Electricity (Renewable Preference) Repeal Bill

Hon PETE HODGSON (Labour—Dunedin North) Link to this

The Government is continuing its assault against progress. It started last week with the removal of the research and development tax credits—that was the opening bid—and we also learnt there will be no action on the emissions trading scheme any time soon. We are sending that legislation off to a so-called high-level select committee. Then earlier today the biofuels industry had its ankles cut from underneath it, which will mean a swag of disinvestment in that industry, quite apart from the disinvestment that has already occurred in the forestry industry last week. And now the Government is saying it is time we should burn some fossil fuels to make electricity. The Labour Party will strongly oppose this bill, because the legislation it repeals has a function to play, and its removal will see the possibility of thermal generation being built that is unneeded and unnecessary. Let us be clear that the moratorium is against baseload thermal generation only. If any more peaking plants are needed in this country, they can still be built despite the moratorium; it is baseload thermal generation to which the moratorium applies.

Why does the moratorium apply? It applies for the simple reason that this country has an integrated electricity generation system involving, predominantly, hydro and thermal energy, with increasing amounts of geothermal and wind energy. That integration is secured by a variety of Cook Strait cables, and it is in balance now. It used not to be in balance; it used to be wildly out of balance, depending on how far back in history one wants to go. I can go back quite a long way, but the Max Bradford era will do. Max Bradford took the electricity generation system and turned it on its head. There was, in effect, a strike by capital for years to come. We had a strike by capital in the early part of this decade. We saw one thermal plant go on, then we saw the five new generators/retailers duck and weave, to see whether they could avoid capital investment, until one of them came forward. Then another came forward, but in the meantime we certainly started to run thin on the margins.

Those margins are now in much better shape than they have ever been—or at least in the last 1½ decades that I can speak of. The degree of new generation coming on is known to be sufficient. The point is that the new generation coming on is renewable. There is now widespread investment in geothermal, wind, and small-hydro energy. Those investment projects, all of which are known because they have been publicly signalled—and one or two of them have not been publicly signalled but have been privately signalled to officials—and many of which have already been consented, will come on the book, one after another, in an orderly sort of queue. The 10-year moratorium on baseload thermal generation was simply to signal that the future of our integrated system needed to be more predominantly based on renewable electricity generation. It was that straightforward.

It is possible to build—so long as one can secure a long-term gas contract, and that does present difficulties—a quite large baseload thermal generation plant quite easily. Such plants are less costly because their capital costs are lower. The running costs are of course higher, whereas the running costs for renewable electricity generation plants approach zero. The consent process is simple because the footprint, if you will, of a non-renewable electricity generator is relatively modest—it might take up only a hectare or so of land. Once the investment in transmission supports a baseload generator, the generator will be used. Once the owners have it up and running and the gas contracts are in place, they will bid in such a way as to ensure that the generator is used. That is why additional baseload thermal generation is not a good component of our electricity system.

The opposite needs to happen. As our renewable generation picks up, we need to take offline some of our most inefficient thermal generators, which happen to be coal-based in the main. We have four big coal driveshafts, all of which are in Huntly and all of which are called, collectively, the Huntly power station. Each of them can produce 250 megawatts, but there is no reason why, one by one, they cannot be taken offline in the future as they come up for major refurbishment, or indeed cannot be refurbished and put into the reserve scheme. The Electricity Commission has the say over that and the role to play there, not Cabinet or this Parliament. That is what the future of this country looks like. We should take some of our older thermal generation plants progressively offline. Some of them should stay in the reserve generation market in case we get an unusually calm and dry year in our hydro catchments, but there is no need for new thermal generation plants to proceed at the moment.

If this moratorium comes off and a plant goes ahead as a result—because gas contracts that give investors security of supply might be bought or sold on the market—what will the Government do about that? The member who spoke before me was the Hon Dr Nick Smith, and he spent his entire 10 minutes saying that thermal generation in New Zealand had increased. He is right. Just to recap briefly why that is the case, I tell members that the main reason was a strike by capital straight after the Bradford reforms, and only when people finally woke up to the fact that we might start to run out of electricity did we get ourselves a thermal power station in the form of e3p. There is no need for another thermal power station. It is a shame we have that one. There is no need for another. Nick Smith, in his logic, spent his entire 10 minutes saying that we had increased thermal generation, yet his response is to remove a moratorium to allow for more. This guy has a PhD; what does that say about the quality of tertiary education when he says that his position is to be against more thermal generation, but his voting position is to vote down a moratorium that would stop it?

