Red tape and Green myths make the problems worse

By MALCOLM McPHEE*

Electricity is dangerous stuff, especially when its price and supply are causing trouble and politicians are added to the mix.

The market is small - just 4 million widely scattered people, many well away from the sources of cheapest supply. You have either to shift the raw material to generate the power to the markets (gas, coal or oil) or shift the power to the markets (especially water-generated power).

When you have broken the supply side into competing bits like we have now, they are not going to compete from really level playing fields. Plant cost aside, when there is a lot of water for hydro generation these plants can outsell those with more costly fuel, like gas or coal. When there's not much water, the gas and coal generators don't have to worry about the hydro competition.

Certainly, each of the five main generating companies - Contact, Genesis, Meridian, Mighty River and TrustPower - has a mix of "raw materials" but the mixes are not all the same. And their geographic spreads are different.

The result is that it is not easy for a generator-supplier to balance outputs among sources when circumstances change, as with a widespread dry spell.

Despite its manmade lakes, New Zealand's hydroelectricity supply, unlike that of many countries, is hugely dependent on run-of-the-river water flows. The only alternative is more and/or bigger manmade lakes.

Its monopoly problems aside, the national generator Electricorp cum ECNZ that we once had did allow integration that could make it easier to balance generating sources.

It is a big call on the working capital of one smaller company with a chunk of coal station capacity to hold a big stock of coal to cover the likelihood of having to step in when water flows elsewhere in other companies are low.

There is no substitute for electricity in a modern economy - and a growing, job-rich smart one that most politicians say they want us to be.

There are alternative generating sources to water, coal and gas, of course.

But just as the rain doesn't fall where and when you want it, the sun doesn't shine on solar panels every day and the wind doesn't always blow where you can catch it. And those are far from significant sources.

Thanks to the well-intentioned and often-nonsensical Resource Management Act, building dams and bigger lakes for power generation - and irrigation and town supply - is no longer straightforward.

It is not the only roadblock. Now we have the Government's Kyoto pledge in the path of gas and coal use.

We've lots of coal - by one reckoning 600 years' worth - and despite the damning of coal by the Greens, coal combustion technology has vastly improved in efficiency and cleanliness.

Climate is forever changing and it has more correlation with the sunspot radiation activity of our weather engine, the sun, than anything much else. Assertions - for some folk virtually religious belief - of manmade climate-change catastrophe remain just that: assertions, as plenty of sane but too-much-ignored scientific discussion makes clear.

Around two-thirds of New Zealand's electricity comes from hydro stations, about 22 per cent from gas stations, under 7 per cent from geothermal and the rest - about 5 per cent - from coal, wind-farms and landfill gas.

More than two-thirds of hydro-power (approximately 45 per cent of total national electricity supply) comes from the South Islandand all the geothermal and natural gas electricity is gen-erated in the North Island.

Most of the major easy (and cheap) hydro station sites have been used. Certainly, it is hard to think of any significant options close to major populations that would give shorter, cheaper transmission lines and lower "line losses" (the longer a transmission line, the more electricity it loses).

Let's not forget the risk to security of supply - over-dependence on one-line routes. For instance, Greater Auckland's security would be improved if there were a substantial regional ring line to reduce dependency on the Harbour Bridge crossing; a major generating plant north of the bridge would help too.

The risk that the Maui gasfield would be bigger or smaller than first estimated has always been there. Its vast size has probably been the biggest encouragement for Governments to be slack about spurring oil and gas exploration and development, onshore and off.

The continental shelf within New Zealand's economic zone is about 20 times the size of its land area. There are eight sedimentary basins with known or potential hydrocarbons, largely untouched. Why?

We have an electricity market - of sorts - sending price signals for supply to match demand.

If electricity were apples at the supermarket, the supply would be increased pretty quickly either at that shop or elsewhere to meet demand.

The apple producer doesn't have the same sort of Resource Management barrier on the land he can use.

What is the use of price signals if the ability to respond by increasing supply is muffled close to suppression?

On the demand side, price signals can have precious little effect on those who use electricity for lighting or computers.

The birds of past decisions - and indecision - are coming home to roost.

* Malcolm McPhee is a former Business Editor of the Herald