Surely for the National Party, setting a standard and letting the market decide how to achieve it is the simplest, lowest cost way to encourage a biofuel market, but Gerry doesn’t live in the same universe as the rest of his colleagues.

This is now abundantly clear, given his mis-handling of the mining debate, his ill-timed oil drilling permit and his meaningless and expensive re-shuffle of the electricity market.

The Minister is now changing the criteria for the biofuel subsidy because of the poor response.

How he got $36 million out of his Cabinet colleagues for a subsidy while every other Minister was being forced to cut back is a mystery. Fortunately, there has been very little take up of this ill-conceived plan, and Cabinet could spend it on something useful, like restoring cuts to DoC’s funding.

Just how ill-conceived the plan is needs little explanation. The Minister is standing there with $36 million in lollies and no one is interested.

Meanwhile, having repealed sustainability standards along with the biofuel obligation in 2008, on Morning Report the Minister was hiding behind a lack of sustainability standards as his excuse for killing the obligation!

The Government should cut its losses with the subsidy and support Kennedy’s member’s bill to restore the biofuel sustainability standards. The Minister’s performance, while bad for the country, is just what the opposition needs going into the next election cycle.

I suppose this could just as well star Gerry Brownlee, the way he goes on about sexy coal and carbon capture and storage….

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.

The international perspective can be cited from the journal Energy Policy:

Carbon capture and storage: Fundamental thermodynamics and current technology
S.C. Page a,, A.G.Williamson b, I.G.Mason c

a b s t r a c t
Carbon capture and storage (CCS) is considered a leading technology for reducing CO2 emissions from fossil-fuelled electricity generation plants and could permit the continued use of coal and gas whilst meeting greenhouse gas targets. However considerable energy is required for the capture, compression, transport and storage steps involved. In this paper, energy penalty information in the literature is reviewed, and thermodynamically ideal and ‘‘realworld’’ energy penalty values are calculated. For a sub-critical pulverized coal (PC) plant, the energy penalty values for 100% capture are 48.6% and 43.5% for liquefied CO2, and for CO2 compressed to 11MPa, respectively. When assumptions for supercritical plants were incorporated, results were in broad agreement with published values arising from process modelling. However, we show that energy use in existing capture operations is considerably greater than indicated by most projections. Full CCS demonstration plants are now required to verify modelled energy penalty values. However, it appears unlikely that CCS will deliver significant CO2  reductions in a timely fashion. In addition, many uncertainties remain over the permanence of CO2  storage, either in geological formations, or beneath the ocean. We conclude that further investment in CCS should be seriously questioned by policy makers.

& 2008 ElsevierLtd. All rights reserved.

 That advice is pretty unequivocal. On the domestic front, kiwi research is coming to similar conclusions:

Carbon Capture and Storage: An applicable technology for New Zealand?

Page, S.C, Mason, I.G. and Williamson, A.G. (2008)

Proceedings of the NZ Society for Sustainability Engineering and Science Conference “Blueprints for a Sustainable Future”, 9-12 December, 2008, Auckland, New Zealand.

Abstract
Carbon capture and storage (CCS) has been widely touted as a practical way to reduce carbon dioxide emissions from fossil fuel combustion, and if successfully implemented, could permit the continued use of coal and gas for many decades, whilst at the same time meeting greenhouse gas targets. In this paper we discuss the applicability of CCS technology to existing coal-fired electricity generation in New Zealand, and to new thermal generation using Integrated Gasification Combined Cycle (IGCC) technology, with specific reference to the time frames signalled for deep cuts in New Zealand’s greenhouse gas (GHG) emissions and those required for major works of this nature. Energy penalty estimates show that adoption of CCS with IGCC would involve the consumption of at least 22% additional coal for the capture and compression stages only. The current global absence of full-scale coal fired power plants with operational CCS systems, and the planning and construction times likely for adoption and construction of new plant, indicate that CCS technology will not assist New Zealand to meet interim GHG reductions of 20-40% by 2020. If applied to a 900 MWe (IGCC) thermal power plant, the technology could contribute 7% of annual GHG reductions starting from 2024-2030. However, considerable technical, commercial and legal uncertainties remain to be resolved. On balance we consider CCS technology to be inappropriate for New Zealand conditions and recommend alternative investment of research funds into the use of woody biomass, a permanent and sustainable resource, for future thermal heat and power generation.

Hmm. “Inappropriate for NZ conditions”.  That pretty much says it all. The energy penalty, (read economic penalty) is just too great. So what is NZ supposed to do Gerry? Hey, I’ve got an idea – lets build heaps more geothermal baseload, and wind, and worry about the real sources of our emissions, namely transport and agriculture. In short, execute the renewables policy put in place by the last government, but with even less timidity than they showed.

As for transport – well, that Biofuel Bill, with it’s excellently crafted sustainability principles, could easily sail back through the house. How about some fuel economy standards too, but only for cars entering the NZ fleet for the first time?

