Editorial: Wake up to reality, for Pete's sake

Energy minister Pete Hodgson has long adopted a schoolmasterly sangfroid when confronted with the country's power woes. Two electricity supply shortages in the past three years have given him plenty of practice. Perhaps it was only natural, therefore, that he would offer a reprise when faced with the cancellation of Meridian Energy's Project Aqua hydro scheme. "New Zealanders should not be worried that the country might run out of electricity, although the price of electricity might well be higher," he said. Unfortunately, the facts do not support Mr Hodgson's equanimity. As before, he is guilty of an alarming disregard for the realities of the power outlook.

Mr Hodgson has been wont to describe the search for alternative energy supplies to replace the cheap but soon-to-be-exhausted Maui gas as a challenge, not a crisis. Yet even he must be rethinking that, given the loss of Project Aqua and Genesis Power's unwillingness to commit to a gas-fired power station at Huntly. Together, these were to be key electricity sources of the future.

Both are victims of an uncertain investment climate. There are three major problems: whether gas will be found to replace Maui and the smaller Kupe and Pohokura fields; the unknowns associated with the Kyoto Protocol, particularly the imposition of a carbon tax; and the hurdles that are part and parcel of the Resource Management Act. In this environment, Meridian and Genesis cannot be faulted for making sound commercial decisions. Project Aqua fell foul of the costly and time-consuming environmental consents process. Genesis is keeping its options open because of concerns over gas supply and the resource consents needed for the Kupe field.

In sum, investment in new generation capacity has almost stalled. This is ironic because New Zealand possesses alternative energy sources, most notably Southland's seven billion tonnes of lignite. That coal is a resource equivalent to 30 Maui gasfields and could meet electricity needs for the foreseeable future. It could be delivered from a large coal-fired power station through an upgraded national grid. Such stations, however, are responsible for high levels of "greenhouse" gas emissions. That puts them at odds with the Kyoto Protocol which New Zealand has - prematurely - ratified.

New generation projects will become commercially feasible only if the Government removes as many unknowns as possible from today's environment. Obviously, it cannot guarantee the discovery of a major gasfield, although a more friendly exploration regime would help.

It can, however, make the implications of the Kyoto Protocol far clearer. Although the international treaty may not survive, the Government could confirm its intent by spelling out the details of a carbon tax. Alternatively, it could take the view that, even with a large new coal-fired station, New Zealand would still be well in credit in terms of greenhouse gas emissions thanks to its forest sinks. It could, therefore, justify postponing a carbon tax until a date well down the road. Finally, the Government must subject the Resource Management Act to major surgery so that projects, big and small, are no longer endlessly delayed by the objections of a few.

Bringing more certainty to the investment environment is not the only option, it is the best. The alternatives are unpalatable or impractical. It is not desirable for the Government to start directing state-owned enterprises, or to set up a new generator to build a coal-fired power station. Nor is Mr Hodgson's vision of a collection of small projects coming on stream ever going to suffice. Nor will the likes of wind or geothermal power ever offer a complete solution. The answer lies in sweeping clear the obstacles to commercial investment. And doing it quickly. Ministerial sanguineness is no answer when everything points to a looming crisis.