Due to a lack of gas, rain, wind and, to some extent, coal, the electricity situation is getting worse every day. The storage lakes are going down fast. A year ago they were at a higher level than they are now. We need heavy rain to avoid rotating blackouts from July onwards. Spring rains usually arrive in early September.
If it doesn’t rain and lakes reach their minimum levels, New Zealand will have to reduce its electricity consumption by something like 15%. This will have serious effects on the public, industry, commerce and the economy.
If it does rain, we will still be at risk into the future.
Wholesale electricity prices have already exceeded 35¢/kWh and will increase as the lakes go down. Sooner or later, these high prices will feed their way into consumer prices and will further damage the economy. The generators are desperate to maintain storage of water or gas or coal and are jacking up the price in the vain hope that it will substantially reduce demand. The trouble is that most people are on long-term contracts and don’t see the high spot prices. These high prices arise because the electricity market and Jacinda have failed to ensure that we have sufficient fuel.
Why Are We at Risk?
The electricity market and the Electricity Authority have failed in their primary responsibility: ensuring a reliable and economic supply. The previous government’s ban on gas exploration has further limited energy availability, while the push for “net zero” emissions has resulted in a lot of money being squandered on costly and unreliable alternatives.
Transpower has already warned that the system may not be able to meet the demand on calm, cold winter nights for the next few years or even more.
Last year, Methanex had to shut down, and the Tiwai Point smelter cut back production due to dangerously low lake levels.
Unless effective action is taken, we are at risk of prolonged blackouts lasting days or even weeks in any year with low rainfall. The declining availability of gas will make the situation even worse.
Can Renewables Save Us?
Government statements suggest that increased wind and solar power, combined with “demand-side responses” such as draining power from electric vehicle batteries and household solar storage, will prevent blackouts. There is no evidence of this working overseas.
Across Europe, UK and Australia, frequent “wind droughts” are pushing power grids to the brink, increasing the risk of blackouts and system collapses. Large-scale wind and solar generation require large-scale, long-term energy storage, yet the needed storage technology does not yet exist. Batteries are prohibitively expensive and can only store electricity for a few hours.
Another major issue is the low average output of wind and solar farms. To supply a 1,000 MW load, about 2,500 MW of wind and solar plus 1000 MW of backup is needed because the supply fluctuates wildly. When wind and solar generation is high, there will be a 1,500 MW surplus that will crash wholesale prices and make these generators unprofitable. When wind and solar are on holiday, prices will spike but the wind and solar generators won’t make much money. It is a case of “heads I win, tails you lose”.
The belief that wind and solar power can provide cheap, reliable electricity is simply not true. Evidence from overseas shows that increasing the amount of wind and solar power on a system increases the power price.
More and more countries are actively considering abandoning net zero policies. We should do the same. Continuing with Net Zero policies will inevitably lead to an unreliable and expensive supply.
The Market Is Failing
If wholesale prices remain at or above 35¢/kWh for a few months, consumer electricity rates could rise by 50% or more. Market theory suggests high prices should reduce demand and increase supply, but demand won’t drop significantly because electricity is an essential service. Supply won’t increase because the issue isn’t a lack of power stations—it’s a lack of fuel. A few days ago the CEO of Genesis said “Genesis will no longer fund broad market back up in either spare generation or stored fuel.” This will help their bottom line but it won’t help the country. We need to reward generators for holding reserve energy for a dry year.
What Must Be Done Now?
To reduce the risk, the government must recognise that energy reserves are a national energy insurance policy: without adequate reserves, there will be severe economic disruption.
- Urgently increase coal reserves: The government must act to ensure there is enough coal stockpiled to run Huntly Power Station at full capacity for three to four months.
- Ensure Huntly operates at full output whenever possible: Genesis Energy must be persuaded to keep Huntly generating at maximum capacity until rainfall replenishes hydro reserves rather than the 30% – 60% output we have seen in recent weeks..
- If necessary, encourage public energy savings: In the 1992, shortage voluntary electricity savings made a significant difference. The current policy of shutting down industry before asking the public to conserve energy is reckless. People should be given the choice between some inconvenience and the risk of losing their jobs.
Long-Term Solutions
There is some good news: the government has launched a comprehensive review of the electricity market and industry, with consultants expected to report back in June. This review must examine all aspects of the market and the industry rather than simply applying superficial fixes to the existing market that has failed to deliver its prime objective.
Additionally, a recent report by Sapere strongly criticizes the Electricity Authority. It warns that the Authority has abandoned its core duty of ensuring affordable and reliable electricity, describing its failure as a “recipe for electricity shortfalls and panicked government intervention.” If this report gets the attention it deserves, it could lead to substantial long-term improvements.
The High Cost of Net Zero
According to the Global Warming Policy Foundation the direct costs associated with the pursuit of Net Zero in the UK are about £100 billion over the last 10 years. This works out to about NZ$8000 per household. The indirect costs are probably much greater. All for no reward.
How much better off would Australia be if it had not subsidised wind and solar power and, instead, stuck with coal and gas? Add to that the very high cost of Snowy 2 and all the new transmission lines.
How much better off would New Zealand have been if Jacinda had not killed off gas exploration and, instead, promoted wind and solar power?
If we do have rotating blackouts this year or next year, how much would it cost the economy?
Is Professor Michael Kelly right when he says Net Zero electricity would cost NZ an unaffordable $500 billion or more?
According to a recent paper by energy transition expert Vaclav Smil decarbonising by 2050 will cost 25% of GDP of OECD countries for the next 25 yrs!
There are lots more questions like this. I think they would all add up to a frightening amount of money for absolutely no benefit.
Nothing we do can change the climate because India and China are burning vast amounts of coal and, anyway, real world evidence tells us that man-made global warming appears to be the biggest hoax in the history of the world.
Trump and Badenoch have given up on net zero and we should do the same.
The Bottom Line
Lack of rain has put New Zealand’s electricity system is at serious risk and escalated wholesale prices to more than four times normal. Without immediate action—securing coal supplies, ensuring Huntly operates at full capacity, and addressing fundamental market flaws—we face a serious risk of even higher higher prices, blackouts, and economic damage.