Power Grid

13 Aug 2021

New Zealand’s Energy Emergency

13 Aug 2021  by   

Regardless of the spin Jacinda Ardern’s government is putting on the fact that parts of our North Island cities have been plunged into cold and darkness, with power failures affecting large areas of cities overnight, calls are coming for the resignation of Energy Minister Megan Woods. In the coldest weather we’ve experienced this year, electricity demand is hitting a record high. Predictably, the government is blaming the power companies. However, gas production issues have limited the amount that can be supplied.

Not only is the closing of the Marsden Point oil refinery itself a big concern. The latest report from Energy News is also far from encouraging. We are already aware that the government is importing coal at a record level into New Zealand to cope with the energy crisis. Although it inveighs against the use of fossil fuels to produce energy, Ardern’s government, the largest importer of coal, is applying punitive taxes on industries and products relying upon them. It would be hard to disagree with the word hypocritical to describe its stance — although some might instead opt for incompetent. Perhaps both?

As Steve Rotherham reports, New Zealand’s electricity generation took a big step backwards in this year’s June quarter, with high pricing set to continue. Looking ahead, although Contact Energy is building new baseload generation — baseload power refers to the minimum amount of electric power needed to be supplied to the electrical grid at any given time — and is the only firm doing so, it will not be until available until 2023. Moreover, it will just take the place of Stratford Power Station, looking to switch off gas-fired baseload generation.

As Rotheram points out, more than half of that output came from coal. “In terms of energy security, Methanex and the Tiwai Point aluminium smelter both sold fuel into the market.” (That is, they were paid to switch off parts of their operations, so the energy they would have used was then available to other customers.) “Several large energy users around the country curtailed operations. A system that needs such measures is not really secure.”

Energy News now reports that thermal generation — making power by using fuels such as coal, petroleum, or natural gas to produce electricity — increased by 45 per cent to 2291 GWh, the highest since the September 2013 quarter. 50% of this was coal. Moreover, wholesale spot prices (the price retailers pay when they buy electricity from the wholesale market) in the June quarter were the highest on record. The Interim Climate Change Committee says sustained spot prices above 11.5c/kWh are unaffordable for the New Zealand economy. Last quarter was 27.3c/kWh. The current price is 14.4c/kWh.

Rainfall has had minimal impact on long term prices, even though hydro storage is above average levels for this time of the year. So why is there an energy crisis? And what of our government’s extraordinarily foolish – even questionably subversive decision — to cancel further gas and oil exploration in New Zealand in future? It was described at the time as economic vandalism; a triumph for the eco-fascism of the Left obligingly wedded to the extremist theories of the increasingly challengeable global-warming cultists.

Although the licence allowing drilling off the Taranaki Coast is still current, with the company seeing little future in this country the Austrian oil giant OMV announced some time back that it is indefinitely postponing its remaining oil and gas exploration plans in the Taranaki Basin. NZ Oil and Gas, together with its partner, Beach Energy, has this year also relinquished an oil exploration permit in the Canterbury Basin that was estimated as able to provide this country with $32 billion in royalties and taxes over its lifespan. This covered an area 60 kilometres off the shore of Oamaru, estimated to contain the equivalent of 530 million barrels of oil.

Inevitably, as highly skilled engineers leave this industry, the upkeep of the infrastructure of the gas pipeline is threatened, although 15% of the energy provided to the North Island is piped gas. The Ardern coalition government’s attack on these vital industries contrasts with the ‘Think Big’ projects from the Muldoon era which included the smelter at Tiwai Point and the oil refinery at Marsden Point. While the rationale behind some of these projects may have been questionable at the time, the strategic decisions taken ultimately proved correct, for sound economic reasons.

Before the recent closure of the Marsden Point refinery, with the loss of hundreds of jobs, New Zealand could at least refine its own oil and produce 20 per cent of its required needs, rather than relying totally on overseas shipments. We have no realistic prospects for reversing this decision in the future. The reasons given for the Marsden Point closure include rising electricity costs, minimum wage and extra sick leave legislation, coping with the Covid-19 environment, and escalating infrastructure costs.

As the Marsden Point operation will no longer process crude oil, all of the country’s fuel and petrol supplies will apparently be imported from Asia. Refining NZ Chief executive Naomi James has said there is no reason to believe the move will make the country more vulnerable to fuel insecurity, and that New Zealand can source fuel from a range of refineries in a range of countries.

However, as has been pointed out, if there is a conflict in the South China Sea and the shipping lanes are disrupted, how will we power essential trucking, even, for example, o deliver stock to supermarkets?  We have little reason to respect the feeble response from a spokesperson for the Ministry of Business, Innovation and Employment, that “There is not a strong economic case to hold onshore reserve stocks beyond the current stock level, but there may be other reasons to consider this — for example, the management of international supply chain risks.”

The Ardern coalition is viewed as so obsessive about the non-existent “climate emergency” hysteria that it is willing to put New Zealand at risk. However, many New Zealanders strongly believe that existing strategic manufacturing capability should be retained by our country. This thinking is more under attack now by our government of the Left than by any other in our history, with our industrial infrastructure being internally eroded, little by little.

Energy Minister Megan Woods has little reason to boast about the fact that we will have at least 18 days of supply up our sleeves when we go to a 100% importing model. What if the future does hold shipping disruptions, pipeline problems and panic buying? The consequences will impact all New Zealand.

In 2017 Prime Minister Jacinda Ardern campaigned on the need for an additional pipeline, saying a second shutdown of the Marsden Point fuel pipeline to Auckland Airport, endangering the aviation industry, showed the need for alternative infrastructure, calling it a ”vulnerability”.

All talk and no action? Big on election promises, Jacinda Ardern’s disastrous government has not only been deeply divisive; it has been very poor on delivery. The price for this is being paid now by every one of us, in every area of our daily lives.

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