Keep the coal in the hole

This afternoon Jeanette presented Solid Energy with a gift from the Green Party to mark Earth Day – a stocking containing a lump of coal – a traditional gift at Christmas for naughty girls and boys. But, as Jeanette says, it’s not just Solid Energy that has a coal addiction problem:

[I]mportant as oil is, it’s not the biggest climate change risk. That’s because it has passed or is close to its peak rate of extraction. From now on production will decline because oil fields around the world are depleting and since the sixties we have been finding less each year than we have been consuming. We do have to reduce our use of oil, but this will happen whether we plan it or not as its availability declines and its price rises astronomically. We have already seen world oil prices quadruple in the last five years.

The big problem is what we – and I mean the whole world here, not just New Zealand – choose to replace it with.

As you might have guessed the choice is renewables or coal. She then continues on to announce the Green Party’s 6-point coal policy:

  • No consents for new mines unless they are to fill a specialist non-energy niche in NZ.
  • Close the Huntly power station one unit at a time, leaving some part of it available for security of supply in an exceptionally dry winter or when another station is down. Replace it with greater energy efficiency and more renewable electricity.

The biggest user is the Huntly power station which burns 44% of the coal used in NZ. About half of it is imported from Indonesia and the rest comes from the Waikato coal fields. It’s an old, inefficient station which runs at about 33% efficiency, which means two thirds of all the energy from the coal heats up the Waikato river or the air above. So it’s a big carbon dioxide producer – more than half of our electricity emissions and around 6% of our total emissions in 2006.

  • Phase out the export of thermal coal first; our markets need to develop renewable electricity too.

The coal we export doesn’t carry a cost for us – the countries who burn it are responsible, just as we are responsible for emissions from the oil we import, rather than Saudi Arabia. So the coal we sell to Japan is in the Japanese inventory and they have to pay for credits to cover it. However India, Chile, China and other countries we sell to are not developed countries and so have no cap on their emissions and no price on carbon.

  • Issue an instruction to the SOE Solid Energy that it is to stop pouring our money into investigating lignite to liquid fuels and instead invest more in its renewable enterprises.
  • Amend the Emissions Trading Bill to ensure that coal seam methane is included in the climate change obligations of coal mining companies. I will be moving an amendment to this effect when the Bill comes back to the House.

[It’s] not just carbon dioxide that results from coal mining. When underground seams are disturbed they give off methane, twenty-one times worse than carbon dioxide in its global warming potential. That methane is counted under the Kyoto system – it is in our inventory and we have to hold credits to balance it at the end of the Kyoto period. But a weird anomaly in our Emissions Trading System is that coal seam methane, or “fugitive emissions? as they are called, are the ONLY greenhouse gas that the Government proposes will NEVER be included in the carbon trading scheme.

And lastly:

  • If carbon capture and storage ever becomes feasible, secure and economic, use it to capture the emissions from our steel and cement plants and larger dairy factories.

Jeanette’s full speech is here.

28 Comments Posted

  1. Rather than close Huntley sooner, I’d suggest adapting one of the four Huntley units to be able to run on biomass – probably charcoal. Huntley runs on less than four units much of the time – particularly when it is constrained by high river temperatures, so one unit running on charcoal could save much more than 25% of the coal it currently uses. Then the other units could be shut down progressively as other renewable generation comes on line.

    Hat tip to Sean Cox who mentioned this option on an earlier thread.

    Trevor.

  2. insider, actually it has rained more than usual in the east of the South Island which is what normally happens in a La Nina with it’s preponderence of nor’easters. Unfortunately the southern hydro lakes catchment is in the Southern Alps which depend on nor’westers to generate significant rainfall. Sou’westers tend to produce snowfall. Bare that in mind if the weather forecast mention heavy rain in the deep south over the next few weeks.

  3. We got moderately close to power cuts earlier this year because most of Huntly was offline and two gas plants were out, oh and there was no wind. We are currently again getting into sticky territory because it hasn’t rained much in the South Island so prices are up and supply is having to be very carefully managed. If we had a bit more thermal, particularly in the the south, it would significantly ease pressure on the system. But no, that is now banned.

    And you are breezily saying we can take down huntly permanently? And replace it with what? More wind that might not be there? You won’t let any river be dammed anywhere ever.

