Electricity (Renewable Preference) Repeal Bill - First Reading Speech
Mr Speaker, I move that the Electricity (Renewable Preference) Repeal Bill now be read a first time.
The previous government inserted Part 6A into the Electricity Act 1992, which makes the connection of new thermal generation plant (above 10 MW) for which an exemption has not been granted a criminal offence, punishable by fine.
The provision is known widely as the "thermal ban". Eligibility criteria and matters dealing with the exemption application process were to be dealt with in regulations yet to be made.
This Bill repeals Part 6A of the Electricity Act 1992.
Let me first briefly outline the circumstances in which Part 6A was added to the Electricity Act.
The previous Minister of Energy, Hon David Parker, added the thermal ban provisions to the Bill which introduced the Emissions Trading Scheme at the very last minute.
The provisions had not been signalled in advance and the industry was taken completely by surprise.
The justification for the ban was written hurriedly into the explanatory note to the Bill and was somewhat deficient.
At select committee, the ban came under heavy criticism. All of the major electricity generators said they were opposed to it.
Major lobby groups like the Major Electricity Users' Group and the Business Council for Sustainable Development said the thermal ban should be dropped.
However, the previous Minister remained wedded to the policy and it became law with the passing of the Emissions Trading Scheme in September this year.
The current government has listened to the experts, agrees with the criticism of the ban, and we are now moving to repeal it.
Mr Speaker, I want to outline the specific reasons why the government is repealing the thermal ban.
The first reason is that the ban is a totally unnecessary intervention into the electricity market.
National believes that investment decisions in the electricity sector should be made on the basis of sound economics, with environmental effects taken into account through a price on carbon, rather than through some decisions being ruled out through the command-and-control style reflected by the ban.
Mr Speaker, if a price is put on carbon, it will incentivise the uptake of renewable generation technology because thermal generation would be subject to carbon charges, while renewable generation would not.
It therefore surprised us that the previous government felt it necessary to advance the thermal ban. This raises two questions. First, did they have confidence in their ETS? It looks like they did not. If they did, then the second question is, is the ban just a bit of political symbolism? We think it is.
Unfortunately that symbolism has dangerous consequences.
That brings me to the second reason why the Government is repealing the ban: it puts security of electricity supply at risk.
New Zealand's electricity system relies on thermal generation. Coal and gas-fired power plants generate around a third of our electricity each year.
Without coal and gas, the lights would not stay on. This was made clear in the winter of 2008, when gas and coal plant was, at times, supplying over 50% of New Zealand's electricity needs, due to the low level of the hydro lakes.
Thermal generation underpins the security of our electricity system and the ban creates an unnecessary hurdle for this vital resource.
New gas plants like the e3p plant at Huntly are highly efficient and produce relatively low levels of carbon emissions. The last government was so keen to see e3p built it underwrote the gas contract to ensure it had fuel.
More importantly, thermal plants like e3p can run around the clock and produce large amounts of electricity.
It is foolish for New Zealand to close off the option of more e3p-like plants if the gas is available and the electricity system needs bolstering.
The Government will leave investment in new generation plants up to the industry, which is best placed to weigh-up the capital and operating costs of new plant, and the availability of fuel into the future.
What we are not doing is ruling out types of plants carte blanche, when an economic and environmental case can be made for them.
I do want to make it clear now that the Government does not expect that repealing the thermal ban will lead to coal-fired power stations being built. That was not the situation before the ban came into force and nor will it be the situation after it is repealed.
The third reason why the Government is repealing the ban is that it does not lead to environmentally sound outcomes. This is because the ban blocks investment in new generation that could displace more inefficient and more carbon-emitting existing generation.
For example, the ban blocks the building of new efficient gas-turbines at Huntly, which could phase out the coal-fired turbines or return them to the reserve capacity for which they were originally built.
So the ban ironically would have ensured that for the foreseeable future, each winter, Huntly's coal-fired boilers would be fired up, and belch out emissions. That makes no sense whatsoever.
Newer thermal plants are very efficient. A modern combined cycle gas plant like e3p emits just under half the volume of C02 per MW of energy produced compared to Huntly when it is burning coal, and around 20% less than when Huntly is burning gas.
The fourth reason why the government is repealing the ban is that it disincentivises oil and gas exploration. Already the ban, in its short timeframe, has seen explorers and investors shy away from New Zealand.
Under the current ban, explorers have less opportunity to offset exploration risks and costs against gas sales, if NZ bans sales for new electricity generation. Repealing the ban removes this risk for explorers.
As I said at the outset, the current government has listened to the experts and agrees with the criticism of the ban. This is why we are now moving to repeal it.
