KEY POINTS:
The Government says its ban on the construction of any more fossil fuel-burning power stations over the next 10 years should not cost consumers money.
It has already told the three state-owned generators it expects them not to build any more thermal generation, effectively blocking Genesis Energy's plans for 480MW of gas-fired plant at Rodney.
Climate change legislation tabled yesterday would give that ban the force of law and apply it to privately owned generators, notably Contact Energy, as well.
Contact has resource consents to build another gas-fired plant at Otahuhu, although it has said it intends its next $2 billion of generation investment to be renewables.
The Government's policy is to raise the proportion of New Zealand's electricity generated from renewable sources from 70 per cent now to 90 per cent by 2025.
It says this will not make electricity more expensive than it would otherwise be.
That is because it is also introducing an emissions trading regime that would require large emitters like coal- and gas-fired power stations from 2010 to buy carbon credits to cover their emissions.
It believes there is enough untapped renewable capacity, especially wind farms and geothermal plant, to cope with expected growth in demand and get to the 90 per cent target at costs competitive with gas-fired generation within the range of prices it expects to see in the new carbon market.
At a carbon price of $25 a tonne, for example, retail power prices are estimated to rise by 2c a unit or 10 per cent.
But the Government is unwilling to rely on the market alone to deliver the greener generation it wants.
It is afraid that a combination of factors like a high exchange rate and a low gas price, as could happen if there was a big gas discovery, could mean fossil fuel generation was cheaper even with emissions trading.
This could crowd out renewables and jeopardise public confidence in climate change policy, it says in the legislation's explanatory note.
There are exceptions to the ban on new thermal generation, however.
Plant needed to ensure security of supply in dry years is allowed, as is plant to supply small isolated communities where there is no renewable alternative.
There is also an exemption which Genesis has welcomed as potentially reopening the door to the development of Rodney.
If a new efficient gas-fired plant means old and much less efficient thermal plant, like the coal-fired machines at Huntly, is retired early and the result would be lower emissions overall, that might be allowed. But this would be a complex calculation.
"So I don't think this is a signal the Government wants Rodney to proceed," Energy Minister David Parker said.
"Indeed the explicit signal to the contrary sent to the SOEs is clear and stands."
* WHAT IT MEANS
For individual consumers and all but the largest businesses, the Government's emissions trading regime scheme will feel like a tax.
But the level of the charge is still unknown. It will depend on a developing international market in "carbon" or tradeable rights to emit greenhouse gases.
The Government estimates that at a carbon price of $15 a tonne, petrol will cost 3.7c a litre more (from 2009) and electricity 5 per cent more (from 2010).
At $25 a tonne the increases are 6c a litre and 10 per cent respectively.
* GREENPEACE HAPPY, BUT BIG USERS SAY GAS BAN IS CRAZY
Greenpeace has welcomed the moratorium on fossil-fuelled power stations.
But the Major Electricity Users Group says it is crazy to ban gas-fired generation if it is cheaper, even when its carbon emissions incur a market-based cost.
Other countries are switching to gas from coal in order to reduce their emissions, says executive director Ralph Matthes. He believes the policy is driven by the Government's need to look whiter than white - or greener than green - in the international negotiations that have just begun in Bali.
New Zealand is in a weak position because it is expected to overshoot its target under the Kyoto Protocol by 12 or 13 per cent.
It therefore needs other countries to recognise, in setting a post-Kyoto target, that half of its emissions are from agriculture and the technological options for reducing them are limited.
Hence the need to make gains where they can be made, such as the electricity sector or biofuels.
