Electric Dreamers – Investigate June 2003


You know the drill: cold shower threats every two years, government warnings of a “1 in 60 year drought” every 18 months – are solar and wind power really the answer to our power prayers? HAMISH CARNACHAN reports

In terms of history repeating itself, it’s hard to find a more perpetual example than New Zealand’s power crisis woes. The last time the situation was so bad that Auckland ex-perienced near-crippling power blackouts the rest of the country was merely amused. However, it was still somewhat mind-boggling to comprehend the situation unfolding in the City of Sails, the supposed ‘powerhouse’ of the New Zealand economy.

Here was one of those stories you tend to associate with third-world countries, either crippled by poverty or tearing themselves apart through civil war, as you skim over the ‘news in brief’ column in the world section of the national newspaper. But when “crisis” is plastered all over the front page, it’s generally a lot closer to home.

Nationwide, similar sentiments of exasperation were expressed: “It’s not the sort of thing that happens here – we learn from our mistakes.” Apparently not. That was a little over four years ago but today New Zealanders again find themselves having to pull together, in the mould of some monumental wartime effort, to try and avoid another winter of seemingly imminent power cuts.

Should we be surprised? Not really, say some critics, the signals have been there for some time, perhaps the most significant of which was recent news that the Maui gasfield, that provides nearly 80 percent of the country’s natural gas, is due to run out in just four years’ time: 2007.

Most of us would have had no idea of the significance surrounding the announcement of the looming, but inevitable, demise of Maui. However, a matter of weeks ago, when it was coupled with “dry winter” forecasts and warnings of very low hydro-lake levels, alarm bells started ringing – for the second time in three years.

Although news of the Maui gasfield running dry was followed by an apparent consolation – the Pohokura field, we found out, is due to come online in 2005 – there is a problem in that the replacement is only a third the size of Maui. Additionally, energy boffins expect the gas will be considerably more expensive. While Pohokura will almost certainly leave a massive shortfall in energy supply, greater concern surrounds the hydroelectric schemes, which are the major source of power in New Zealand.

The impending power crisis is now the most significant we have had to face in what has been a well publicised, chequered history of power demand and supply, and many people have been left to ponder the question: “Where to from here?” Well, government has finally set a course, but it remains to be seen whether they are steering us in the right direction.

While some commentators continue to argue that we would be all right but for the lack of rain, that clearly is not a solution. Power generation in New Zealand has been in a sorry state of flux for quite some time despite warnings of a situation similar to what we now find ourselves in having been heralded, and signalled, well before the rock-bottom blackouts that hit the Auckland central business district in 1998 – remember the 1992 power crisis?

In more recent times, two years ago, Energy Minister Pete Hodgson was touting the same magic figure of 10 percent power savings we are again being told will help us avoid cold showers and missing out on our favourite TV soap operas this winter. Conservation measures worked in 2001 – just – but how much longer are New Zealanders expected to tread this well-worn winter path? Have we learnt nothing from the past?

Believe it or not, this is a question that has been posed in Parliament, yet invariably discourse degenerates into a finger-pointing exercise with blame being passed around like a light bulb hot out of a live socket.

Hodgson has stated publicly that there are no more rivers to dam for hydroelectric power schemes and, bound by the Kyoto Agreement to reduce greenhouse gas emissions, it seems unlikely that the Government will endorse the increased use of coal, gas or oil-fired power generation favoured by the electricity industry as a means of meeting escalating energy demands.

The government’s Energy Efficiency Conservation Authority (EECA) paints a vivid picture of this voracious appetite for energy consumption. Its figures show that between 1996 and 2001 energy demand increased by roughly 1.5 percent per annum (others put it as high as 5 percent) from 425 petajoules (PJ) to 458 PJ. To put that in some sort of context, 30 PJ translates to the annual energy consumption of 840 000 households or 30 times the total annual energy consumption of a town the size of Nelson.

