happening in Victoria is due to global warming, but if even less can one deny that it may be. What we are seeing fits the projections of what we should expect in a global warming world. What cost is our security, our food or our lives? Until you actually recognise this, claims about fossil fuels being cheaper are specious.
New Zealand, with its relatively small population and bounteous wind and solar resources, should be showing real leadership. I am not arguing the merits or not of this scheme as such, but I am strongly arguing against our present market, and this markets ability to prevent long term planning and its shutting down of the sort of debate that is required to ensure a 100% renewable energy future, of which this scheme could be an important part. I am equally opposed the market’s reliance of fossil fuels, its inability to deliver effective mechanism for energy efficiency, its active opposition to distributed electricity generation, etc. . It hasn’t delivered what is was supposed to deliver, even conventional economists and commentators, not known for their left wing or ecological views, are starting to question the wisdom of our electricity “market”. But to call it a market is to misname it. It is a highly constrained and artificial trading scheme set up by a particular political dogma, which to survive has to support the dogma that created it. This dogma even now is bringing the world economy to its knees.
John
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John
Thanks for clearing that up. It is not “the market” that is preventing anything. It is just a thing. It’s people that make decisions. Energy efficiency is hampered mainly because the costs are greater than the perceived benefits. what that telss me is that power is cheap. So much for the market not delivering. Ironically it was a dogmatic belief in the future of distributed generation that has led to a reputed grid underinvestment by the central planner of transmission.
You are right it is not a true market – that might be why it has been less effective in some areas, but it is freer than many. WHat is has delivered is a more reliable power supply than we have ever had. You may not believe it but the data proves it. It has also delivered some of the cheapest power in the world. Unfortunately Max Bradford said it would reduce prices, which was never going to happen due to the way power is charged for. But it may be argued that price increases have been minimised.
But in case you missed it, there has been widespread anger at recent price increases for power. People do not have unlimited money. And it is all well for you to rail that it is not doing what you want, but what the market does is minimise the ability of people like you from imposing the costs of your grand designs onto others because you think you know better. As I said, there is nothing stopping anyone proposing and doing exactly the things you want. But they don’t. Why? Because people like me are not willing to pay. That may be shortsighted but it is reality. Your leadership is my 15% cost increase.
As for Victoria, Australia has been a hot country for a long time. Bushfires are not new
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We’re going to have to agree to disagree on so many things really, we’re definitely not going to come to any satisfactory intellectual agreement.
You say it’s not the market that’s preventing anything, it’s just a “thing”. What “thing”? The simple fact is that Max Bradford, for the National government, split up the then publicly owned generating network, sold two parts off to private investors, kept three as supposedly competing state companies, and said, wonderful, this is the way to run our electricity system. It is not a “thing”, it was a deliberate, but naively thought out policy, according to the economic dogma that at that time ran the world. To call it a “thing” is an intellectual cop-out. There must be a thousand different ways to run an electricity system, we have a particular one which I contend isn’t working at all well, and could be run a lot better, particularly if we were to seriously consider our long term environmental future.
You contend it was the overstated benefit of distributed generation that undermined expenditure on our transmission system. Please provide the evidence for this statement. The under-investment in transmission infrastructure is repeated around the world where these “market” style reforms have been introduced. It is obvious that private, or even in our case, state-owned companies, will, without strong regulation to force them to do so, fail to invest in infrastructure to maximise profits. These companies have fought tooth and nail against forcing distributed generation, and still do. The last thing they want is competition or the dilution of their monopoly. I don’t blame them, that’s the nature of private competitive business but it is exactly what you’d expect in a “market” system and why I continue to disagree with you.
You say that our electricity market has delivered some of the cheapest power in the world. But so it should, the fact is that about 60% of our generation capacity is hydro, the capital cost of all these schemes was paid for years ago, by our parents and grandparents – the cost of our baseload hydro must be measured less than a couple of cents a unit. I wonder what Rio Tinto are paying, certainly up to the last agreement last year, they were paying about 3.5 cents a unit. And while our industrial users have benefited, domestic consumer prices have rocketed, and we are now around the middle of the OECD. But even business customers are now complaining when spot prices are shooting up and down, and it’s affecting their business. I don’t feel in the least sympathetic, they were happy to see their costs fall whilst consumers were picking up the tab, but now they’re in the same boat they are most aggrieved.
