Post-Covid power sector spending plans 'tone deaf'

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The country's energy industry is "tone-deaf" if its response to Covid-19 and the loss of the Tiwai Point aluminium smelter is to consider building new capacity when many households can't afford their electricity now, First Gas chief executive Paul Goodeve says.

The industry had known for years of the challenge many consumers faced paying their bills, yet recent industry decisions showed no recognition of that, he told delegates at the industry's Downstream Summit in Wellington.

The Electricity Authority's recent decision on transmission pricing looked likely to increase costs for some of the country's worst-off regions, like the Far North, he said.

National grid operator Transpower is planning to accelerate a $100 million of upgrade of the South Island grid to help move surplus power north in the wake of the smelter closure next year.

Dry-year cover

The government has also proposed spending up to $100m investigating pumped-hydro options to help cover dry-year generation risk as part of its 100 per cent renewable electricity target. A large chunk of that funding will test the business case for a potential $4 billion pumped hydro station at Lake Onslow in Central Otago.

"We've seen a response to Tiwai Point which is premised on building more assets – more assets which will have to be paid for by New Zealanders who can't afford to pay for it anyway," Goodeve said.

"Is that investment premised on reducing the cost of energy to New Zealanders or protecting generation assets in the deep south?"

Goodeve was speaking on a panel of chief executives looking at the industry's role in helping meet the country's transition from Covid-19 and its longer-term transition to a net-zero carbon economy by 2050.

Electric Kiwi chief executive Luke Blincoe told delegates that consumers' ability to pay is only going to become more critical.

The number of customers now struggling to pay bills is increasing and that will only get worse as government stimulus measures roll-off, he said.

"The Covid-hangover is still coming."

Blincoe said many in the industry still focus more on their assets rather than their customers. And while energy efficiency and home insulation improvements are all worthwhile initiatives, they are also long-term in nature, he said.

"What consumers really need is cheaper energy and what they need is an industry structure that delivers that."

Meet demand for low-carbon energy

A recurring theme in the conference is how energy providers can meet the increasing demand from consumers for low-carbon energy, without making that change overly expensive for them.

Genesis Energy chief executive Marc England said the common over-emphasis on the government's 100 per cent renewable electricity target, rather than the greater benefit available from decarbonising the broader economy, is frustrating.

He also noted that in the past year there has been no policy or frameworks developed to help drive that wider change through things like greater take-up of electric vehicles.

Goodeve said the low take-up of EVs in NZ is both disappointing and embarrassing. And he said it was "mind-boggling" that the government hadn't yet placed an order two or three thousand of them.

England said it was good to see the government examining the longer-term options to manage dry-year risk in the generation market, but gas still has an important role to play in providing affordable back-up generation.

"We are supportive of the review, albeit we don't think it should be focused wholly on an Onslow idea.

"It should be looking across the mix and saying what is the best balance for the trilemma of low-cost and low carbon and reliable power, and how are we going to use that to decarbonise other sectors."