When viewed in such light, it is not too hard to see that demand has clearly outstripped regional growth but, perhaps more concerning is the fact that while the trend shows no sign of abating, generating capacity has been static for the past two decades.

Unfortunately, history suggests the solution is not equally as simple, otherwise New Zealand would not be seen by some as the only ‘first-world’ country to neglect what our counterparts view as an essential service worthy of continual monitoring and upkeep.

Prior to the problems stemming from demand outstripping capacity, hydroelectric power generation had been a faithful servant to New Zealanders, and could explain why we are one of the few countries in the world to use water for most of our power. It provided households with a reliable and comparatively cheaper source of electric energy than that offered in other countries. And aside from the initial damage to river systems and valleys during dam construction, it is still accepted as a ‘clean’ method of energy production. Now though, it appears evident that we have been guilty of storing all our eggs in the one basket.

According to Green Party Co-leader Jeanette Fitzsimons, our single-minded reliance on hydroelectric power generation is one of central parts of the present crisis. She suspects that the valleys flooded for the hydro system were too narrow and steep, resulting in inadequate storage.

“If it doesn’t keep raining we soon run out. If it does, we spill water over the dams.”

Relying on the weather gods is futile (at best) in a place like New Zealand, but by today’s standards the majority of the country’s dams are probably inefficient too. Clyde, the most significant and recently commissioned hydro dam, was built 20 years ago, before the advanced technology now utilised in overseas hydro schemes had been developed. Modern dams in Wales have been fitted with reversible pump/turbines that use off-peak electricity to recycle water from the lower reservoir back to the top to use again – the system is ideal for coping with periods of reduced flow.

Technology aside though, critics also suggest the problems link back to legislation set in place three decades ago. In 1973 the Labour government of the day signed a contract to use up the Maui gas deposits over the following 30 years, in order to secure the fuel at the cheapest possible unit price. Says Fitzsimons: “This meant we could only get through the contract amount by using it very wastefully. We built up a huge dependence on gas and no planning was ever done to replace it when it ran out, as it is now doing.”

Over the same period, successive governments have deregulated the electricity sector into what is (arguably) a competitive market. However, as Fitzsimons points out, Ministers from Doug Kidd to John Luxton to Max Bradford to Pete Hodgson have set in place and perpetuated a market structure where no one is responsible for the security of supply. Left in the wake of sweeping market ‘reforms’ have been the Electricity Corporation of New Zealand (ECNZ), the Electricity Department, and their associated planning and forecasting authorities. Even the Minister of Energy no longer has a Ministry – the portfolio has a department located somewhere in the murky depths of the all-encompassing Ministry of Economic Development.

Now a quest for renewable and sustainable power-generating alternatives seems to be the Government’s chosen answer to tackle the issue of developing a consistent power supply.

While energy production via ‘alternative’ measures has been in parliamentary pipelines for years, past considerations have resulted in little more than a lot of wasted hot air. Like the recently embarrassing Beehive episode, the lights have been on but no one has been home.

That was, at least, until October last year when Cabinet confirmed a ‘renewable energy target’ stipulated in the National Energy Efficiency and Conservation Strategy (NEECS). Currently New Zealand generates 133 PJ a year from renewable sources. The goal of the strategy is to produce an extra 30 PJ of renewable energy by 2012 – equivalent to the energy produced by an additional 3.5 Benmore dams or 60 Tararua wind farms.

One might be forgiven for thinking the Government had a sense of the impending gloom, however, the Energy Minister’s address given at a conference on the topic two weeks before Cabinet’s announcement, suggests otherwise. While Hodgson acknowledged the probable demand/supply shortfalls by stating, “New Zealand will need significant new generation capacity by about 2005 if we are to adequately cover the risk of a dry year”, he assured the audience that “there is no suggestion New Zealand’s electricity system will be unable to meet business-as-usual demand about three years from now”.