JEANETTE FITZSIMONS (Co-Leader—Green) Link to this

On the face of it, it does not matter very much that the Government is repealing the renewable electricity preference in Part 6A of the Electricity Act 1992, because the renewable electricity preference has so many exemptions and loopholes in it that one could drive any power station through those loopholes and have it approved. So I am not really sure why the Government is bothering to repeal something that was always a bit of a fiction.

Let us look at some of the exemptions. First, the preference applies only to baseload power stations. Anything that runs for less than about one-third of full-time is exempt anyway, so one does not have to get permission for it. Secondly, one can apply for an exemption if there is any kind of security of supply problem. I can imagine a number of situations where people wanting to build power stations might do that. Thirdly, one can apply for an exemption if one can show that one’s power station will replace a power station that produces higher emissions. That is true of any gas-fired power station that anybody wants to build, and it is true of any new coal-fired power station that anybody wants to build, because they will all be more efficient than Huntly power station on coal. It is true that the Minister of Energy and Resources has to sign this off.

I asked three submitters who made submissions on the Climate Change (Emissions Trading and Renewable Preference) Bill to the Finance and Expenditure Committee about this. I asked whether they could imagine any kind of power station, at all, that could not be built under one or other of these exemptions. None of the three submitters could. Contact Energy said that it could not, but that it is a nuisance having to apply for an exemption even though it would be granted one. So we could argue that renewable electricity preference was always a bit of a wet paint sign. The Minister, Gerry Brownlee, said he would abolish it, and, goodness, it is important—is it not—to take urgency before Christmas to pass the abolition of a wet paint sign through all its stages!

However, the Minister talked about symbolism. I think the reason this bill matters is its symbolism and the message it sends, which is that the Government will burn more fossil fuel, it does not believe in renewable generation, and it thinks coal is sexy. If the Government is not trying to send that message, why would it bother repealing legislation that would never stop a single power station being built?

The Minister says that putting a price on carbon will encourage renewable electricity rather than fossil-fuelled electricity. But the way in which the electricity market—which was set up by a previous National Government—actually operates means that all electricity, whether hydro, wind, or anything else, will be charged at the same price to the consumer as coal-fired electricity. That means there will be large returns to renewable electricity generators, but not to consumers. Those returns were to be the source of funding for the billion-dollar Green Homes Fund. We wanted to give this money back to people in a form that was more use to them than just a bit of cash. We wanted to give it back to them in the form of a warm, dry, healthy home that would be there for ever. That was to be the source of funding. The Government keeps claiming that there was no source of funding for the Green Homes Fund, but that is where it was going to come from.

The Minister says that we need to build more fossil-fuelled plant for security of supply. Well, I am sorry, but we cannot find any numbers, at all, to justify that. A lot of geothermal plant is being built at the moment, which is—

Hon RODNEY HIDE (Leader—ACT) Link to this

It is with much pleasure that I rise on behalf of the ACT Party to support the Electricity (Renewable Preference) Repeal Bill. This bill is a direct consequence of the relationship built up between the National and the ACT parties. I am very pleased that we are going to have some economic sanity and some sanity in energy planning and supply in New Zealand, as a consequence.

Putting a ban on the use of fossil fuels to generate electricity in New Zealand was a mad idea cobbled together at the last minute. It shows that the previous Government’s policy on climate change, global warming, and the emissions trading scheme was cobbled together and not well thought through. If that Government had been committed to, and had believed in, an emissions trading scheme—and I have to say I do not believe in it—it would have priced the emission of greenhouse gases and it would have allowed people to get on with it, reflecting the price. That is the whole logic of having a tradable scheme. That is the purpose of such a scheme. One does not need to tell people how to do it, when to do it, and why to do it; one lets them get on with it. But the previous Government, being of the meddling variety that knows best and tells people what to do, was not content with just jacking up the price of everything to every business and every homeowner in the country; no, it wanted to go a step further.