    You are on to a real winner with this polcy guys…

  4. frog

    On the contrary what he was highlighting was the observed (in his day) preference of individuals, who chose to patronise local merchants out of self-interest (trust, relationships, reputation), but which still contributed to the public good. He didn’t advocate for politicians or bureaucrat to decide for us where to spend the products of our labour.

    This was before the modern subsidised transport infrastructure, limited liability, government trade subsidies, international capital markets infrastructure, government underwriting of “development” (development of flood and fire prone areas, utilities, mining, logging) etc etc

  5. SleepyTreeHugger – Yes, Stiglitz is referring to the neocons co-opting of the term to mean what they think it means. Unfortunately that is the meaning in common currency. It’s the conflation of market forces being put on par with divine forces – a very conservative viewpoint, beloved by the far right and used to justify the myth that wealth comes only to the virtuous and poverty to the non-virtuous.

    What Smith was really talking about was that multinationals (like governments in your argument) are inefficient market players. He chided them to take lower profits and keep their production at home so that everyone could benefit from the greater security that such a move afforded. (Not very free trade, eh?) Smith puts security ahead of profits, a heresy for today’s free market economists.

    In his Theory of Moral Sentiments, Smith placed benevolence, (exercise of only those affections that encourage the happiness of others) right alongside prudence, (the judicious pursuit of our private interest) and propriety, (the appropriate control and directing of our affections). The neo-cons ignore the first and the last and only preach the middle virtue in order to promote their agenda.

    The Green Party honours all three of these sentiments and adds a fourth – that the environment on which all life and economy is based is priceless and irreplaceable and should be cherished and protected for the benefit of all of humanity, present and future.

  6. “Governments do? that the less power government has then the less point there is in lobby groups doing any lobbying.”

    My point exactly.

    Social democrats make the mistake of assuming that governments are the sole legitamate representative of the public sphere, despite constantly complaining about its capture by special interest groups, especially if they represent the interests of business. What do they expect?

  7. One could probably say on “Who panders to the desires of big spending business lobbygroups? Governments do” that the less power government has then the less point there is in lobby groups doing any lobbying.

  8. frog,

    In Adam Smith’s day and age it wasn’t a particularly utopian idea.

    Like most commentators on the left, Joseph Stiglizs conflates the neo-cons hijacked interpretation of the “invisible hand” with what Adam Smith actually meant or even said. Have you actually read the passage that talks of the “invisible hand” in its entireity?

    “But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.?[39]
    http://www.onlinejournal.com/artman/publish/article_499.shtml

    In his seminal, Wealth of Nations, he harshly criticised the British East India Company, in some ways a forebear for today’s limited liability multinational corporations for what we now call principal agency problems. A problem, which social democrats, particularly Greens must recognise that government employees are particularly prone to.

    Who facilitates the concentration in the hands of a wealthy few by granting special granting privileges at the expense of everyone else ? Governments do

    Who panders to the desires of big spending business lobbygroups? Governments do

    Who subsidises and socialises the costs of exploitation of the commons by absentee landlords? Governments do

    Precious little to do with the “market” eh?

  9. The price of coal is going to go up a lot. We (the govt) therefore have an asset set to have significant capital gain. Perhaps this argument will appeal to the ‘free-trade’ capitalists at the top. It should at least gain some time. Also, the longer we sit on it, the better as coal burning technology may have improved.

  10. Thanks for that clarification toad. So that is only 480,000 square kilometres of wind generation. Assuming that the Crest Energy/Kaipara Harbour project makes it through the RMA with it’s projected 3% of current demand capacity unscathed I guess we are down to 335,000 square kilometres of wind turbines.

    Should breeze through the RMA process (excuse the pun).

  11. mawgxxxxiv, the Greens are not suggesting that gas fired generation be immediately replaced by renewables – just the 10.9% that is currently coal. And while Jeanette is advocating closing Huntly, this is as more renewables come on-stream, a phased transition, closing it one unit at a time, and keeping it commissioned as an emergency generator in case of a crisis caused by a dry winter.

    Wind isn’t the only renewable option either – there is plenty of potential for small scale hydro, tidal, wave generation as well.