At the time of his “Energy: the way forward” speech, modelling by Transpower (the national grid operator) suggested 2005 as the point at which the current system might have difficulty meeting demand in a seriously dry year. But through his work with Canterbury University’s Centre for Advanced Engineering, energy consultant Bryan Leyland had come to a markedly different conclusion. He suggested that Transpower was being too optimistic and warned that in 2003 and 2004 the country would have serious problems.

“This is not particularly surprising,” quipped the Energy Minister in response, “as Bryan has been releasing his forecasts every two years for nearly a decade now and they always ring alarm bells.” Perhaps it could be construed as a little surprising then that no one has paid Leyland due attention.

Local industries, which have recently been forced to periodically shut down their processing plants because of soaring electricity spot prices, will review Hodgson’s statements with bitter irony considering they come from, in a roundabout sort of way, the Ministry of Economic Development.

At the very least, the Minster’s remarks, made only six months before this current crisis, now serve to highlight the seriously flimsy nature of the country’s electricity sector. So, in an attempt to firm it up, a number of renewable energy alternatives have subsequently been earmarked as the preferred ‘way forward’.



For industrial process heat, both geothermal and wood waste com-bustion can compete well with fossil fuels, especially for large high-load plants. The NEECS highlights this as an area of “significant opportunity” for the wood processing industry and of high potential for increasing New Zealand’s overall use of renewable energy sources.

The United States has realised the potential for geothermal energy for years now. The US Department of Energy (like most OECD countries America still has one) has sponsored an initiative called ‘GeoPowering the West’ since the early 1990s. Basically, the scheme is a commitment to dramatically increase the use of geothermal energy in the western United States and aims to have seven million homes using the energy by 2010.

Washington has already invested considerable amounts of capital into the scheme. It views geothermal energy not solely as a reliable source of heat and power for the growing American West, but as a major economic opportunity too – US$500m in new income has been estimated for western landowners over 20 years.

But also favoured in New Zealand are wind farms. In early March, the Government approved two new projects: Trustpower’s proposed 36 megawatt (MW) extension of its existing 32MW Tararua wind farm and a new 40-80MW wind farm proposed by Meridian Energy. These are expected to roughly triple New Zealand’s current wind generation capacity of just under 40MW.

Meridian Energy proclaims that its wind turbine project will be the country’s most productive wind farm, generating enough electricity for 32 300 homes. The scheme won’t come cheap though, at an estimated cost of $100m, and it will be at least two years before power is flowing into the national grid.

In much the same way that we are behind the US in terms of developing our geothermal energy resources, New Zealand is also well behind European nations in terms of generating power from wind, despite these recent initiatives. Last year, Europe increased its wind-power capacity by more than 35 percent and now wind farms deliver enough energy to support 10 million households. Additional offshore wind farms are also in the pipeline – nearly a hundred such ventures are currently being planned to come into operation before 2015.

European electricity suppliers are investing heavily in wind power, which they view as a mature industry with a growing potential to make a significant impact on the energy scene. European wind farms have 17,000MW installed, and Germany tops the list, housing half of Europe’s wind-power capacity.

The Dutch company DNV has just commissioned 80 wind turbines, each with a 2MW capacity, in Denmark at a cost of EURO 250 million, and plans to invest several million EURO per year in wind-power projects over the coming years. It accepts the “considerable investment” needed to implement such schemes because Europe, like New Zealand, is bound by environmental emission standards and both the EU and OECD are moving towards including the cost of pollution in the overall price of electricity. Renewable energy sources are therefore expected to become more competitive when this legislation is set in place.

Additionally, an EU directive, which recently became law, stipulates that 22 percent of the Union’s electricity consumption should be generated by renewable energy sources by 2010. Such stringent environmental legislation has encouraged some rather lateral thinking when it comes to alternative energy production and European nations have subsequently become world-leaders in the field.

