A new harbour crossing to supplement the "broken bridge" is seen as NZ's biggest future infrastructure project. Photo / Dean Purcell
Meridian Energy had always planned for the exit of Rio Tinto and the aluminium smelter, according to its chief executive Neal Barclay.
Closing the Tiwai Point aluminium smelter moves the electricity grid closer to being 100 per cent renewable by at least a decade earlier than otherwise expected, says the Meridian chief executive.
An exit by the smelter owner Rio Tinto is not something "we would have chosen but it was probably inevitable sooner or later. Whilst a bitter pill to swallow for employees and the wider Southland community, a smelter exit does create other opportunities that are likely to be of more value to New Zealand in the long run," Barclay said.
"We think the organic increase in energy demand and the electrification of our economy to achieve our zero carbon goals will over time go a long way, if not all the way, to replacing the current consumption of the smelter."
Barclay says the exit does provide New Zealand with a unique opportunity to accelerate the decarbonisation of the economy. It also creates the chance to establish new industries, ideally in Southland, that see long-term value in being powered by renewable energy. "For the electricity sector, it is a disruptive and exciting time."
Meridian, the country's biggest energy company and third largest listed local stock by market capitalisation, offered support to Rio Tinto to extend the exit period to four years past the smelter closing in August next year. Barclay says to date, the offer has not been accepted.
He says considerable progress has been made at the policy level in supporting New Zealand to meet its zero carbon aspirations. The Climate Change Response (Zero Carbon) Amendment Bill was passed, the Climate Change Commission was established, and a package of Emissions Trading Scheme (ETS) reforms are the key policy tools driving emission reductions.
"As a 100 per cent renewable energy generator, we remain focused on helping New Zealand achieve its zero-carbon goals — and for the country to be successful, government and business need to both play their part. The policies are a good start, but we still have a long way to go, and there is most definitely a role for businesses."
Barclay says the industry can and will build the renewable generation and transmission assets required to power growth in electric vehicles on the roads and the electrification of stationary energy uses, ending the country's current dependence on fossil fuels.
"Supply is not the issue. Policy settings need to be targeted at improving incentives for energy users to convert to electric. Whenever central planners try to pick technology winners, they invariably get it wrong, and the ETS would seem like the most sensible way to achieve the outcome. With the right cost signals, businesses and individuals will innovate and invest for the best long-term outcome.
"We need to focus on projects that will help transform our society and economy in the next decade as we reduce our reliance on fossil fuels and transition to clean energy to respond to the climate emergency facing us all. We need to do all this while keeping electricity affordable."
Barclay believes New Zealand is in a good position overall, despite the Covid-19 pandemic. "New Zealand businesses are a resilient bunch looking at how we can adapt and change the way we do business to further help combat climate change and reduce our impact on the planet. Those countries that embrace this challenge will be the most prosperous societies of the future."
Barclay says New Zealand has responded well to the pandemic and businesses are genuinely putting customers first. "As a country, New Zealand is in a fortunate position. And this must make us an attractive and reasonable place for global businesses to relocate key people and maintain their global network with confidence. But we have to find ways, supported by technology, to safely allow more sustainable access through our borders."
Meridian was classified as an essential service and maintained full operational capability during the lockdowns. "We supported customers impacted by Covid by working with them to find payment solutions that suited them and by making sure their power wasn't unfairly disconnected. We also didn't charge any late-payment or credit-reminder fees to customers across our brands in New Zealand and Australia," says Barclay.
"We like most businesses have been very pleased — if not a little surprised — about how effectively we continued to operate through the various Alert Levels. It has opened our eyes to the benefits of allowing staff more flexible working arrangements including the ability to work remotely.
"We continue to 'flexperiment'to ensure we take advantage of new ways of working and don't slip back into the old model."
Top 3 issues facing the nation:
Our ongoing ability to sell products internationally — advocate for open borders.
Our ability to attract talent to meet current and future needs — sell New Zealand as a superb place to live in a chaotic world.
The ease of doing business in New Zealand — streamline regulation and the entities which provide regulatory frameworks.
Top three business priorities for the next six months:
Manage our relationship with key customers — in our case, that largely translates to Tiwai Point in the short term.
Ensure our product can get to market — support Transpower's build of transmission to unlock the South Island renewable resources.
Continue to grow into Australia while managing our cost base effectively.
Spend-up on infrastructure: what the CEOs think
The business leaders were united. Most of the respondents in the Mood of the Boardroom survey — 91 per cent of them — agreed that a focus on infrastructure spend is a useful mechanism to help the economy recover from economic shock. Only 5 per cent disagreed and four per cent were unsure.
What's even more interesting was that 85 per cent of the respondents backed increased user pay charges to help fund infrastructure build; 8 per cent said No to the proposition, and 7 per cent were unsure.
Here's what the business leaders had to say:
"It is generally accepted that infrastructure investment provides stimulus that is beneficial for economic recovery. Perhaps, the bigger debate is the alignment of funding to the social and economic objectives, so that benefits are maximised in the long-term." — Steve Killeen, Downer NZ
"As long as spending is well directed with an understanding of the benefits over cost." — Matthew Cockram, Cooper and Company NZ
"This is our new deal, if we grasp it. Never let a good crisis go to waste." — Sam Stubbs, Simplicity
"Yes of course, but it is not the only answer. Large infrastructure projects take time — shovel-ready versus machine-ready would be more useful in the near term, providing of course that red tape doesn't get in the way." — Don Braid, Mainfreight
"Let's do this — let's get on with it now."
On increasing user pay charges:
"Tolls on motorways worldwide are common as long as there is an alternative route for those who can't/don't want to pay." Real Estate boss
"Why are we different to the rest of the world? Build the roads and toll them." — Transport and logistics boss
"Operating and living in New Zealand is expensive, and wages low. Government can't keep taxing people, so need to find alternative ways to fund infrastructure." — Wine company leader
"Yes, preferably through congestion charging along the Singaporean lines." — Banker
OPINION: Tensions are likely to become more evident next year.