I listened carefully to Jeanette Fitzsimons’ speech, because I am always open to the possibility that we could be wrong and that reversing the ban might be a mistake. I have to say I heard no reason to suggest that the Government is wrong in going with this ban. Jeanette Fitzsimons said—and I remember her saying the same thing at the time the ban came in—that the ban was toothless, that it would not achieve any result, and that anyone who wanted to could get round it. Well, is New Zealand so short of legislation that we should be passing legislation that has no effect? I do not think so. If Jeanette Fitzsimons does not think the ban achieves anything, then let us get rid of it. I guess the hallmark of this Government is that it is honest about what it is doing. I think that what we saw previously was a lot of hot air—

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

Last week Wellington hosted a prestigious event packed full of academic excellence, ground-breaking research, and creative expertise. I am not talking about the maiden speeches—as outstanding as they all have been—I am thinking of the Realise the Dream event, which celebrates our extraordinary young secondary students who are pushing boundaries and taking on the world of science, research, and technology. The event, hosted by Genesis Energy, included a project from Jake Martin of Cambridge High School. He explored the possibility of turning biomass energy and waste streams into a usable energy source for transport by experimenting with an engine that runs on wood. His model, a gasifier, demonstrated not only that the charcoal waste product of his engine was useful for growing plants but that the biochar produced was also magnetic.

Is it not time for Aotearoa to realise the dream? The question is, of course, what the nature of that dream is. In the Māori Party our dreams include keeping our natural resources and environment healthy, safe, and intact for future generations. To do this, we know, will require this House to exercise as much rigour and expertise in creating innovation and energy efficiency as those students attending Realise the Dream did. For the great challenge facing us all is that while on one hand Genesis Energy was sponsoring an amazing event that was all about inspiring our young people to achieve, on the other it was announcing plans for price hikes of up to 9 percent in parts of Auckland. This is our challenge: to meet the growing demand for electricity while at the same time seeking to reduce demand by the energy efficiency strategies we invent. If a group of secondary school students can construct a steam engine that produces electricity, surely the members of this House can come up with a good idea or two about renewable energy sources including geothermal, hydroelectricity, wave, wind, photovoltaic, and solar. Merely continuing to use coal, oil, and gas to generate electricity is hardly stretching beyond the frontiers of what we know already, which is that coal is the fossil fuel that generates the most carbon dioxide per unit of energy generated.

The coal-fired power station at Huntly—technically known as a baseload fossil-fuelled thermal electricity generation plant—has a direct and immediate impact on climate change, yet in this bill we are disregarding our best knowledge and throwing caution to the wind. Is caution or is commercial pressure paramount? The question that must test all of our minds is whether we actually know what problem this bill seeks to address. Is the real issue that we all need to show much greater interest in creating effective energy conservation and efficiency strategies? Is the real issue that our transmission infrastructure is in such a poor state that the surplus capacity in Te Wai Pounamu cannot be carried across to Te Ika-a-Māui because the Cook Strait cable needs urgent repair or replacement? Is the real issue the bizarre fact that in our southern hydro lakes, Waitaki and Manapōuri, the transmission infrastructure is so weak that water is currently being spilled? Or is the real issue the structure of the electricity industry itself?

I was interested to read the recent statement from Bryan Leyland of the Climate Science Coalition. He suggested that the way the market is structured now rewards generators for keeping us on the edge of a shortage. It is all a matter of perspective. Rushing under urgency to try to meet the growing demand for electricity by increasing thermal generation is at best short-sighted, and at worst it simply heaps coals on an ever-burning fire. Repealing the ban on thermal energy generation will have other effects that the Māori Party is concerned about. Māori organisations involved in sustainable energy developments such as geothermal power have spoken to us about their concerns that fossil fuel plants, as a result of this bill, will be at an unfair advantage that is not conducive to fair competition with renewable energy developments. That is because there is no current economic instrument through which these fossil fuel plants will have to face their carbon costs.

