John Noble: No planning so we're left in the dark

There is a classic Roman fable in which the various parts of the human body argue about which is the most important. The argument becomes heated; the stomach says it's hungry; in a fit of pique the hands refuse to pick up any food, and so on until the body dies.

Our electricity supply system is in a similar situation. If our body is to operate viably, its parts have to work out what needs to be done (get regular meals, for example) and co-operate to do it. It is the same with an electricity system.

The system operates on the basis that each part of it - the generators, lines companies and retailers - each know best what is best for itself, and that the combination of these individual bests will produce the best overall result for the nation. Of course, it is not true.

To be confident that we have an adequate supply system, we need to know, first, how fast electricity consumption is growing in different parts of the country. Then we need to work out the most appropriate combination of the available energy resources (including increasing usage efficiency), the practical ways of harnessing these resources and of supplying what is needed where its needed.

It is this combination that is important. Having the most technically advanced and efficient power station is pointless if its advantage is wasted by transmission losses. Having the most technically advanced transmission system is no use if it does not take power from the generators to where it is needed.

In the past we had power planners to do this. Political interference apart, they did it fairly well. They gave us, for example, low-cost electricity from hydro stations, the direct-current link that transmitted it to the North Island where it was needed, and the development of an efficient mixed hydro and thermal generation system.

But they were accused of building power stations for the sake of building power stations, and fell out of favour. It is true that the planning was not perfect, but in many cases the errors resulted from political interference. Clyde is a prime example.

Market forces, it was thought, would do a better job. So since the mid-1980s there has been no formal power planning. The result has been a dangerous reduction in supply security as generation and transmission capacity margins have dwindled and, at the same time, prices have soared - exactly the opposite of the advertised intention.

Hence the politically motivated panic 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.

Similarly, the new 400MW CCGT station - to be built because of a Government gas guarantee - is driven by panic. It should be at Otahuhu where the demand is, not at Huntly.

If the proper sites had been chosen, they would have gone a long way towards solving the problems of transmission into Auckland. We have done away with power planning, but the price we have paid is less security and more political interference.

Over the past year or so several industry leaders have warned of the risk of power shortages and high prices. Many, often conflicting, suggestions for new generation and efficiency improvements have been floated.

Because "long-term planning" is a dirty word, no one knows which of these options could give us the best combination of security, reliability and cost in the long term. This is not good enough.

There is no doubt that our transmission system is in a parlous condition. The latest system security forecast by Transpower shows that nearly all our major transmission lines are at risk during peak demand periods. Twenty years of neglect is coming home to roost, and with a vengeance.

Long-term planning would have upgraded our 220kV system years ago at a modest cost. We have lost this option because it is no longer possible to take a line out of service for a major upgrade.

With the low-cost, low-impact options lost, Transpower has decided to build a 400kV transmission system that will cost more than $2 billion over the next 10 years or so. But what is the use of that if nobody knows where the new generation will be?

We could push through the 400kV upgrade at maximum speed, which could influence market forces about where they locate new generation - a clear case of the tail wagging the dog. Or, we could investigate a range of generation and transmission scenarios to see which ones are likely to give us the most secure and reliable, lowest-cost power supply.

These studies would expose the options we have in terms of where the best opportunities for development lie, the appropriate associated transmission investments, the possibility of avoiding investment by efficiency increases, and the financial, environmental and societal costs and benefits of the various proposals.

The Government should instruct the Electricity Commission to carry out long-term studies to identify the best generation, transmission and efficiency options and their wider implications. These studies would be used to benchmark any proposed new developments and to ensure we build a power supply system that will serve the long-term interests of the country and, importantly, avoid any panic reaction to shortages or disruptions that could have been avoided.

This cannot be done at the moment. The commission is limited by the Government policy statement, which stops it from doing this sort of analysis. All it can do is comment on the adequacy of the system and plan the implementation of emergency measures if there is a problem.

Even then, it is precluded from initiating conservation programmes - the cheapest, most painless and most efficient way of reducing consumption if a shortage looms - except as a last resort. Why? Because that might panic voters.

Another example of planning by political interference.

* John Noble is an energy industry consultant.