John Blakeley: Blind faith in market-driven power leads us astray

John Blakeley

John Noble, in his Perspectives article, said a politically motivated panic following the 2003 winter electricity shortage led to the decision to build a dry-year reserve power station at Whirinaki, when, if it were needed at all, it should have been at Marsden Pt.

He also said that the 400MW combined-cycle gas turbine station now to be built at Huntly should be at Otahuhu, where the demand is.

He then concluded that no one was in overall charge of the electricity generation, transmission and consumption situation to help ensure that new power stations were located to provide optimum solutions to the country's electricity requirements.

Where we are now is the result of a blind faith that the "market" must determine when and where power stations will be built. The problem is that we have a very imperfect electricity market which does not take all factors fully into account.

We have seen protesters on the roof of the never-used Marsden B power station, supported by many local people on the ground demonstrating against the resource consent application to convert that station to burn coal. If the Whirinaki reserve power station had been built at Marsden Pt, could the need to bring Marsden B into operation have been avoided?

We have also witnessed demonstrations by farmers in both Matamata and Tirau against the proposal by Transpower to build a new 400kV transmission line from Whakamaru to Otahuhu.

If the 400MW power station were built at Otahuhu instead of Huntly, would the immediate need for this transmission line have been averted?

Nearly four years ago, three similar proposals for gas-fired power stations were being developed more or less simultaneously for sites at Otahuhu, Stratford and Huntly. Clearly there was not sufficient growth in demand at the time for all three proposals to proceed, and there would not have been sufficient gas available for them all.

In the event, all three projects received resource consent approval to proceed, but for a while none of them did so because the downward re-evaluation of the remaining reserves in the Maui field caused uncertainty over future gas supplies.

Eventually, the new power station at Huntly proceeded, but only after the Government agreed to underwrite the risk of insufficient gas being available.

Some people claimed this action distorted the electricity market by favouring a particular generating company, which happened to be a state-owned enterprise.

The question, inferred by Noble's article, which now needs to be asked is: If instead of favouring the Huntly proposal the Government had underwritten the risk of insufficient gas for the Otahuhu proposal instead, could the need for the new 400kV transmission line have been averted for a few years at least?

Also, should future new generating capacity be located much closer to the centres of electricity demand to minimise transmission losses and help avoid the need for very expensive upgrades to the transmission system?

It is probably too late to reverse the decision to build the power station at Huntly, but the Government needs to be quick to introduce policies that will ensure power stations are built in the right locations to cover demand growth and avoid unnecessary major investments in transmission line capacity.

* John Blakeley, the convenor of the Sustainable Energy Forum, is a research fellow at Unitec.