It is time to be brave, to realise the dream, and to explore other alternatives. Alternatives such as geothermal energy deserve the support of this House. Geothermal energy is a sustainable energy source. There are no pollutants attached, so it is safe for the environment. There is also a significant amount of energy to be harnessed with geothermal power. It is a source that is available 24 hours a day and for which very little land is required. It is a concept the Māori Party is very interested in. We know that Māori organisations have been heavily involved in geothermal energy developments. In fact, one of those energy developments, Tuarōpaki Trust—an amalgamation of landowners from the seven Mōkai hapū, who affiliate to both Tūwharetoa and Ngāti Raukawa—topped the Māori and iwi sector in the National Business Review’s monthly exciting company series with a rating of 93.1, which is the highest ever recorded.

The Tuarōpaki Trust was described by trust chairman Tūmanako Weretā as giving his people a beacon of hope and prosperity. That hope and prosperity has emerged from annual revenues that have almost doubled to around $50 million in the past 4 years. The trust combines farming and horticulture business with geothermal power generation and satellite communications. It has come a long way since 2000 when the trust commissioned its first generator, Mōkai I, powered from geothermal steam under the land. A second plant has since opened up and now a total of 110 megawatts of electricity is being produced. Tuarōpaki Trust is not just about providing a beacon of hope and prosperity to the descendants of seven hapū of Mōkai; it provides Aotearoa with inspiration about a bright future—a future when renewable energy allows us to be sustainable while at the same time protecting and preserving the limited resources of oil, gas, and coal.

We are so fortunate in Aotearoa that we have so many renewable options. We must place faith and trust in those organisations that can produce renewable energy and reduce carbon emissions as a result. We need to find new, post-carbon ways of living, to contribute to solutions that address the global issues of peak oil, and to find sustainable energy alternatives without indulging in further finite and exploitative gas and oil exploration. The security and demand of supply, the infrastructural problems, the price hikes, and the structure of the electricity industry are all challenges that face us. But they are not insurmountable. Windflow Technology in Christchurch has become a world leader in the design of smaller but highly efficient wind turbines. We can accelerate the development of new technology by making a commitment to using renewable energy. That commitment creates a market for electricity from renewable energy and supports private investment, which in turn brings down the relative cost of renewable electricity. We need a forward-looking policy to kick-start a new industry and to create a competitive market in which new players can compete with established operators.

With the Electricity (Renewable Preference) Repeal Bill we have a solution that misses the mark in terms of addressing the wider scope of these problems. Furthermore, it is, of course, of note when one of our country’s biggest energy companies, Contact Energy, said last night that it had no plans to build fossil fuel power stations, despite this bill being on the books today—a view that is apparently shared by Genesis Energy, as well. The Māori Party policy is to support the development of renewable energy as a key response to both climate change and peak oil. We cannot support this bill. Thank you.

Hon PANSY WONG (Associate Minister of Energy and Resources) Link to this

I think the Green Party co-leader Jeanette Fitzsimons actually provided the reason why Parliament should support the repeal of the last Labour Government’s legislation in terms of the emissions trading scheme—the part relating to banning thermal generation. She correctly pointed out that the legislation relating to the thermal ban had so many loopholes that one could drive a bus right through it—it was completely useless. So why should Parliament embrace the retention of part of a piece of legislation when apparently nobody—even the parties that supported it—has confidence in its being effective? In fact, it is useless, so why should we retain that part of it?

The other issue is that Labour—the Opposition—has made much of the fact that this bill has not been sent to a select committee. Let me share with members of Parliament the way that Labour respects the select committee process. When the emissions trading scheme bill was sent to be examined at the select committee, the part of the legislation banning thermal generation was, actually, added in the last very minute, despite all the submitters, including the Business Council for Sustainable Development, which opposed the inclusion at the last minute of the thermal ban. That is not to mention the major sector groups, such as the Major Electricity Users Group, and the generator group. So Labour did not pay much respect to the select committee process. A bill was sent to a select committee, new additions were made, and the committee completely ignored the feedback on the legislation from the submitters.

