Keith Turner has been instrumental in persuading the Government that renewable energy is the way forward. Photo / Mark Mitchell
Keith Turner has gone fishing for a month in Fiordland. He stepped down this week after nine years as Meridian Energy's chief executive.
As he took a break from packing up to talk to the Weekend Herald, still to be seen on the walls of his office were framed copies of the dividend cheques he has sent the Government - more than $2 billion in all.
Whether he took them with him as trophies or left them as a challenge for his yet-to-be-appointed successor, Turner will be a hard act to follow.
One of those dividend cheques, from two years ago, was fattened by the $600 million profit on Meridian's foray into Australia, nearly double the initial investment.
Turner wryly notes the contrast with a string of public companies which crossed the ditch and got burned - Air New Zealand, Telecom, the Warehouse.
He is entitled to a little crowing. The acquisition of Southern Hydro had been controversial. Self-aggrandising empire-building with public money, people said.
And the process of adding value to what were, Turner admits, pretty scruffy assets took time and repeated bites out of Meridian's bottom line.
But he never had any doubts about the strategy. "Australia's power generation is extremely carbon-intensive. Mitigating its cost of carbon is a high priority so renewable energy over there is going to be highly valued."
Meridian is still backing that view, by way of a joint venture with AGL to build a 450MW wind farm in Australia.
Turner is a passionate advocate of renewables and on his watch has resisted any temptation to diversify into thermal generation.
Instead he has been influential in persuading the Government that greater reliance on renewables is not only desirable, but achievable.
This has not endeared him to those at the sooty and gassy end of the energy industry. He dismisses as "frivolous" gas industry claims that the Government's target of 90 per cent of generation from renewables by 2025 will raise real power prices 50 per cent.
"Gas prices have nearly tripled over the past five years. I don't think there is any justification for the prices they have extracted. They have driven up the cost of thermal generation dramatically, to the point where it is actually very economic to invest in wind and geothermal and hydro.
"The country has got a huge portfolio of renewable projects which will not force up prices like gas prices have in the past five years. In my view renewable projects will flatten off the rise in electricity prices."
Turner worked as a planning engineer back in the days of the New Zealand Electricity Department on an almost pure renewables future.
"It is just a matter of having enough generation investment to ensure you have enough energy margin in the system. When you look at the amount of generation being consented right now, there's more than enough to meet our energy needs. No doubt whatsoever about that. And we can keep doing that for probably 20 years in my view."
There is an excellent synergy, Turner argues, between wind power and the kind of hydro plant New Zealand already has, which has high capacity relative to its average flow. "That means you have a lot of spare capacity to manage the variability of wind. It is back-up that is available for free."
Where the concern about security of supply is not misplaced, he said, was in relation to investment in the national grid.
"Anyone coming to New Zealand as an investor and looking at the security of delivery can see straight away our grid is running at close to capacity and we are pretty slow to get new investment into the grid," he said.
"The grid investment now in the pipeline is 15 years too late, in my view. There was a philosophy in the 1990s that distributed generation [small-scale generation close to load] was going to appear. It hasn't and meanwhile demand has kicked on strongly. That philosophy of 'glide path' asset management has proven fatally wrong." Over the medium to long term renewables will represent an increasingly valuable hedge against the cost of "carbon" (rights to emit greenhouse gases as it becomes rationed) as concerns about climate change grow.
"While we are fiddling around trying to get the cost of carbon into the economy so are other countries. Eventually we will have a global carbon market just as we now have a global oil market - it didn't happen overnight either. And New Zealand will look incredibly well placed with a strong renewable supply," he said.
Though Meridian has prospered under the market model, Turner is ambivalent about whether it is better than centralised command.
He cites work by economist Paul Joscow at the Massachussetts Institute of Technology. "He concluded that if you are going to have a competitive market, you have to spend more on transmission. Is that additional cost offset by the benefits of competition? Professor Joscow hasn't been able to answer that. I'm not going to either," he said.
"Competition does stimulate all sorts of innovation. We are rolling out smart meters and we are really focused on giving consumers services that I'm not sure would have occurred under a central command model."
But nine years after the radical restructuring of the sector was completed, the real benefits of markets were only starting to appear, he said.
"I liken it to the break-up of AT&T [the former US telecommunications monopoly]. That occurred in 1978 but the innovation and the transformation of communications didn't start occurring until the 1990s."
Turner is not nostalgic for the NZED. Corporatisation in 1987, which turned it into a commercially motivated Electricity Corporation, came just in time.
"I was about to eject myself from the public service. I found it extraordinarily frustrating," he recalls.
"I kept poking my head up and making decisions - and getting it chopped off."
By contrast, creating a business from scratch out of a portfolio of generation assets has been enormously satisfying.
It has involved engendering a corporate culture - they call it the Meridian Way - where bright ideas are applauded and mistakes are allowed, just not the same mistake.
"I have loved coming to work," Turner said. "I've never felt it was stressful. It wasn't quite as good as fishing. But nearly."
KEITH TURNER
Departing Meridian Energy chief executive
* Born: 57 years ago
* Married with three sons and a daughter
* Home town: Rotorua
* Educated: Canterbury University BE (Hons) ME PhD
* Accomplishments: Has built a boat and a house. He sold the boat but still lives in the house
* Career: 28 years in the New Zealand electricity industry, first at NZED (becoming its head planning engineer) then ECNZ
* After a stint as poacher-turned-gamekeeper on the new electricity market's surveillance panel he became chief executive of Meridian Energy in 1999 when it was formed out of the split up of ECNZ
* Hobbies: Gardening and fishing
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