Hon GERRY BROWNLEE (Minister of Energy and Resources) Link to this
I move, That the Electricity (Renewable Preference) Repeal Bill be now read a third time. What a demonstration of supreme arrogance we have seen from the Labour Opposition this evening. When the Hansard record is perused, it will be extraordinary to note not only the weakness of Labour’s argument but also the fact that throughout the evening Labour members had to rely on a lot of personal attacks on colleagues of mine to get them through the argument. You see, I suppose for all those new members who have come into the Labour Party there is no need to be apologetic about the debacle of the last election result. Of course, they will be basking in the success that they have personally enjoyed. Unfortunately, this debate confirms that the Labour Party is just as arrogant and out of touch today as it was on 7 November.
The bill deals with this very, very simple problem: for decades now we have seen a neglect of the generating assets of this country, which has meant that New Zealand has put itself in the position of having a less than secure electricity system. If anyone on the other side of the House wishes to argue against that proposition, I ask them to just look at the recent history. In 9 years the Labour Government managed to preside over four one-in-60-year events in the electricity sector. That is not something that just happened by coincidence. It is something that happened through that Government’s very much designed neglect.
The thermal ban is very, very symbolic. It was extraordinary to hear the previous Minister of Energy, David Parker, argue over and over that there was no need to repeal the legislation. In essence, his argument was that it had no effect anyway. When we think about it, we are left with the question about what exactly the plan was that that Minister was trying to follow. The reality is that over those 9 years not only did carbon dioxide emissions from the electricity generating sector climb considerably but so did the price that New Zealanders paid at a retail level for their electricity. The people Labour claims to be so concerned about—the poor and middle-income people who struggle to pay bills at times—saw a 63 percent increase in electricity prices over the time that Labour was presiding over this portfolio.
More than that, that figure represents a two and a half times inflation for each of those 9 years. That cannot be a record that any Government would be comfortable with. The question is why that occurred. Well, it is simply that Labour was too harsh in the way in which it dealt with hydro-generating applications. They were knocked over, one after the other, if not by the resource management process, then, in many cases, by the Minister of Energy or a Minister inside the Government. The consequential effects were that after the crisis of 2003, with great fanfare and a huge amount of trumpeting, the Government backed the development of the e3p plant at Huntly by underwriting a gas contract for Genesis Energy. That is a thermal plant built by a Government that was so committed to renewable energy. As if that was not enough, the Government decided it needed to back itself up by having an emergency capacity—a capacity that would produce up to 3 percent of New Zealand’s electricity needs at tight times. So what did Labour do? It built a 150 megawatt diesel-fired plant at Whirinaki. Those were Labour’s responses to the neglect that had gone on in those early years.
Not only that, Labour decided that it had better fix the organisation of the electricity industry by putting in another committee—another body, another bureaucracy—the Electricity Commission. Over the first 5 years of its existence, the Electricity Commission has taken some $230 million off New Zealanders. That is over and above the 63 percent price rises, and over and above the two and a half times per year inflation rise.
Hon GERRY BROWNLEE Link to this
I say to Mr Parker that it is. There we go: here is a man who has his head so far in the clouds that he does not even read his own electricity bills. That is a straight levy; it is $250 million taken straight out of the pockets of New Zealanders to set up a bureaucracy that has achieved what? We have gone from being a country that was able to generate its delivered electricity from 72 percent from renewable sources to a country that is now producing about 66 percent from renewable sources. It is a massive fall, and all this has come from a party that all through this debate has said that it was all about renewable energy when it was in Government. I just find that totally, totally—I cannot say the word that I would like to, but I am incredulous.
The member Shane Jones used a lot of “ous” words; he said this legislation was “ruinous”, “egregious”, and “circuitous”. Well, I think many of those arguments could be mounted for the way the Opposition has handled this debate. Members opposite can screw up their faces all they like, but they have an appalling record in this area. The barefaced facts are right there in front of them—72 percent down to 66 percent, price rises of 63 percent, $250 million out of the pockets of New Zealanders, and this year 70 million - odd litres of diesel burnt in the Whirinaki emergency plant. That indicates that the party now in Opposition did not have a clue what it was doing in Government—not a clue.
Hon GERRY BROWNLEE Link to this
Mr Hodgson—the man who presided over the establishment of the Electricity Commission, the man who made the decision to underwrite the gas contract for Genesis, and the man who made the decision to build Whirinaki—says he is going to stand up in a minute and give us a history lesson. Well, history lessons are interesting, but they make no difference to the consumers who have to pay the price.