I am glad, once again, to be able to take a call in this House to support the legislation that National has been campaigning on—we have made our position very clear. We believe the way to incentivise renewable resources is that thermal generation will, eventually, be subject to carbon charges, and renewable generation will not, through the emissions trading scheme that we will develop. That is a very sensible way forward, rather than retaining the part of the legislation that even the Green Party says is not workable and is sending all the wrong signals. Of course, I hasten to point out that I have not seen Pete Hodgson—who goes on and on about what the Hon Max Bradford did to the electricity industry—in his time as Minister of Energy ever come up with a plan. Even now, every winter, New Zealanders are still subject to the threat of either a power cut or increases in power prices. I believe that our Minister of Energy, the Hon Gerry Brownlee, has once again sensibly brought in legislation that sends a clear signal that we support renewable preferences. Once again, we believe that to retain a part of a piece of legislation that is not workable, and puts our energy supply at risk, is not the way to go. I am very happy to support the passage of this legislation.

Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) Link to this

Members on this side of the House treat the challenge of tackling climate change very seriously, because if anyone heard the contribution by the Hon Nick Smith, Minister for the Environment, they would have had their strongest inclination confirmed that a National-led Government does not believe in a coherent approach to tackle the defining issue of this generation—climate change. We have heard members from all over this House say how important climate change is. We have heard members from across this House say we need to do more for future generations of young New Zealanders. But what we hear from the Government is something that should concern young New Zealanders. It is a signal that I think does not provide leadership, and does not lift aspiration to the possibilities of how this country could operate in terms of where it sources its energy.

The mere fact that we are speaking to the Electricity (Renewable Preference) Repeal Bill shows that the Government will do anything to get energy, no matter where it comes from. That is a real concern, because the Minister for the Environment made light of the serious challenge confronting our country to reduce greenhouse emissions, to better regulate our reliance on new thermal generation, and provide and incentivise the landscape to explore and realise renewable energy generation. Instead, the Minister claims that by lifting the moratorium on new thermal electricity generation, the National-led Government’s commitment to tackle the effects of climate change remains on track.

I say no. In support of the earlier contribution of my colleague David Parker, I say that this bill will do nothing to encourage a coherent step towards a sustainable future. I absolutely agree with statements made by the Māori Party on Māori wanting to take leadership on this issue. The example that she raises with Tuarōpaki—and I have talked to the people there, and I have seen that they have an absolute commitment in renewable energy—reinforces the view that I present in this House. I know, too, that in the area of wind generation across the west coast, from the north down to the south, there are iwi who are looking at how they can better engage in renewable energy generation.

In the first 2 weeks of this Government we have seen a delay in the introduction of the emissions trading scheme by establishing a special select committee that serves no other purpose than to placate the confidence and supply agreement with ACT. I again draw members’ attention to the contribution made by the leader of the ACT Party. A good 50 percent of his speech was a distraction to many members of the House and to those who were listening to the debate in a very serious way.

We have also seen the dismissal of the intent of the biofuels sales obligation—putting at risk private sector investment, and local jobs in small communities. If this is the Government’s leadership in this area, then I will have nothing of it. I know that many more people feel the same way.

The third thing we have seen in the last 2 weeks is the ramping up of thermal generation; a message that says we should be ramping up thermal generation through the introduction of this bill. There has been much talk in this House about great leadership, a brighter future, and lifting aspiration. For those words to have real meaning, courageous steps in climate change have to be taken; action has to take place. Instead, the National-led Government wants to be a fast follower. That is right—a fast follower. Surely we should do more to encourage investment in renewable energy, to ramp up our effort in energy conservation, and to promote new technology to reduce carbon emissions. There is no sign of this happening under the Government. Instead, it chooses to walk quickly into the past, forgetting about a sustainable future, forgetting about what people think, and how this bill might affect them. After all, we are here under urgency, limiting opportunities for members of the public to hold this Government to account.