German company Farmatic is one such example. It has developed into a market leader for the industrial conversion of biomass and manure into regenerative energy. In Devon, England, the first farm incorporating the company’s technology has recently commenced operating. The plant, which cost £7.7m, uses effluent from 30 local farms to generate 2MW of electricity – enough power to supply 900 households. Waste heat, a by-product of the process, can be routed to local buildings for heating, and the solid waste is safe to spread on fields as fertiliser. Biogas produced by Farmatic’s bio-power plants can alternatively be refined into fuel to power motor vehicles.

It seems almost reminiscent of a certain beer commercial (currently screening on television) in which a group of Kiwi lads utilise the services of a four-legged methane factory and a length of hose to fire their barbeque. Comical? Certainly. Nonsense? Not necessarily.

With more than five million head of cattle in New Zealand some commentators suggest the answer to our power crisis is right under our nose. Dairy farmers, already copping high electricity bills (around $10,000 each year for a 400 cow dairy farm) and set to be hit with emission taxes dictated by the Kyoto Agreement, would look at their farting Friesians in a different light if the Farmatic alternative was given serious consideration.

And New Zealand is ideally situated for what experts at the Scottish engineering company, Wavegen, refer to as the largest untapped energy resource on the planet – waves. Oceans cover approximately 75 percent of the world’s surface and according to Wavegen represent “a vast natural energy resource in the form of waves”. In the United Kingdom alone, it has been estimated that the recoverable wave energy resource exceeds total UK electricity demand, and the World Energy Council estimates that 2TW of energy – the equivalent of twice the world’s total electricity production – could be harvested from the world’s oceans.

Sound too good to be true? Well, it may be. Critics argue that the turbines used to generate the electricity are notoriously expensive and only economically viable in isolated areas, far from conventional power supply. Then again, calling New Zealand’s current power supply anything close to “conventional” would be bold.

There is little detail of research into the feasibility of wave generated power in New Zealand because, Fitzsimons suspects, “international work in the area shows it is much less developed commercially than wind or biomass and not likely to contribute much in the short term”.

“[However] biogas is particularly well suited to New Zealand but it would be a terrible waste to burn it in power stations which waste at least half, and often more, of the energy value in the fuel. [It would be] better to use it as direct fuel instead of electricity.

“Its suitability to New Zealand is that you can make it from a wide range of agricultural and forestry wastes.”

In the 1970s biogas initiatives were investigated in New Zealand and several large industry players incorporated the technology into their processing practices. The Alliance freezing works near Invercargill made biogas in a one million gallon digester and used the fuel to replace 17 tonnes of coal that would otherwise have been burned each day in its wool drying plant. Tirau dairy factory digested whey and other milk wastes to produce fuel to help run the plant. However, because of the historically low cost of natural gas, biogas has not generally been seen as an economic alternative – until now perhaps.

While the alternative energy production ‘breakthroughs’ in Europe have occurred relatively recently, they are the result of a decade-long concerted drive to develop new initiatives – even though some of these countries utilise highly efficient nuclear power. Clearly New Zealand’s resolute stance on nuclear energy is not about to be changed any time soon, but the enterprise being shown overseas underlines the neglect with which successive governments have treated the alternative energy sector.

Sadly, we need not have got ourselves into this situation, argues Fitzsimons.

“Over the 30 years I have been involved in energy policy debate the opportunity has been there to take a different path. Any time during that period we could have done it. We still can, but the longer we leave it the more cold showers we will have to put up with,” she says.

“The answer is not large-scale generation anymore. That’s a thing of the past. The answer is many smaller developments built close to where the load is to reduce line losses. Wind and wood suits this very well. We also have to stop thinking how to generate electricity and think how to provide the service electricity does in other ways. Solar water heaters don’t generate power but they do heat water and save power. Insulation will keep your home warmer so you need less electricity. There are hundreds of these examples.”