I tell the House that in advancing this bill we should put a bit of a rationale into the mix for decisions that will be made by those who invest in generation in this country. Why would we want someone who is proposing a wind project to have to go cap in hand to the Minister to ask whether he or she could put in some thermal generation to back up that particular project? It makes no sense. We think those organisations are capable of making those decisions themselves.
There will be fuel substitution as a result of this legislation passing today. I suspect a greater number of renewable projects will be advanced, because although the Government talks about them and they may well be consented, very few are actually in the build stage.
This legislation simply recognises the repeated comments put before the Finance and Expenditure Committee at the time it was first considered. Those comments essentially damned the proposition. It allows the industry itself to make rational decisions about how future investment is made, and this country needs a heck of a lot more of that if we are to see some curb in the outrageous price path that is the legacy of the Labour Government.
Hon DAVID PARKER (Labour) Link to this
It will not be lost upon listeners to this debate, and listeners to the debate in this House over the last 2 weeks, that Gerry Brownlee, who accused the Labour Opposition of arrogance for doing the job of the Opposition—in terms of trying to show the weaknesses in legislation and the poor processes—was the very member who under urgency has pushed through legislation that has not had the benefit of select committee consideration. That member sat in the chair like a stuffed dummy and did not take one call in the Committee on the Electricity (Renewable Preference) Repeal Bill—not one call. And we are accused of arrogance! He abused his position in the chair. He made the occasional interjection, but did not take one call—not one call. His answer to curbing emissions growth in the electricity sector is to make it easier to build more fossil-fuelled thermal plants. When we boil it down, we see that it is as simple as that. The Government is pretending to want 90 percent renewable generation, but its answer is to make it easier to build more fossil-fuelled electricity plants.
The Government claimed earlier that the legislation as it is currently drafted stops the retirement of inefficient thermal plants, but that has been shown to be wrong. It is an issue that Mr Brownlee has not responded to either as the Minister in the chair or in his third reading speech. We showed that the legislation currently allows an exemption to the restrictions on new, more efficient, thermal electricity generation that retires old, less efficient, thermal electricity generation—a new gas-fired station to retire part of the coal-fired Huntly power station, perhaps. But, of course, the ability to exert that sort of control is lost because of this repeal legislation, and in future we will see more gas-fired power stations as well as coal-fired power stations.
Mr Brownlee makes a lot of the fact that the e3p power station was built. Actually, e3p was the only significant thermal power station added during the period of the Labour Government, and it was necessary for the security of supply. That is why it was done. That is one of the reasons why we have security of supply exemptions under the legislation as it currently stands—they are occasionally necessary—but we have got to the point where it is less likely that they would be necessary in the future, because we have brought forward wind power through good projects to reduce emissions. That makes it affordable and helps some of those projects through the consent process, and in the last year we have built only renewable generation. Indeed, against a background where we need to build additional capacity of about 150 megawatts a year to meet demand growth, this year we have 426 megawatts of additional capacity under construction and it is all renewable electricity generation.
So what we did turned the corner; it worked. We had geothermal and wind electricity generation coming forward, and we also had some hydroelectricity generation coming forward. I am on record as saying that I do not think we should need much more hydroelectricity generation. It has too much of an adverse consequence on our rivers. But some hydroelectricity generation has been consented to, and it will be built. That is another point where there is a lack of logic behind the Government’s plans, and this has been disclosed by the Opposition speeches. Mr Brownlee has the temerity to call the Opposition arrogant because we were doing our job, even though he did not take one call during his time in the chair.
Mr Brownlee makes a lot of the Whirinaki power station. I think he referred to 70 million litres of fuel—I cannot recall the exact figure. It sounds like a big number, and it is not small, but he talks in litres. If we convert that figure to greenhouse gas emissions, assuming 1 litre of fuel is roughly 1 kilogram of fuel, we find that that is 70,000 tonnes of carbon dioxide times two. So that is about 150,000 tonnes of carbon dioxide. It is not insignificant, but it is not enormous, either. That is because although the Whirinaki power station has quite a capacity, it does not run very much. It only runs about 1 percent of the time, and when we need it, we need it. We build thermal plants in that sort of situation rather than renewable plants because the capital costs are a lot lower, and the running costs, although they are higher, are incurred only when we are really short and we need it for a short burst.
This legislation is typical of the legislation that is now being promoted by the National Government. The Government says it wants to reduce emissions or to control emissions growth, and it pretends that it wants to meet the goal of 90 percent renewable generation by 2025, but it will not take the steps that it needs to take in order to get there. National criticises any regulatory intervention, saying that we should leave it all to market prices. It ignores the reality that in most of the market economies of the world there are regulatory interventions to lift the percentage of renewable electricity generation. The only real difference between New Zealand and Australia in that regard is that Australia is trying to lift from a very low percentage to something around 20 percent—I forget the exact number—and similar increases are being proposed in other countries. In New Zealand, because we are already at around 66 percent, to get to 90 percent we have to lift it by about 24 percent. So this regulatory intervention to lift it by 24 percent is not very different to the regulatory interventions taking place in other parts of the world.