Comments were made earlier—again, by the ACT leader—about the issue of the regulatory impact statement. There is nothing of that nature with this bill. The public have had no opportunity for this bill to be heard at a select committee where they can raise their concerns. More important, people in the Prime Minister’s own electorate have taken to writing letters to the editor to be able to express their very serious concern of not being able to present this issue to their local member of Parliament. We should be concerned. A local resident in Helensville says: “Local residents and lobby groups like my own have had the brush-off from Mr Key’s electorate office when requesting a meeting to discuss local issues before the election. These include energy and climate change policy relating to the Genesis energy proposal to build a non-renewable energy gas-fired power station at Kaukapakapa. After the election, it is too late; the hearing is next month.” His own residents have taken to writing letters to the editor, when a simple hearing would do.

So we should not be surprised that this bill is being put forward under urgency, not going to a select committee, not enabling local people to have their say, not enabling those people whom we purport to represent to share their view on what I think is part of a range of measures that the members of the public deserve to have a say on. Surely a bill with such an impact on the Government’s overall approach to reducing greenhouse emissions should go to a select committee, but, sadly, it will not. That will be the legacy and track record of this National-led Government’s attempt to meet its sustainability challenge. That will be a very sad face.

Earlier this year, in the Prime Minister’s own electorate, in Helensville, a number of members in his local community just wanted to meet him, and that did not happen. Even during the election campaign Mr Key took a balanced approach by sitting on the fence saying one thing to residents, and possibly another to his caucus who were busy dealing with the detail of this policy after the election—only after the election. We can only surmise that, because this bill is being rushed through in urgency at a time when it deserves public scrutiny.

MPs come to this House and have the privilege of representing their constituencies and their communities. Sadly for his own constituency, the Prime Minister cannot do this; this is the legacy of how the National Government will run the Treasury benches over the next 3 years. We will be back here revisiting National legislation, because it has failed this country and the challenge to seriously deal with climate change.

We cannot have leadership that denies some inevitability about the state of our environment. We cannot be fast followers; we have to be leaders. We cannot be deniers; we have to take responsibility and action. I am a Huntly girl at heart and I was raised there for most of my life. We used to jokingly say that we had the largest light bulb in the country: the Huntly power station. In this House, there is no one who would like more than me to see the retiring of the Huntly power station in favour of renewable energy, but that decision would need to ensure that communities are better prepared to absorb the impact of meeting new employment opportunities, and I hope that that may come through the clean-up of the Waikato River.

I think this bill does very little to lift aspiration in our country’s efforts, and it requires a whole-of-Parliament approach to say that we accept that climate change is an urgent matter that we all must agree to do something on. The lack of leadership provided by the Government is of concern, and we need only look to the changes that have been achieved over the last 2 weeks. Gains under Labour were more than aspirational. We took active steps to tackle climate change through recognising the important contribution of renewable energy to supply the energy sector, strengthening an energy-efficiency campaign and supporting Green Party initiatives like retrofitting homes and encouraging solar water heating, greater investment in public transport, introducing a biofuels sales obligation, supporting smart procurement initiatives, introducing market tools like the emissions trading scheme, and encouraging support for new technologies through research and development tax credits. These are just a few of the real steps taken by the Labour-led approach, and, sadly, in only 2 weeks, all of them have been abolished and reversed by the National-led Government. Its members are not offering leadership when it matters most to the future of New Zealand.

CHRIS AUCHINVOLE (National—West Coast-Tasman) Link to this

I guess anyone listening to the discussion we have been having would wonder what the fuss is about. Earlier we heard from Jeanette Fitzsimons, who I thought spoke extremely well when she described the original legislation as toothless from the very beginning. She thought that it would never work and that it was pointless to have it. In that case, surely we are meeting the requirements for getting rid of it. The previous speaker, Nanaia Mahuta, whom I have considerable respect for, talked about how important it was to have that legislation. But it does not actually do anything. The reality is that the costs of thermal generation are quite high. I cannot imagine a generator thinking “Oh goody, let’s rush into it.” That is not the way it works.

This is a Government that keeps its word and delivers on its promises. The Opposition, sadly, needs to get used to that; we will give those members a little bit of time.

