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Energy & Electricity Policy

General

Energy fuels all economic activity and is the most vital component of a prosperous society. However, energy security is becoming increasingly threatened due to limits in the supply of fossil fuels and the environmental impacts of energy production. Worldwide it is becoming increasingly difficult to produce cheap and environmentally benign electricity.

Since coming to power in 1999 the Labour-Progressive government has undertaken major reforms of the electricity sector to increase security of supply, increase retail competition, reduce profiteering by lines companies and reduce fixed tariff costs for low-use households. However, despite these measures there remains a significant risk that new electricity generation capacity will not meet growing demand and the shortfalls from the decline in the Maui gas field.

New generation is being built around New Zealand at present. Major wind farms, geothermal stations, new biomass and small hydro are all going through consent processes or construction at present. Significant oil and gas prospecting is also being undertaken. However, unless greater improvements in energy efficiency and conservation are made, more generation will be needed to meet high levels of demand growth, particularly near demand centres, like Auckland, if major investment in transmission infrastructure is to be avoided.

If sufficient renewable energy cannot be found and developed at acceptable cost to meet demand then rising demand may require the construction of a coal-fired power station. If a new coal station proves to be economically viable the Progressives believe the very best technology should be employed, and in particular integrated gasification combined cycle technology to maximize efficiency and minimise emissions. In order for New Zealand to make greater use of its coal resources in a climate friendly manner the Progressives will lift New Zealand’s contribution to international research seeking to capture and sequester emissions from gas and coal-fired power stations. However, while NZ has large reserves of coal, exceptional global demand and accompanying coal price increases will place NZ in the difficult position of having to decide whether to export coal for good profit or subsidise it for domestic energy consumption.

The Progressives propose providing a fund for supporting ‘additional’ new renewable generation projects (those not likely to be built under business-as-usual conditions), which guarantees returns for generators by averaging prices and taking away the uncertainties of the wholesale market. The annual shortfall, if there is one, between guaranteed price and actual wholesale market price will be met by a small increase in the Electricity Commission’s low-level security of supply levy on electricity consumers. The Progressives will also provide new funding from the levy and carbon tax revenue to undertake greater research into tidal and biomass energy generation, as both have enormous potential in New Zealand. Tidal research is advanced overseas and is at present being commercialized. Biomass electricity plants are improving in efficiency and cost constantly.

Electricity costs have increased by 20 – 30 % for most consumers over the last decade, which has placed an additional burden on low-income households, particularly the elderly. The Progressives propose the government offer a winter energy rebate, averaging about $20 a month, to reduce winter power bills by about a 25%. The rebate is designed to make heating more affordable in the winter months for New Zealanders on fixed incomes to ensure well-being and reduce illness. Similarly, power disconnections can have a devastating effect on low-income households, particularly on children’s health. Progressives believe that electricity retailers should use other means to enforce debt collection, without risking the wellbeing of vulnerable children.

The Progressives also propose updating the building codes to require all new homes unable to maintain a benchmark winter temperature to have double glazed windows. This will ensure greater energy efficiency in New Zealand’s colder regions. We also propose to make supplementary solar hot water heating mandatory in all new homes from 2010, as water heating comprises the largest single component of domestic electricity, and effective low cost technology for solar hot water heating is now readily available.
New Zealand’s exposure to imported fuels and our limited reserves of economically recoverable oil and gas make increasing fuel costs particularly worrying. The Government is already giving support to exploration companies to boost prospects of petroleum finds. However, in the absence of any major reserves and with climate change impacts firmly in mind, the Progressives acknowledge we will increasingly be looking to land-based sources of fuel from biomass: crops, trees and industrial waste products. These are climate-friendly as their carbon content comes from the current carbon cycle. The Progressives believe more needs to be done in this area and proposes earmarking fuel excise to create a fund to support the establishment of a bio-fuel processing industry by meeting any shortfall between production costs and competitive pricing against mineral fuels. Bio-fuels would remain exempt from excise under the Progressives to stimulate this policy.

Progressive Goals

  • New Zealand becomes increasingly energy self-sufficient, through reductions in fossil fuel dependency and a greater reliance on domestic fuel sources.

  • New Zealand continually increases the contribution of renewable energy to its energy portfolio and continues to pioneer hydro, wind, geothermal, tidal and biomass energy developments.

  • New Zealand electricity consumers, domestic and commercial, have access to reliable electricity at the lowest cost possible, while ensuring electricity prices still promote new generation and encourage consumers to use energy wisely.

  • Reduce public sector energy use by 30% by 2010, particularly through the use of solar hot water heating and energy efficient lighting.

  • Eliminate’ energy poverty’ by ensuring low-income households are sufficiently warm and dry throughout the winter months to prevent ill health and discomfort.

  • All new homes built after 2010 meet best practice for energy efficiency and conservation.

  • Greenhouse gas emissions from transport and electricity generation are reduced from 1990 levels by 60% by 2050.

  • That New Zealand experiences sustained improvements in the vehicle fleet fuel efficiency for all classes of vehicles.

Next Steps

  1. Safeguard security of electricity supply by funding additional generation capacity (in addition to current emergency generation), if and when required, through a fund that provides a guaranteed and economic return for generators, funded by a security of supply levy on electricity consumers and carbon tax revenue.

  2. Provide additional funding for research into tidal and biomass energy generation, from the Electricity Commission’s security of supply levy and carbon tax revenue.

  3. Ensure any new coal-fired electricity generation utilizes best practice integrated gasification combined cycle technology.

  4. Introduce a winter energy cost rebate for beneficiaries, superannuitants and low-income earners in the winter months at up to $20/month/household, funded from dividends from state-owned electricity companies.

  5. Update the building code to require all new homes unable to maintain a benchmark winter temperature of 16 degree to have double glazed windows.

  6. Update the building code to make supplementary solar hot water heating mandatory in all new homes from 2010.

  7. Debt recovery for electricity supply companies should be through normal debt collection avenues.

  8. Introduce mandatory fuel efficiency standards for the motor industry to eliminate more inefficient vehicles from the marketplace.

  9. Earmark fuel excise to create a fund to support the establishment of a bio-fuel processing industry by meeting any shortfall between production costs and competitive pricing against mineral based fuel.

  10. Keep bio-fuels exempt from excise in the immediate future to encourage maximum introduction into the transport fuel market.
  

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