The last point I re-emphasise is that we cannot rely on a carbon price when we do not have a carbon price. How can we rely on a carbon price to stop new thermal electricity when we do not have one? How can you credibly stand up in this House and say that, when you have a select committee set up to look at whether you should ever have a carbon price. We do not have one yet, and the select committee will be considering whether we should ever have a carbon price or whether we should just adapt to climate change rather than trying to reduce emissions. How can you credibly say that you have a carbon price that will forestall extra thermal generation, when the Government is not yet clear as to what the price of carbon will be?
The ASSISTANT SPEAKER (Hon Rick Barker) Link to this
Please keep the Chair out of the debate. The member keeps referring to “you”. Please keep the Chair out of it.
I am sorry, Mr Assistant Speaker.
The Government’s acolytes at the Business Roundtable—themselves fossils—are promoting fossil fuel use and a carbon tax, and they say it should be $5 to $10 a tonne. We know that when push comes to shove they will be saying $5 a tonne. We know that $5 a tonne, which is but 20 percent of the market price of carbon—
Hon David CunliffeThe international price is around $25 a tonne at the moment. Four-fifths of the cost would be left with taxpayers, and the Government would expose the participants in the electricity market to only 20 percent of the cost. That $5 a tonne would not be sufficient to forestall investment in thermal generation. It just would not work. So how can we pretend that we can control the growth in fossil fuel electricity emissions by putting a price on carbon when, first, we do not have it, and, secondly, if we did have it, it might be at an artificially low price that would not work?
In terms of the projects that we already have consents for, the details of these have been listed and provided to those who are now members of the Government on many occasions. Those members made Official Information Act requests and asked questions in the House, and the details of the projects have been provided to them many, many times. They know, like we know, that our cheap sources of generation that are readily available from renewable sources include geothermal generation. There has been a renaissance in geothermal generation in New Zealand and we are very, very lucky to have it, because were it not for that geothermal generation it would be quite difficult for us to meet that 90 percent target whilst maintaining the security of supply. That geothermal generation provides baseload generation. We have substantial quantities available, and we already know that it is economically sound because Mighty River Power and Contact Energy are both heavily investing in geothermal generation in order to bring those renewable projects to market.
I also refer to some of the confusion that the Minister of Energy and Resources referred to in his criticisms of the Electricity Commission. What does the Electricity Commission do and why did we need it? Well, one of the reasons was that after Max Bradford’s reforms, New Zealand was the least-regulated electricity market in the world. We had completely unregulated lines businesses; we now have regulated lines businesses. At the time of the previous National Government, we had about $50 million per annum being spent on capital investment in the transmission grid. That is now up to half a billion dollars per annum—a tenfold increase. So there is that level of investment, which is improving the security of supply. The Minister says security of supply is so parlous after 9 years of a Labour Government, but the reality is the opposite. Security margins in transmission have been improving year by year.
Hon Dr NICK SMITH (Minister for the Environment) Link to this
The first point I make in this debate on the Electricity (Renewable Preference) Repeal Bill is that there are some really important issues on which there is agreement across the House. The first of those is that climate change is the biggest and most important issue facing us, the second is that greenhouse gases need to be constrained, and the third is that we need to increase the amount of renewable energy we are generating in New Zealand. You see, the real argument here is not about the objectives but about how to get there. Where members disagree is that members on the Government side of the House favour price instruments and reform of the Resource Management Act, rather than the very crude and blunt regulatory instrument that we are repealing.
We have heard all sorts of extravagant claims from members opposite. Let me just go through their record during the last 9 years. Let us be fair here. Labour was in charge of climate change policy for 9 years, and National has not had 9 weeks. Before members opposite get on their hind legs and lecture us about successful climate change policy, I remind them what has actually occurred over the last 9 years. Emissions have increased from 68 million tonnes to 78 million tonnes. They have gone up by over 1 million tonnes per year. In terms of renewable energy, the record of the last decade shows that 75 percent of new generation that was built during the course of the last Government was thermal generation.
When we look back over the record of the last Labour Government and compare it with that of the previous National Government, the Lange-Douglas Government prior to that, the Muldoon Government prior to that, the Norm Kirk Government prior to that, and the Holyoake Government prior to that—and we can actually go all the way back to when the lights first went on in Reefton—we see that a greater proportion of thermal generation took place under the previous Labour Government than under any of those previous Governments.