Agriculture? Well, the government could restore the research and development cash and tax breaks it threw away in such haste. We could be a world leader in reducing ag emissions, if we tried.

Energy Efficiency? The government could hold fire on canning the billion dollar Green Homes Fund and actually allow the 2:1 return on investment that it represents to flow back into the government coffers while at the same time creating much needed jobs in local communities.

It’s tough taking on two huge portfolios at once – namely Leadership of the House and Energy. I know Gerry, where your attention has been lately – and rightly so. So why muddle up the latter portfolio by ripping apart all your predecessor’s work when you have nothing of substance with which to replace it?

But I digress. The point of my post is “Get off the coal train, Gerry!”

It wasn’t that long ago in historical terms that Nicolaus Copernicus bucked the established western wisdom and asserted that the earth may in fact orbit the sun. He rightfully feared the retribution of the authorities and was careful to pay them tribute when he finally did publish shortly before his death. Although the evidence has been building for decades, only recently has academia began to get any traction in their criticism of neoclassical economics. This is, in my opinion, due to both their own temerity and to the failure of the fourth estate – the media – to do their homework.

The current economic meltdown is proving fertile ground for legitimate questions to be asked about the scientific rigour of the pseudo social science of economics.

In an article critical of the modelling used by the IEA in their World Energy Outlook 2008 released last week, Dr. Charles Hall fires another broadside at those who continue to lead us based on bad science:

Neoclassical economics and economists have reigned supreme despite their dismal track record of late, as evidenced by governments turning to the same economists who got us into the credit crisis situation to get us out. It used to work better: economies expanded simultaneously with an expansion of economic departments and economic theory. It looked like the theories worked, although since more and more oil was being pumped out of the ground perhaps any theory could ‘seemingly’ work. Capitalism may be a giant Ponzi scheme once fueled by ever more investors and ever more oil at its base, but this has ceased, most likely forever (see here for a definition of Ponzi scheme). The economic theories became ever more analytically elegant as they got further and further from reality. Our most prestigious economics departments not only did not teach very much about oil or grain or other sources of real wealth but increasingly not even about money. Rather their focus was far too often complex econometric models using rather stupid starting assumptions (e.g. Nadeau, 2008). Acceptance of graduate students was increasingly taken based on their math skills rather than their ability to understand real commodity paths. Wall Street followed the lead of our major economists. As we have seen in other disciplines, such as ecology, there has been massive conflation of mathematical and analytical rigor with scientific rigor.

The basic theories of neoclassical economics break many conventional rules of science: for starters the boundaries are wrong, the laws of thermodynamics are not respected and the whole edifice is based on “sets of more or less plausible but entirely arbitrary assumptions” about the economy that were chosen based on an inappropriate physical analogy and that were analytically tractable (Leontief, 1981; Hall et al., 2001; Nadeau, 2008). In fact why should economics be a social science at all? Real economies are about the flow of real materials and the energy required for those flows and materials. Earlier economists (the physiocrats and the classical economists such as Adam Smith and David Ricardo) understood the physical base for wealth and made no such foolish assumptions, nor should we.

Instead of the kind of economics that dominates today what we need is a biophysical approach to our economic system, one that is based on real physical and biological production and distribution possibilities (Cleveland et al., 1984; Hall and Klitgaard 2006). We would do well to understand and guide this transition.

Here in New Zealand, it’s high time we question the accepted wisdom that our leaders claim will lead us to the promised land. The neoclassical economic model is failing us. It is based on some pretty poor assumptions and defies the laws and rigour of science. Before we throw the baby out with the bathwater, let us consider in what ways this ill conceived paradigm has served us. But let us also question every assumption on which it is based, and expose each to a fresh light of enquiry.

Like Copernicus 500 years ago, we need to pluck up the courage to take our view of the world to the next level. A level that is more sustainable, more egalitarian, more humane.

Whenever people have called for more oversight of the industry in the past, they have been shouted down. The ideologues insist that the market will shake out the dodgy operators, reward the better run operators and that such ‘heavy handed’ intervention is not needed. Once again, such ideologues have been proved wrong and we are closing the barn door only after the horse has bolted.

The real problem here, which the ideologues will rush to point out in support of their arguments, is that most of the finance companies that have failed were, in fact, quite sound financially. This is absolutely correct. And had we lived in the perfectly rational world that the Traditional Economists fantasise that we live in, then in fact these better finance companies would indeed still be standing and the rotten ones would be purged. Unfortunately, the real world gets in the way of the free market fantasy, and the invisible hand is one of irrational panic.

I think that finance companies are great. They provide much needed higher risk capital to business and developers. It’s just a pity that they didn’t have to disclose the risk to their investors, and in fact paid lower returns to disguise the risk. (We all know that lower returns equate to lower risk.) How far would you go in regulating those who manage such companies and those who sell their financial instruments?