I commend the Bill to the House.
Mr Speaker, I move that the Electricity (Renewable Preference) Repeal Bill now be read a first time.
The previous government inserted Part 6A into the Electricity Act 1992, which makes the connection of new thermal generation plant (above 10 MW) for which an exemption has not been granted a criminal offence, punishable by fine.
The provision is known widely as the "thermal ban". Eligibility criteria and matters dealing with the exemption application process were to be dealt with in regulations yet to be made.
This Bill repeals Part 6A of the Electricity Act 1992.
Let me first briefly outline the circumstances in which Part 6A was added to the Electricity Act.
The previous Minister of Energy, Hon David Parker, added the thermal ban provisions to the Bill which introduced the Emissions Trading Scheme at the very last minute.
The provisions had not been signalled in advance and the industry was taken completely by surprise.
The justification for the ban was written hurriedly into the explanatory note to the Bill and was somewhat deficient.
At select committee, the ban came under heavy criticism. All of the major electricity generators said they were opposed to it.
Major lobby groups like the Major Electricity Users' Group and the Business Council for Sustainable Development said the thermal ban should be dropped.
However, the previous Minister remained wedded to the policy and it became law with the passing of the Emissions Trading Scheme in September this year.
The current government has listened to the experts, agrees with the criticism of the ban, and we are now moving to repeal it.
Mr Speaker, I want to outline the specific reasons why the government is repealing the thermal ban.
The first reason is that the ban is a totally unnecessary intervention into the electricity market.
National believes that investment decisions in the electricity sector should be made on the basis of sound economics, with environmental effects taken into account through a price on carbon, rather than through some decisions being ruled out through the command-and-control style reflected by the ban.
Mr Speaker, if a price is put on carbon, it will incentivise the uptake of renewable generation technology because thermal generation would be subject to carbon charges, while renewable generation would not.
It therefore surprised us that the previous government felt it necessary to advance the thermal ban. This raises two questions. First, did they have confidence in their ETS? It looks like they did not. If they did, then the second question is, is the ban just a bit of political symbolism? We think it is.
Unfortunately that symbolism has dangerous consequences.
That brings me to the second reason why the Government is repealing the ban: it puts security of electricity supply at risk.
New Zealand's electricity system relies on thermal generation. Coal and gas-fired power plants generate around a third of our electricity each year.
Without coal and gas, the lights would not stay on. This was made clear in the winter of 2008, when gas and coal plant was, at times, supplying over 50% of New Zealand's electricity needs, due to the low level of the hydro lakes.
Thermal generation underpins the security of our electricity system and the ban creates an unnecessary hurdle for this vital resource.
New gas plants like the e3p plant at Huntly are highly efficient and produce relatively low levels of carbon emissions. The last government was so keen to see e3p built it underwrote the gas contract to ensure it had fuel.
More importantly, thermal plants like e3p can run around the clock and produce large amounts of electricity.
It is foolish for New Zealand to close off the option of more e3p-like plants if the gas is available and the electricity system needs bolstering.
The Government will leave investment in new generation plants up to the industry, which is best placed to weigh-up the capital and operating costs of new plant, and the availability of fuel into the future.
What we are not doing is ruling out types of plants carte blanche, when an economic and environmental case can be made for them.
I do want to make it clear now that the Government does not expect that repealing the thermal ban will lead to coal-fired power stations being built. That was not the situation before the ban came into force and nor will it be the situation after it is repealed.
The third reason why the Government is repealing the ban is that it does not lead to environmentally sound outcomes. This is because the ban blocks investment in new generation that could displace more inefficient and more carbon-emitting existing generation.
For example, the ban blocks the building of new efficient gas-turbines at Huntly, which could phase out the coal-fired turbines or return them to the reserve capacity for which they were originally built.
So the ban ironically would have ensured that for the foreseeable future, each winter, Huntly's coal-fired boilers would be fired up, and belch out emissions. That makes no sense whatsoever.
Newer thermal plants are very efficient. A modern combined cycle gas plant like e3p emits just under half the volume of C02 per MW of energy produced compared to Huntly when it is burning coal, and around 20% less than when Huntly is burning gas.
The fourth reason why the government is repealing the ban is that it disincentivises oil and gas exploration. Already the ban, in its short timeframe, has seen explorers and investors shy away from New Zealand.
Under the current ban, explorers have less opportunity to offset exploration risks and costs against gas sales, if NZ bans sales for new electricity generation. Repealing the ban removes this risk for explorers.
As I said at the outset, the current government has listened to the experts and agrees with the criticism of the ban. This is why we are now moving to repeal it.
I commend the Bill to the House.