Regarding international comparisons, the part I find most extraordinary about Labour’s contribution to this debate is that its members have said that Labour’s record of world leadership is being compromised by this legislation. Let me remind members opposite that I have here the record of the United Nations on increased emissions. Our records only go up to 2006, but my officials advise me that the record for 2007 and through to the end of 2008 is likely to be even worse. Let me compare the records where we have data. To the end of 2006, New Zealand’s emissions grew by 12 percent. Over the same period, emissions in Australia grew by 8 percent and emissions in the United States grew by 1 percent. Again, let me put the record straight. The record of the last Government on the increase in emissions was 12 times worse than that of the US under George W Bush. In the United Kingdom, emissions went down by 3 percent. In Germany, they went down by 2 percent.
The only thing Labour led during its period of Government was an increase in greenhouse gas emissions.
Hon Dr NICK SMITH Link to this
I say to Mr Cunliffe, who was a member of the Cabinet for that period, that we on this side of the House think a new approach is required. What is that new approach about?
Hon Dr NICK SMITH Link to this
I ask Mr Cunliffe why 75 percent of the generation built under Labour was thermal. I ask whether any member opposite can tell me why 75 percent of new generation built while David Cunliffe and Steve Chadwick were Ministers was thermal.
Let me answer the member’s question about what this Government thinks is a logical approach to this challenge. One of the biggest challenges for renewable energies is getting resource consents. Let me give members an example from this very city. Meridian Energy applied for a consent to build a major wind farm here in Wellington, and it took over 2½ years to get consent for that wind farm to be built. I think members on both sides of the House think that that wind farm would be a good thing, and that we need to bring it on stream. The truth is that by taking so long to get through the resource consent process, the previous Government had to build a lot of thermal generation to keep the lights on in the interim. This Government says it is time for a new approach. We will be bringing amendments to the Resource Management Act to streamline the process for the construction of new renewable energy, because that is the logical approach by which we can deal with emissions.
The question to ask is where we will provide the incentive. The part that is extraordinary about this Act we are repealing is that we could build the Huntly power station under it. I will tell members why. When the Huntly power station—the biggest single contributor of greenhouse gas emissions—was built, it was very clear that it was built as a peak-load station. I ask what sort of Act allows a Government to build a massive coal-fired power station as a peak-load station. How does this Act that we are repealing in any way protect the environment when someone could build a massive, 1,200 megawatt, coal-fired power station, say it was a peak-load station, and get that station exempt? I ask whether a single member of the House really believes that that is logical.
The last important point I make is that the one area I must say the previous Government did some good work was in developing a pricing instrument. The real way forward is to ensure that in every hour of every day, every electricity generator has a clear financial incentive for renewable power over thermal—not when it is built, but in every single hour of every single day. That is why I say, as the incoming Minister for Climate Change Issues, that getting a pricing instrument is a very important priority if we are to do better as a country in this important area of climate change.
Hon PETE HODGSON (Labour—Dunedin North) Link to this
The witching hour is approaching so I will limit myself to just a few remarks, and take up the call at 9 o’clock tomorrow morning.
I address the first remarks made by the Minister of Energy and Resources, Gerry Brownlee, at the beginning of this third reading debate when he called the Labour Party arrogant. I want to place on the record a rebuttal to those comments. It was not this party but National that decided that the Electricity (Renewable Preference) Repeal Bill would be debated under urgency. It was the Government, not the Opposition, that set the pace and decided we would be debating until midnight. It was the Government, not the Opposition, that said that this legislation must not go near a select committee, and that it must go through the House the week before Christmas when no one else is listening or taking a care because they are concerned with other matters. The Minister, through the entire Committee process, did not take a call except by way of interjection, at which point he was sat down, Mr Assistant Speaker Barker, by your very good self. The Minister took those actions, yet he calls the Opposition arrogant. That is a case of the pot calling the kettle black if ever there were one.
The Opposition’s job where it opposes legislation is to fight it to the closure. We have fought this bill to the closure and we will continue to fight it during the third reading debate until the time has expired. That is our way of offering opposition to something that we think is wrong. We take our opportunity to say why we think it is wrong. The Minister, on the other hand, took no opportunity during the Committee stage to either put his own arguments or rebut ours, yet he got up in the third reading debate and said we were arrogant. That is unfortunate.
I want to say some other things, but it depends on the time available. Perhaps I can sneak in a very quick story about Whirinaki power station. Whirinaki was built by the New Zealand Government in the Hawke’s Bay in around 2004 as a 150 megawatt diesel-fired power station. It was built there because until 6 months earlier there had already been a 150 megawatt, diesel-powered station at Whirinaki.