Jobs lost in rush to renewables
The proposed Onslow pumped hydro scheme shows how political slogans and the quest for silver bullets can obstruct sensible energy and climate policy. In 2019, the Interim Climate Change Committee recommended the Government investigate pumped hydro as a long-term option to reduce dry-year risk in power generation. It didn’t say bet the economy on it.
The committee believed the optimal solution would emerge from a mix of new generation investment, pumped hydro, batteries, and other evolving technologies.
It also advised against the Government’s 2035 target for 100 per cent renewable electricity generation. Existing policies and evolving technologies would get us to more than 90 per cent and aggressive pursuit of 100 per cent renewables risked raising energy costs and delaying electrification of transport and industry.
Two years later, low lake levels and tight gas supplies have driven wholesale power prices through the roof. Major industries have cut production, jobs have been lost, and we are burning imported coal at Huntly like there is no tomorrow.
You could be forgiven for thinking this is the first time since winter 2008 that we have faced low hydro lakes.
In fact, the lakes were far lower half a dozen times during the past decade. Most dry spells were short-lived and unnoticed by the public because – until the Pohokura field sputtered in 2018 – we had the energy flexibility and security that ample gas supply provided.
Dry weather is not the Government’s fault. Nor is it the Government’s fault production from Pohokura, the country’s largest gas field, fell sharply the past two years.
But the current crisis highlights the folly of the offshore exploration ban declared in April 2018 and the Government’s demonisation of gas ever since.
Just one month earlier, in March 2018, gas producer OMV had warned the Government and the wider energy sector that the country wasn’t spending enough on exploration and development of its ageing fields to be confident of future gas supplies.
No-one expected that risk to be realised so soon.
But the current pain is a timely reminder of the earlier warnings from national grid operator Transpower, the Productivity Commission, the Interim Climate Change Committee, the Climate Change Commission, and now the Infrastructure Commission.
The Government ignored advice that extra solar, wind and geothermal investment could get the country to 95 per cent-plus renewables – without making electricity ruinously expensive – so long as we kept enough gas available for back-up.
Instead, in the 2020 election lead-up, it brought the 100 per cent renewable electricity deadline forward to 2030.
In a secret Cabinet process that avoided the scrutiny applied to other ‘‘shovel-ready’’ postCovid projects, Onslow was presented as ‘‘the answer’’ and a job creator. Construction was to start in 2023.
The climate policy chickens are now really settling in. Emissions are up, power prices are up and firms including NZ Steel, Norske Skog and NZ Aluminium Smelters have cut production. Jobs have gone at Methanex and at the Whakatane Mill.
As the Infrastructure Commission noted this month, repeating the message of the Climate Change Commission, the country must pursue its climate change targets while still ensuring sufficient gas to meet the residual needs of heavy industry out to 2050 and declining demand from electricity generators.
‘‘Inadequate backup generation could undermine investment in our industries, potentially drive out key industrial energy users, and increase imports from higheremission producers overseas,’’ the Infrastructure Commission said. ‘‘It also has the potential to increase electricity costs or keep them higher than they need to be.’’
Onslow – or some other pumped hydro option – probably can be built. The question is whether and when it might be needed.
Why rush to write a $4 billion cheque to deal with the last 5 per cent of power generation coming from coal or gas, from a sector that only accounts for 5 per cent of the country’s emissions anyway?
Nor are we short of crumbling schools, hospitals and water pipes that need fixing. There’s also $90b-odd of Covid-related debt that needs repaying.
New wind farms and geothermal power stations are being built and the first of five gridscale solar farms could be operating next year.
But the pace must pick up rapidly to lower generation costs and push our remaining gasfired power stations into their logical back-up role.
The last thing we need is a Government getting in the way and putting at risk the very industries we need to be leading decarbonisation efforts in the broader economy.