Why would NZ actively disadvantage clean energy?

Today’s DomPost had an excellent opinion piece around clean energy, penned by the chief executive of the NZ Wind Energy Association. My priority this Parliament is to protect our environment and climate by stopping risky deep sea oil drilling and promote clean energy opportunities.

You will note the Wind Energy Association are not asking for subsidies and special favours, they are just asking for a level playing field.

The International Monetary Fund is calling for a move away from all fossil fuel subsidies, which it says totalled nearly US$2 trillion (NZ$2.36t) in 2011, or 2.5 per cent of the world’s gross domestic product. This estimate includes direct subsidies and indirect subsidies, such as the environmental costs of using fossil fuels….So, the cost of renewable energy policies pale in comparison to the subsidies paid to the fossil fuel industry. In the US it is estimated that the fossil fuel industry has received US$447 billion versus the renewable subsidy of US$6b over the past hundred or so years.

New Zealand has very supportive policies and subsidies for the fossil fuel sector. Successive New Zealand governments have systematically sought to reduce costs for this industry by increasing certainty – either through provision of research facilities, tax incentives for investment or help with marketing the industry to overseas investors. In particular, the Government has a favourable taxation regime for oil exploration, funds data acquisition and invests in research to support the fossil fuel industry.

In New Zealand we have seen $46m a year in tax breaks for oil companies (already one of the most profitable sectors in the world), free exploration and survey data and Emissions Trading Scheme pollution subsidies. The Government also has what looks like an open-door policy to oil lobbyists, crafts and passes law in their interests under urgency; opens up huge swathes of our waters for oil permits with no public consultation; bans protest at sea; takes away public say in consenting and literally calls the Navy when protesters get in their way! New Zealand under National is looking more and more like a petro-state.

Eric Pyle points out:

We are ranked in the top 10 countries for policies that are favourable for oil and gas exploration. However we rank 39 out of 40 for policies that support renewable energy investment. Our neighbours on this list (prepared by Ernst and Young) are Saudi Arabia, the Ukraine and Greece.

New Zealand has a huge clean energy opportunity but as the Pure Advantage group of successful Kiwi business people point out we risk missing out. The Government is ‘putting all the eggs’ in the oil basket and is disadvantaging renewables. We will never compete with Saudi Arabia for oil drilling but we can compete and prosper selling clean energy technology and services that the world is crying out for. Half the words installed geothermal capacity has come from New Zealand; we are leaders in this field and could be exporting these skills. We know there are four times as many jobs in clean energy, public transport and energy efficiency than in fossil fuels. We have a wealth of clean energy options that Price Waterhouse Coopers estimate could be a $22 billion economic opportunity for New Zealand. More capital was invested in renewable electricity generation than all the fossil fuel and nuclear combined in 2011 so we shouldn’t be looking to the past but should orient towards the future.

The smart strategy for New Zealand should be to focus on our clean energy strengths and not actively disadvantage the renewables sector by lavishing public subsidies, government leadership and legislative focus on oil drilling.

New Zealand needs a separation between oil and state.

5 Comments Posted

  1. The “oversupply of energy” is due to companies like Genesis wanting to continue using their older gas-fired generation burning relatively cheap gas, even if it means importing some. That gas is relatively cheap because of the very subsidies that the NZ Wind Energy Association is complaining about, and because the price on CO2 emissions is very low. And it is the same consumers – in the guise of taxpayers – who have to wear the costs of paying for those subsidies including the subsidies built into the NAct’s version of an ETS.

    Removing the subsidies will increase the cost of electriciy and also the cost of using natural gas and LPG for water and space heating. This will improve the economics of solar water heating, improved insulation and other conservation measures. The savings from removing the subsidies can be returned to the consumers via tax cuts, benefit increases and improvements to other government services so overall they will not be worse off.

    However if we continue with business as usual, the cheap gas will run out and we will be forced to use more expensive gas to generate our electricity and heat our water and homes, and we will be worse off.


  2. “Their costs are too high, and/or their lifespan not long enough. Both issues that are documented to plague wind plants.”

    Newer wind turbines are larger, allowing them to reach into higher wind speed zones and giving them a significant increase in output power. This reduces the cost of the power they generate. There are also economies of scale, and the manufacturers are learning how to reduce their costs further. They also have longer lifespans than the older turbines.


  3. Eric Pyle quotes the Earnst and Young Renewable energy country attractiveness index (PDF 3MB) a few times, but fails to mention one really important factoid from it.

    It states:

    In New Zealand, Genesis Energy has received consent to take forward its ambitious 860MW Castle Hill wind project, the country’s largest proposed wind farm to date. However, oversupply of energy in the country means the utility has no immediate plans to start construction.

    So we already have more than sufficient generation for our needs, so we aren’t just going to build a lot more renewables as that cost will just get passed directly onto consumers (that’s us) with no direct benefit.

    Other than a reduction in reduction in emissions, of course, as something approaching a third of our power is generated from non-renewable sources.

    Of course, anyone who want to can build a power plant, and sell what they produce on the open market. And if someone chose to build a renewable plant, then they are competing against the existing renewable plants (mainly hydro) and non-renewable plants. We know what it costs to generate power from renewable and non-renewable sources, the numbers are all in the prospectuses of the flogged off power companies, it isn’t a secret.

    And all the subsidies in the world paid to (mainly) oil and coal wont alter the fact that it costs many times more to generate power from coal or gas than it does from hydro.

    And that really is the problem for new entrant renewable players. When they are raising funds, they aren’t competing against coal and gas en masse, they are competing against the published numbers for sunk-cost hydro.

    Once built, if they can’t compete against coal and gas on today’s playing field with new renewables to displace existing (very) expensive thermal generation, then they really don’t have a business plan that works. Their costs are too high, and/or their lifespan not long enough. Both issues that are documented to plague wind plants.

    But that doesn’t make for as good a headline, and, of course, completely fucks over Gareth’s topic opener, that its all the fault of of fossil subsidies. Which it isn’t, really.

  4. Did you ever read this report Gareth?

    It is about research completed to understand and map New Zealand’s fault lines, in the interests of tsunami risk assessment and preparation. The interesting bit for you may be the second-to-last paragraph:

    The report’s co-author, Francesca Ghisetti, of geological consultancy company TerraGeoLogica, said the research built on work by previous scientists and data from the oil industry’s exploration off the West Coast over several decades

    In your ideological hatred of the oil industry, and your desire to continue with your obfuscations about “subsidies” you (probably deliberately) hide the fact on what these “subsidies” represent.

    They are seismic survey data.

    Actually, using your reasoning, the oil industry “subsidizes” the people of New Zealand by millions of dollars every year, by providing seismic data for this research. It is a requirement under the Crown Minerals Act that people relinquishing exploration permits must give all seismic data to the crown. That is where this data comes from.

  5. This is such a no brainer – even free market rhetoric is all for killing oil subsidies. Shamefully there is not nearly enough media coverage around the ridiculous amount taxpayers essentially give fossil fuel companies.

    It’s odd that the comments in the Stuff piece are so opposed to subsidising wind power despite the multiple mentions in the article about how much special treatment the fossil fuel industry gets. What the?

Comments are closed.