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Bryan Leyland

Energy Strategy – expensive, misleading and futile

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The recently released draft New Zealand Energy Strategy is dominated by the government’s conviction that climate change (more properly described as man-made global warming) is happening and that renewable energy will save New Zealand from climate driven disaster.

The National Energy Strategy fails to recognize that meeting our legitimate needs for energy is important; minimizing damage to our economy is important; and, most of all, it is important that we know exactly what it might be costing us to meet the government’s obsession with renewables. As it is, the Strategy is an expensive, misleadingand futile exercise.

The Strategy ignores the uncertainties in the evidence claimed to support the belief that manmade global warming is real and dangerous. It ignores the fact that the world has cooled since 1998 and recent evidence that solar emissions related to the sunspot cycle and cosmic rays drive our climate. This theory explains climate change in the past and predicts that the climate will continue to cool until 2030.One proven effect of the increased CO2 in the last century is that it has enhanced plant growth by about 15%. To an agricultural nation like New Zealand, this significant economic benefit is totally ignored.

In reality, the Strategy is all about climate change and nothing about the energy strategy that we need toto ensure that New Zealand has a reliable and economic supply of energy. We can easily get this from our huge reserves of coal and hydropower or from or nuclear power.

The Energy Strategy includes a chart purporting to show that wind power costs about 7 c/kWh. The recurring theme through the Energy Strategy is that wind power is the lowest-cost generation available to us.Yet a recent detailed study by the Electricity Commission shows that the real cost is in excess of 11 c/kWh and that a carbon tax of $45 per tonne would be needed to make it competitive with conventional generation. Such a tax of $45 per tonne would increase the cost of electricity to consumers by something like $1.8 billion per year – $450 for every man, woman and child in the country!

The predicted increase in wind generation of 5000 MW by 2030 is huge. Laid out in a line the wind turbines would stretch for 700 kilometres, almost from Auckland to Wellington. Lots of new transmission lines would also be needed. Most of these windfarms will need to be in the North Island. 4000 MW or so of thermal backup plant will be needed to provide power when the wind doesn’t blow – about 20% of the time. These will need to be running and ready to generate if the wind drops suddenly. It will be the consumers, not the developers of the wind farms, who will pay the costs of transmission and the backup.

Meridian Energy is allowed to sell carbon credits from its Te Apiti wind farm because they have convinced an auditor that it was expensive compared to conventional power generation. Since it was built, there has been a massive increase in the cost of wind turbines so the more recent stations willbe even less economic. One can only conclude that Meridian and the governmenthave known for several years that wind power was expensive compared to other forms of generation. Therefore they knew that statements and the chart in the Energy Strategy showing that wind is the lowest cost generation were wrong. The Strategy also suppresses the fact that conventional generation could provide all our electricity needs with greater reliability and a much lower cost. There would be an uproar if the public were misled like this in a prospectus for a new share float. Is there one rule for private companies and another for the government?

The Strategy assumes an unrealistically low load growth for electricity and projects that only 1200 MW of new coal and gas fired stations will be needed by 2030. It ignores the need to replace at least 3000 MW of existing thermal stations. If, as it predicts, the installed capacity of wind and wave power increases from 200 MW to 6000 MW (20% more than all our hydro stations) we will need as much as 3000 MW of thermal power stations to backup this unpredictable supply.In total 6000 – 8000MW of new fossil fuel, hydro or nuclear plant will be needed. Not a word on where it will be, what it will it burn and how much will it cost.

Nuclear power has hit the headlines over last few days because, quite logically, George Bush, John Howard and many other world leaders have concluded that if man-made global warming is a real problem, nuclear power is the only large scale technology that can make a large reduction in carbon dioxide emissions at a low cost.

17% of the world’s electricity is generated by nuclear power stations. In terms of deaths per unit of electricity generated themortality rate associated with nuclear power is well below that of coal or hydropower stations. Much is made of the problems in disposing of nuclear waste while, at the same time ignoring the far greater problems of disposal of huge quantities of ash and other pollutants from coal fired power stations and the huge risk associated with dam failures at large aging hydropower dams that have filled up with silt. Listening to talkback radio, it seems that many New Zealanders agree that nuclear power should be among the options we consider for future power supply. But Helen Clark and her government have decided that New Zealand should not even consider the possibility that nuclear power is a better option than expensive and intermittent renewable energy. This, to me, defies common sense and is strongly against the best interests of this country.

We have enough coal to provide us with low-cost electricity for more than 200 years. Not a word about this in the Energy Strategy.We could develop more than 1000 MW of hydropower generation at a low-cost and with minimal environmental impact. Hardlya word about this in the Energy Strategy.

The Strategy also makes much of biofuels even though all the evidence points to the fact that growing crops to make biofuels is bad for the environment, can increase air pollution from motor vehicles, deprives people of much needed food and in most cases, does nothing to reduce carbon emissions. The only beneficiaries are those that grow rich on the billions of dollars in subsidies paid for biofuel production. As Fred Pearce wrote in the New Scientist (23/9/06) Biofuels will trash rainforest, suck water reserves dry, kill off species and, worst of all barely slow down global warming.

There appears to be a lot of support for carbon trading – or cap and trade. But most of it comes from those that expect to benefit financially or politically from it. When I first heard about carbon trading at a conference 10 years ago I got up and said If I was the financial adviser to the Mafia, I would recommend that they get into carbon trading.

When you buy electricity on the spot market, you know exactly what you are getting – electrical energy – and you know exactly how much you are getting because the accuracy of measurement is better than 0.5%. When you buy carbon credits you arebuying something that has no real substance and cannot perform any useful purpose. In fact, what you are buying is a piece of paper which has more in common with the Papal indulgences that were sold in the Middle Ages than with almost anything else. In most cases, the purchase of carbon credits is not associated with a real reduction in carbon emissions. The whole process is wide open to fraud and corruption because the measuring errors are huge – especially if you are buying carbon credits arising from plant growth – and also because both the buyer and the seller benefit if they bribe the auditor to exaggerate the amount that is being bought and sold. There is ample evidence of millions and millions of dollars worth of fraudulent transactions already.

Even if man-made carbon dioxide does cause dangerous global warming, all the effort, expenditure and economic damage that will be visited onNew Zealandby the Energy Strategy will make hardly any difference to our carbon dioxide emissions, will possibly increase world-wide emissions and, most certainly, will have no effect on our climate.

For all these reasons, New Zealand would be better off without a strategy than it would be with the one outlined in “Powering Our Future”. Support for it comes mostly from those who believe that economic development is incompatible with the environment, or see it as a way of making profits from carbon trading or, like Al Gore and his Generation Investment Management company push heavily subsidized renewable energy projects because, without subsidies their projects would bite the dust. Many academics see it as a bottomless source of research money and an excellent way of getting recognition, promotion and income.The government sees it as a way of reaping windfall profits from Meridian, Genesis and Mighty River Power,gaining votes and exerting more control over the economy and our lives.

No-one shows any concern for domestic and industrial consumers who will pay more and more for an increasingly unreliable power supply. It is about time that someone did just that.