Brian Fallow: Coal's turn in the spotlight

COMMENT

These days, no one is responsible for ensuring the lights stay on.

But if someone did have that job, it would be hanging by a thread.

Meridian Energy's decision to pull the plug on Project Aqua was accepted by its shareholding ministers, Michael Cullen and Mark Burton, as a commercial decision which the state-owned enterprise's directors had every right to make.

Because of the uncertainties and risks, the mounting delays and rising costs involved, the directors can easily argue it was the commercially prudent course of action.

Likewise, the board of another state-owned generator, Genesis Power, can easily justify not having yet committed to a large, efficient gas-fired power station at Huntly.

Because the Maui field is running out earlier than expected, Genesis does not have enough gas lined up.

The problem is that these two projects - one cancelled, the other up in the air - were to have added enough electricity to the system to meet about six years' worth of growth in demand.

We are left with a hand-to-mouth outlook for electricity supply, more than ever threatened by the risk of a dry year to keep hydro lakes low as it did in two of the past three years.

What we have is a cocktail of Government policies. Each ingredient on its own may be defensible, even wise, but together they are perilous.

One is the move from central planning to a market model for electricity under the previous Government, which gives investment decisions to the boards of commercial enterprises, whether owned by investors or taxpayers.

Another is the Resource Management Act. Government moves to change the rules in the Waitaki River case would only have added years to the process.

Then there is uncertainty about the proposed tax on the carbon content of fossil fuels, adding a big unknown factor to the cost of gas-fired and coal-fired power stations.

We have the energy equivalent of 30 Maui gas fields in the lignite deposits of Southland. Maybe it's time to get serious about developing that resource.