Generators welcome climate policy

Keith Turner

Electricity generators have welcomed the prospect of a more politically durable environment on climate change policy in which they can make investment decisions.

Both the Government and the National Party yesterday signalled support for a domestic emissions trading system and indicated that the electricity sector would be the first to which it would be applied.

Meridian Energy chief executive Keith Turner said climate change policy which could be changed within three years would be ignored by electricity industry investors who had to invest in assets with 50-year lives.

"We really need policy with broad [political] support."

Mighty River Power chief executive Doug Heffernan said: "For the perspective of an investor in electricity generation, the really important thing is to have more of a convergence of policy across the political spectrum."

And he believed a market mechanism like emissions trading was likely to be more enduring and make it easier to integrate climate change policy and an energy strategy.

As far as the Kyoto Protocol's first commitment period, 2008 to 2012, the die was already cast in terms of electricity investment and the vast majority of what was in the pipeline was renewables anyway, he said. But the prospect of a cap-and-trade system would affect decisions beyond that period.

The possibility of a carbon tax for thermal generators and large industrial emitters, had left the table late last year when the Government scrapped plans for a broad carbon tax.

Genesis Energy chief executive Murray Jackson welcomed the fact that it now appeared to be out of the picture, but awaits more details on how the trading regime would work.

Climate Change Minister David Parker indicated there would be more information in the New Zealand Energy Strategy due out in draft form in about a month.

Jackson said an incentive to invest in wind generation was needed, but he doubted that any more than half of the likely growth in demand over the next 15 years could be met from renewable sources.

Although emissions from the electricity sector account for less than 10 per cent of national emissions they have been rising sharply and have doubled since the early 1990s.

National's climate change spokesman Nick Smith said National would grandfather existing emissions but any increase from new or existing power stations would need to be offset by buying tradeable permits earned either for certified emissions reductions elsewhere in the economy or by establishing permanent forests to store carbon taken from the atmosphere.

"The generators are crying out for some certainty about the policy instrument that will be use so they can evaluate investments. We start with them because their emissions are growing fast. There are reasonable economic alternatives and it is administratively quite practical to introduce a tradeable permits system because there are only five operators."