There may be hundreds of examples but the Government’s Energy Wise Home Grants scheme, part of the energy efficiency and renewable energy strategies, focuses on two key areas: insulating the homes of low-income families and encouraging the use of solar water heating.

“Hot water heating accounts for 45 percent of a home’s power use, which means there is significant potential for savings,” says the Energy Minister in a briefing paper. “The grants scheme will help develop the market for solar water heaters, which will enable us to utilise more of this renewable resource to meet household energy needs.”

In addition to the $1.2m allocated to projects that will insulate the homes of low-income families, the Government has committed $200,000 to the Solar Hot Water Grants scheme – in the next year it plans to install 400 solar water heaters.

But are such relatively minor investments going to pull the country from the clutches of chilling winter power crises? For many, the level of funding is a pitiful response relative to the scale of the problem. Fitzsimons suggests the Government could be doing a lot more. Instead, she says, it is being left up to industry.

And while the National Energy Efficiency and Conservation Strategy has set in place a target of a 15 percent improvement in energy efficiency in the public sector by 2006, even Hodgson admits the goal is “ambitious” – hardly encouraging when we are being threatened with blackouts if we fail to reach what has almost become an annual 10 percent power savings threshold.

Time for the million dollar question then: Can the New Zealand public expect that recent renewable energy developments and initiatives, and proposed renewable energy targets, will realistically meet future power demands?

“This is highly dependent on the future growth in the economy and as such, no concrete answer is available,” admits Energy Efficiency and Conservation Authority spokesman John Boyd. “However, recent energy use projections, by EECA and MED [Ministry of Economic Development], indicate that if both the NEECA targets are achieved, total consumed energy will have increased by a total of 30PJ. Thus the growth in the economy, and the resultant increased power supply demand, could be entirely accommodated by renewable [sources].”

But with the NEECA target nine winters away and the proposed power-generating alternatives due to be phased in over the same period, what happens in the interim, particularly if we have more dry spells and less natural gas?

Boyd won’t comment on the prospect of winter power crises in the near future, but he says a number of actions of the renewable energy programme have already been initiated. According to EECA these include:

· Regulatory barriers – a work project to investigate and address legislative barriers to renewable energy development, undertaken in conjunction with the Ministry for the Environment.

· Industry development – ongoing support of the renewable energy industry associations (including the development action plans for future priorities) to encourage the uptake of renewable energy covering wind, solar, bioenergy, geothermal and hydrological.

· Biomass – an investigation into the opportunities for biomass through liaison with forestry and other relevant sectors.

“The project’s mechanism,” adds Boyd, “which is part of the Government’s commitment to the Kyoto Protocol, includes the introduction of a carbon emissions charge from 2007 and opportunities for carbon credits to help ensure the economic viability of proposals. The Minister of Energy has recently awarded carbon credits to two proposed new wind farms.”

Under investigation it still appears a little thin on substance because, say some critics, these strategies are more closely aligned to meeting Kyoto commitments than sourcing a reliable power supply for the New Zealand public.

Fitzsimons doesn’t buy into such attacks. She says take the Kyoto Agreement out of the equation and investments in alternative power generation still pay off. The Green Party co-leader may have a point. Presumably Meridian would not be building a large wind plant if it were not going to pay dividends – the company’s shareholders simply wouldn’t agree to it.

Yet, despite the extent of the power supply problems in New Zealand, it is still questionable whether the Government’s renewable energy strategies represent a response to the issue as serious as that taken by members of the European Union, or even the United States. While the US is often, many would argue justly, vilified for excessive energy wastage, Washington is investing billions into the research and development of renewable energy resources.

There is little doubt that alternative energy-generating infrastructure does consume significant capital investment. But if New Zealand wants an uninterrupted supply of power we are going to have to fork out for it. The wind of change is blowing but at the moment it seems little more than a breeze – it could take some time to fill in on our shores too so don’t dust off the electric blanket just yet.