But then you go and undermine your whole thesis by saying people are angry about soaring electricity prices!! And that we don’t have unlimited money! Where is your logic? This all started by looking at scheme which may or may not allow our hydro reserves to be tripled, at a stroke keeping prices to a stable minimum. I was supporting examination of this proposal, and I was pointing out that having an electricity market that wouldn’t allow this to happen was absurd, and you have shot me down in flames, yet now you are angry about high consumer electricity prices!! It’s bizarre. I am actually trying to help you in your financial need, Insider.
Your say energy efficiency is hampered because the costs are greater than the perceived benefits. It depends how you measure them. If we can save a beautiful valley being drowned by another hydro scheme because we are being required to install energy efficient lamps, or if insulation warms homes and reduces our third-world levels of rheumatic fever and ear and chest infections in children then these costs may well be worth it, if someone goes to the bother of measuring them. But then our present economic system isn’t very good at measuring the worth of a pristine valley or the health and comfort of a child. Energy efficiency improvements may take ten or more years to break even, but that doesn’t mean they are not worth doing, again, our present economic system very much overstates opportunity costs, and understates long term benefits. You are doing exactly that when you say “People like me are not willing to pay. That may be short-sighted but it is reality. Your leadership is my 15% cost increase” Well, talk about arrogance. It isn’t my leadership, it’ll be this country’s leadership. If your fellow citizens take on board that the planet is worth saving, then you’ll just have to put up with paying more for your power, just as you pay duties on your petrol. You might then find that an investment in energy efficiency make some sense.
Insider, you are so last century. The resources that you seemed determined to rely on are failing us, and the planet that supports us. You admit yourself to be short-sighted. Well, at least you’re honest, it’s your reality, but it’s not mine, and if I have my way, it won’t be most other people’s. You’ll then have to learn to lump it and accept the world has changed, for the better.
And Insider, I’m sorry to see you are a global warming contrarian. This thread has gone on long enough so I am not going to take you up on this, but it is yet another example of your inability to let go of the intellectual and emotional investment you’ve made in the status quo – I don’t know how old you are, but it is likely you’ll take your unchanged ideas to your death, rather like Marie Antionette or Tzar Alexander!!
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The big problem looming ahead is the dwindling fossil fuels. Unfortunately fossil fuels provide much of the means by which we balance supply and demand.
Many of our renewable energy sources fall into the use-it-or-lose-it category, and don’t always generate power when we want it, including wind, wave, solar, tidal and flow of river hydro. Our current geothermal plants are also mostly in this category, running at nearly 100% capacity factors. Even some of the hydro with storage systems have minimum water flow requirements and therefore minimum generation levels that require water to be spilled if they are not met. As we increase our renewable generation, we will have increasing periods where the supply exceeds the demand.
There are various time-scales involved. Demand usually peaks in the early evening, with a smaller morning peak. (In summer, the peak may be mid-afternoon in some areas running air conditioning.) Demand varies from week to week depending on weather and holidays. It also varies between winter and summer. Our renewable generation also varies but not necessarily in phase. The difference is met using storage and fossil fuels.
Despite having a lot of hydro generation, we don’t actually have a lot of hydro storage. We have about 4000 GWH of storage, but use about 40,000 GWH per year, i.e. we have only about 5 weeks of storage. The Onslow-Manorburn scheme would increase this by 10-12,000 GWH or to about 20 weeks of storage. It would also provide a means to absorb some of the excess generation capacity when the winds are blowing but the power isn’t needed.
Another option to provide storage without using fossil fuels is to burn charcoal at Huntley during dry (low hydro inflow) seasons.
Trevor.
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Last century, NZE also faced dry years. Their solution was simple – build more capacity and accept spilling some water in wet years – no problem.
NZE didn’t have lots of wind, wave, solar or geothermal generation so they didn’t have to deal wih short term supply exceeding demand. I understand that this is a more recent development. Part of the solution is to identify any generation that can store energy and time the generation for when it is needed – even if the storage is only for a few hours. Geothermal is a strong candidate for this, but the extra generation capacity is expensive – around $3 per Watt. Coal seam gas generation and generation from biogas also offer the possibilities of storage and their extra capacity is cheaper to install. However the markets aren’t giving the price signals to these generators to encourage the installation of the required gas storage and extra generation machinery.
Interesting times…
Trevor.
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