  12. SleepyTreeHugger – to quote the chief economist of the World Bank, Joseph Stiglitz, “there is no such thing as the invisible hand”. You are correct that there is no such thing as a free market economy, and thank god for that! Adam Smith’s capitalism is as utopian an idea as Marx’s communism. We should stay well shod of both of them in my opinion.

  13. jh – thanks for the Saudi link. It’s all over the net. I didn’t blog on it because it’s a subtle technical matter that most people wouldn’t be interested in. In this week’s Peak Oil Review from ASPO-USA, there is an interesting commentary on the Saudi king’s remarks and oil industry responses to it. The amazing thing is that it went so unnoticed in the US press. Must be the election. Or perhaps the subtlety of the discourse. Combined with Norway’s recent comment, one could almost guess that we are getting a version of the oil depletion protocol by default. A longer plateau can only help countries like ours that are totally dependant on foreign oil to get around.

  14. jh

    We don’t have the true free markets that Adam Smith envisioned so it is rather dubious to assert that the “invisble hand” has failed. The world would be a very different place if there were.

  15. toad: that is a very big “if”. Taking the numbers below: 25% of our electricity is generated by burning gas & coal. Is it really realistic to replace that with wind ( currently at 0.9%) without substantial impediment from the RMA ? A quick calculation shows that it would take 1.2 million square kilometres of wind farms to achieve that.

    “Electricity Generation
    In 2004 New Zealand’s electricity generation was 41,554 GWh. 65% of New Zealand’s electricity is produced from hydro with 11% supplied by coal.

    Breakdown of New Zealand electricity production:

    * Hydro 64.8%
    * Gas 15.9%
    * Geothermal 6.2%
    * Coal 10.9%
    * Wind 0.9%
    * Others 1.2% (biogas and wood)

    In the last 10 years electricity generation has grown by 18% – 6310 GWh. The New Zealand Ministry of Economic Development estimates that electricity generation will reach 47,800 GWh by 2015 – growth of 15% from 2004.” http://www.worldcoal.org/pages/content/index.asp?PageID=403

  16. Lets face it the guiding hand has failed us. Adam Smith was correct to observe the ecology of the markets (baker and butcher), but didn’t forsee the even greater picture that at the macro level humans (world economy) behave like bacteria in a petri dish. (IMHO)…. 🙄

  17. Political Parties are like small think tanks coming up with competitive products; o.k for deciding what we have for desert, but not who should get their leg cut off. 😕

    What about cars… ?

  18. StephenR asked: what does “No consents for new mines unless they are to fill a specialist non-energy niche in NZ? mean?

    I think it means things like steel production, where the coal is an inherent part of the production process, rather than just the energy source for the process.

  19. mawgxxxxiv, many renewable energy projects do go ahead under the RMA. Large-scale hydro is the worst form of renewable energy project because it has major environmental impact. If we can get the energy we need from wind, tidal etc (plus reduce our need for ever-increasing energy use through conservation measures), that is far better than damming the last of our wild rivers.

  20. Of course a side effect of this would be to see at least three railway lines close (Wairio, Rapahoe and Rotowaro lines only carry coal), and the whole West coast rail network would become less viable (and if coal disappears from it, the line has no future – it is far too expensive to keep open for one general freight train and one passenger train a day).

  21. What’s interesting is that could actually do this. NZ has plenty of renewable options, so we don’t need to burn coal to keep the lights on. Most production is for export. The industry is almost entirely dominated by the government, which (once you include the environmental costs) effectively makes a loss on it. Phasing out coal and limiting it to domestic industrial use would therefore make no difference at all to the lives of the vast majority of New Zealanders. And for those to whom it will matter – the West Coast – a gradual transition gives plenty of time for them to start doing other things (and we can always pay them again, as we did with Timberlands).

  22. Stephen, In her Ilam speech Jeanette mentioned the production of carbon-fibre and high carbon steel. In essence processes in hich most of carbon in the coal is converted into another solid form rather than being released into the air.

  23. Plastics and other petrochemicals using coal rather than oil as a feedstock? Eventually we’ll have to do this as coal will outlast oil.

    With regard to steel (and maybe cement), I think we could eventually make that industry close to zero emission. A minimill (which recycles scrap steel) runs on electricity, and could be fueled by hydro or wind.

  24. Interesting, what does “No consents for new mines unless they are to fill a specialist non-energy niche in NZ” mean? “non energy niche”??

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