CHRIS HIPKINS (Labour—Rimutaka) Link to this

To take up the point of the previous member when he asked what all the fuss was about, I thought I would go back to the purpose of the Electricity Act 1992 we are repealing here today and talk a little about that. The purpose of Part 6A of the Act, as stated in section 62A, “is to reduce the impact of fossil-fuelled thermal electricity generation on climate change by creating a preference for renewable electricity generation through the implementation of a 10-year restriction on new baseload fossil-fuelled thermal electricity generation capacity, except where an exemption is appropriate (for example, to ensure security of supply).”

Let us run through that for a moment, and just consider some of those things: “to reduce the impact … on climate change”; well, I think surely members on this side think that that is a good idea. We have always believed in human-induced climate change. We do not take the “balanced” approach of National members, who believe that it is a hoax one day and believable the next, and who then come back and repeal all of the climate change legislation. They have a balanced approach on the same day, in fact; they change their minds as they go along.

JONATHAN YOUNG (National—New Plymouth) Link to this

The ban on new thermal baseload generators is part of the emissions trading scheme, as members know, and it has the intention of reducing carbon dioxide emissions in New Zealand. This ban has created a scenario that the designers of the policy may not have foreseen, and had they foreseen it they may have thought twice.

Members might quickly disregard the following statement, because it comes from a stakeholder in the oil and gas industry: “The Government’s planned 10-year ban on gas-fired base-load power stations is ‘ill-conceived’, posing risks of much higher power prices, and risks for the oil and gas sectors, power security and the economy.” Todd Energy said that, in March this year. Members might quickly disregard that statement, but I believe that this policy has led not just to those weaknesses and concerns but also to an environmentally unsound outcome, as well. I will explain this to members, because they may find that to be a bewildering statement, as well. I will tell members why it delivers a worse situation, environmentally and socially, and why it is an ill-conceived policy.

The moratorium essentially says to those companies that explore and mine for oil and gas that there is now a diminishing market for their gas. Daily costs to explore for oil and gas are moving upwards towards $1 million per day. That is $1 million a day for helicopters, support crews, platform costs, etc. If one suddenly finds oneself with a swiftly diminishing market, then one has lost the serious motivation to invest that sort of money. So exploration and, subsequently, the supply of gas to the New Zealand market begin to be threatened.

This, of course, is OK if one wants to stop the increase of thermal generation. But the problem is that around 50 percent of the plants built since 2000—plants built under the last Government’s oversight—are gas-fired thermal plants. The major players that this affects are Genesis and Contact Energy, which have embarked on a project to now import liquefied natural gas (LNG) in order to secure their security of supply for electricity, because nearly all of their power stations run on gas.

The managing director of Todd Energy commented: “Damage to the gas sector will increase gas prices in the long term. Ironically this upward pressure could actually lead to a switch back to coal or other more GHG intensive sources of energy.” Such a greenhouse gas - intensive source of energy is LNG. The Contact Energy and Genesis consortium called Gasbridge is proposing to import LNG to New Plymouth to fuel its gas-fired plants as an insurance policy in case gas supplies run out.

To produce LNG one has to refrigerate it to minus 162 degrees Celsius, ship it in specifically designed tankers from a LNG production plant located in a different place on the planet, offload it, and through a heat process convert it to gas so that it expands to a volume 600 times greater than what it was stored at. Then one can use it to fire a power generation plant. This process creates a carbon footprint that is far higher than that of natural gas, which we source from our own reserves. Indigenous natural gas produces 52 kilograms of carbon dioxide per gigajoule of energy. A full fuel cycle using coal produces 99 kilograms of carbon dioxide. The full fuel cycle analysis on gas through the LNG process showed that the overall emission was 73 kilograms of carbon dioxide per gigajoule of energy. That is a 40 percent increase in greenhouse gas emissions due to the process of production, transportation, and conversion to gas. This is what is happening in New Plymouth, where a consortium wants to establish an LNG terminal because it cannot trust the gas supply as a result of the proposed ban on thermal base generation.

This moratorium seeks to decrease greenhouse gas emissions, but it is actually serving to create the need and opportunity for LNG to come to New Zealand, and this will increase greenhouse gas emissions. Although it might not increase them from here, it will increase them overseas at production plants, and as tankers carry LNG across the planet. Thank you.