Megan Woods brushes off 'hurry along' from Environment Commissioner

Wednesday, 1 February 2023

Energy Minister Megan Woods says decisions are of great importance and the time they are taking is appropriate.

Energy Minister Megan Woods has brushed off concerns raised by the Parliamentary Commissioner for the Environment, Simon Upton, that the Government is taking too long to develop its energy strategy.

Upton stated in a lengthy letter sent to Woods in December that the Government’s goal of finalising an energy strategy next year risked being overtaken by events and was “unnecessarily drawn out”.

Issues faced by the sector in recent years include big swings in wholesale pricing, concerns over possible power shortages over the next few years, competition worries and doubts that the state-owned generators have sufficient incentive to invest in new generation under the current market structure.

Upton noted in his letter that The Boston Consulting Group had estimated that $42 billion of new investment in electricity system infrastructure would be required in New Zealand over the next decade.

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The “lengthy process” the Government was envisaging to develop its strategy could “contribute to undue uncertainty and would almost certainly invite arguments, narratives and actions by market participants whose interests are not necessarily aligned with the wider national interest”, he wrote.

“I am concerned that decisions taken by private and public agents over the next couple of years prior to the publication of the energy strategy could commit New Zealand to suboptimal outcomes for the economy and the environment.”

Upton said “a range of players” in the industry were expending a lot of energy trying to cast doubt on the possibility of the Lake Onslow pumped hydro scheme being developed in Otago.

State-owned “gentailers” Meridian, Genesis and Mercury have appeared sceptical of the possible multi-billion dollar investment.

But Upton said he believed commercial considerations were at play and the “system-wide benefits” of the possible investment in Lake Onslow must not be ignored.

“Despite what some gentailers say publicly, their own commercial interests are not necessarily aligned with the interests of the Government or of ‘New Zealand Inc’,” he wrote.

“Gentailers participate in a competitive electricity market to maximise profit for their shareholders. It is therefore in the best interests of gentailers to keep competition low and electricity prices high. This comes at the expense of securing the least costly transition to a de-fossilised economy.”

Parliamentary Commissioner for the Environment Simon Upton says the commercial interests of the major gentailers are not necessarily aligned with the interests of the Government or “New Zealand Inc”.

A host of developments including Lake Onslow, the accelerated deployment of electric vehicles, the need to transition away from natural gas, faster investment in solar and wind power and the fate of the Tiwai Point aluminium smelter were “large enough on their own” to have big implications, he said.

“Understanding how they might interact with one another is something different again. It is essential that we can gain an appreciation of how these different elements could play out in real time.”

Woods’ office has now released her response to Upton’s concerns.

She stated in a shorter letter that she considered the timeline set out for the development of the Government’s energy strategy was appropriate.

“These decisions are of great importance, and it is critical that they are based upon comprehensive whole-of-system analysis. The decisions we make will also require input from a diverse range of parties across the country,” she wrote.

Upton would not immediately comment on whether Woods’ response had allayed his concerns. His chief adviser, Matt Paterson, said he was “still considering what the letter means and his views on that”.

Upton’s letter identified several steps that he said the Government could take “immediately” to assist the transition to a low carbon economy.

They included additional investment in new distribution and transmission infrastructure, including upgrading the transmission lines under the Cook Strait to allow more power to be transferred between the North and South islands, and mandating that all new electric vehicles were sold with smart chargers.

Woods responded that the Government was taking action in some of the areas identified by Upton and said officials were “continually assessing opportunities for low regrets actions” that could be taken before the publication of its energy strategy.

Transpower separately announced on Wednesday that it was bringing forward the second $55m stage of a planned $144m investment upgrading capacity on the national grid in the upper North Island.

General manager of grid development John Clarke said managing transmission on that part of the grid had become increasingly challenging due to the retirement of fossil-fuelled generation over the last 10 years and the real and projected growth in demand for electricity.

“Since we began work on stage one of this project in 2021, the speed of change in the electricity landscape in the North Island has increased with greater electrification of industry and transport, new data centres and major new residential developments,” he said.