Transpower has begun “creative” work on an electricity conservation campaign that it fears could be needed by late January if it does not get substantial water inflows into its hydro lakes.
Meanwhile, the Government announced yesterday that it would take a suite of measures to deal with the electricity crisis, but none will immediately produce any more power.
And it is power that is short.
Arguments about the power prices, although important, are a sideshow to the real issue.
The current crisis is primarily caused by the country’s lowest hydro lakes since 1992.
With the possibility that the power shortage could extend into the new year, it is becoming the first real test of Prime Minister Christopher Luxon’s ability to manage a crisis.
Transpower warned as far back as January that hydro storage had been below average since November 2023 because inflows had been lower since October 2023.
At the same time, gas production from the major Taranaki fields was running nearly 20 per cent behind the same time last year.
Transpower was also warning that wind flow was lower than usual.
It might have been hoped that late winter rain would solve the problem as it did in 1992.
But so far, it hasn’t.
That is why Transpower is now preparing for the worst and the possibility that the supply situation will worsen in the new year.
Last night, Meridian reported that its South Island lakes were touching their bottom limits except Manapouri, which was at about its average level for this time of the year; Genesis reported a slight rise in Lake Tekapo after some rain fell on the Southern Alps.
The Government response has been driven by Energy Minister Simeon Brown, Regional Economic Development Minister Shane Jones and Infrastructure Minister Chris Bishop.
Interestingly, no ACT Ministers are involved; this is a National – NZ First response.
Yesterday, the Ministers, giving every impression of having moved into crisis mode, announced a series of moves to address the shortage.
The one that is potentially the most far-reaching is to be a review of the electricity market.
This review will be alongside reviews already being conducted by the Electricity Authority and the Commerce Commission.
The Prime Minister, Christopher Luxon, said the Government would examine the market regulatory regime to determine “whether it is delivering competitive, affordable prices.”
“I think we all know at the moment when we don’t have affordable prices, but we want to show that it is competitive and that we’re seeing an investment in New Zealand.
“And we want to make sure that the regulatory framework can deliver what is required during a time of great change.”
What went unsaid here was whether the study would investigate splitting the gentailers into generating and retailing companies along the lines of the 2011 Telecom split.
The small independent electricity retailing company, Octopus, has argued that the big gentailers sold power to their retail arms at much lower prices than what it was priced at on the wholesale market.
The consequence, says its CEO, Margaret Cooney, is that the market here is not conducive to Octopus scaling up with its innovative market solutions like smart meters.
“I think the key issue is we have a supply shortage,” said Energy Minister Siemon Brown at the media briefing.
“That is the focus. We want to make sure we have competitive markets and we have affordable prices and we’ve got a secure supply of energy. That’s the key thing, “ he said.
“There’s a lot of commentary on these issues. But critically, that is the most important element of what we do.
“There are some key issues around ensuring that small retailers and industrials are able to access the hedge market, which has become a major issue, which is something that we expect to be dealt with.”
In a separate regulatory move, the Government has agreed to ease the restrictions on lines companies, which are currently prohibited from owning generation assets of more than 50MW connected to their own network and are also required not to own assets of more than 250MW connected to Transpower’s network.
This move will be particularly relevant to Northland’s Top Energy. Last year, it had to get an exemption from the Electricity Authority to allow it to nearly double its Ngawha geothermal generator to 117 MW and build a 10 MW solar farm.
The Top Energy plan is ambitious and would require Ngawha to produce as much power as some of the smaller stations, like Karapiro on the Waikato River.
At yesterday’s media conference, Ministers also highlighted a number of moves, such as the RMA Fast Track consenting process, Transpower’s decision to allow South Island generators to access their contingent water in their lakes, and the proposal to import LNG.
They also proposed a regime for offshore renewable energy that would be in place by mid-2025 to open the first feasibility permit round in late 2025.
Brown and Infrastructure Minister Chris Bishop said this would give developers greater confidence and certainty to invest and enable the selection of developments that would benefit New Zealand most.
What they didn’t say was that it might be a way around the intense opposition from some Taranaki environmental and Maori groups to offshore wind out from the Taranaki coast.
If there was a niggle yesterday, it was over the slow response to the removal of the ban on offshore gas exploration and access to conservation land during gas exploration and drilling operations.
This requires an amendment to the Crown Minerals Act, which the Minister promised yesterday would come with “urgency”.
However, that didn’t seem to convince Energy Resources Aotearoa, whose CEO, John Carnegie, said he remained concerned that the Government did not appear to be proceeding with enough urgency given the magnitude of the problems that had emerged.
Carnegie said the state of the domestic gas sector has been well-known and signalled for several years.
“We strongly urge the Government to move with urgency to pass the proposed amendments to the Crown Minerals Act and encourage appraisal and production of New Zealand natural gas through the necessary regulatory pathways,” he said.
This power situation is the first real test of the Government and its ability to manage a crisis.
At this stage it requires the technical skills that Bishop, Brown and Jones can bring to the energy shortage.
But if, as Transpower fears, it continues on into next year and if the public has to start cutting back its electricity use, then it is going to require leadership skills from the Prime Minister.
As the former British Prime Minister Harold MacMillan famously replied when asked what was most likely to blow governments off course, ” Events, dear boy, events.”
