Parker DavidHon DAVID PARKER (Minister for the Environment): Thank you Mr Speaker. I know I'm not allowed to mention the presence or otherwise of a Minister but I am giving this speech today because the Minister is unavailable to give it. Could I begin by saying that regardless of the mechanisms and the rules of the electricity market in New Zealand which are complex it is absolutely the right of New Zealanders to expect that on a cold winter's night—indeed at any time of the day and night on any part of the annual cycle of demand—the lights will stay on and the heaters will stay on and the system will stand up to the demands of a cold winter's night. The situation that unfolded on Monday of course was unacceptable and I want to go a little into what happened—and the member Barbara Kuriger who has just taken her seat has summarised that but I'll restate that—and then I'm going to make some comments as to how it is that we're going to try to get to the bottom of what's gone wrong here.The system in New Zealand—you can't store electrons in the electricity system. You can store fuel in the form of hydro or in the form of coal and there is a complex system of rules that require every part of the system to be playing its part from the people who generate the electricity to the Transpower grid that transports large quantities of electricity through to the local distribution lines. All of that is controlled by the system operator which is Transpower and Transpower has the job of forecasting future power needs and matching the demand for power with the generators who provide the power that's transmitted to consumers. Now they look out a few days. About 72 hours ahead of demand they get serious about starting to try and predict future demand and then as they get closer and closer they get more confident in their projections of future demand. They have got rules that they operate in as to whether they think that the prospective bids that they have from generators who say they're willing to sell electricity into the system will match up with the anticipated demand.On Monday early in the morning they put out a notice which wasn't a great alarm; it was just Be aware that we think that we need some more generation bids." Then by lunchtime by around 1 o'clock they put out a more serious notice and said "Look we really could need some more juice here." Then in the absence of getting that required balance between generation and demand they had to take emergency measures later that evening telling the distributors of electricity to shed load in order to protect the system overall from collapsing. Some of the questions that need to be answered as Barbara Kuriger rightly asked is: was there proper communication with Ministers' offices? And those are proper questions to ask. I would make the point that irrespective of what the communication with offices should have been it wouldn't have changed the practical outcomes on the evening.Hon Gerry Brownlee: Oh come on.Hon DAVID PARKER: Gerry Brownlee says "Oh come on." Well actually the switches and the bidding system and the requests for further electricity generation do not come from Ministers' offices and never will never should and never did when he was Minister of Energy and Resources.In respect of the questions that now have to be inquired into I can inform the House that there are two inquiries. One actually arises from a contractual duty that Transpower have under their contract with the Electricity Authority that says when there is an event that shows up as a threat to security of supply they have to give an initial report to the Electricity Authority within 48 hours of the event. So that's under way and there will be some information provided to the Electricity Authority by Transpower in that regard. The Minister has instructed the Ministry of Business Innovation and Employment to commission a review and that will include a consideration of all of the relevant considerations.Was the peak demand estimate right? It was there or thereabouts but it's a proper question to ask whether they got that demand estimate right. The demand on the night was the highest ever but should that have been estimated? They got pretty close to the actual demand figure so it wasn't that far out but I'm sure that should be looked at. Was the communication to generators clear enough? Was the communication to local distribution companies clear enough and early enough?I'm aware of one particular issue there that wasn't quite right from Transpower. Transpower advised the distribution companies who are effectively the people that hold the switches locally that they were going to have to for reasons of protecting the network and to balance demand reduce demand by 1 percent. They then in a short period thereafter sent notices to the individual distribution companies that converted that 1 percent into a megawatt figure and the translation of that looks like that it wasn't correct. At least in some instances some of the lines companies—including the largest lines company in the country Vector—picked that up and they verified the correct number and therefore didn't use the other number which was higher than the 1 percent figure that Transpower wanted. They didn't use the higher figure; they used the verified number. Some other lines companies used the number that had been sent to them rather than the 1 percent and that resulted in some people and additional people being effectively cut off the network. Therefore the outage was in those areas probably larger than it would otherwise have been.We need to look at whether there were appropriate attempts made at appropriate times to reduce some of the demand that could perhaps have been moved by some of the large energy users. Was the communication with them by market participants as it ought to have been? We don't know the answer to that. Then of course we need to look at the question of what generators did—whether they brought on all of the available demand. Now the Minister in the House yesterday said that Genesis Energy made a commercial decision not to bring on the number three Rankine unit at Huntly. She didn't mean to imply by saying it was a commercial decision that there was some improper motive trying to manipulate the market; she was just making the point that they made a decision. They prefer to call it an operational decision rather than a commercial decision but the Minister's office asked me on behalf of the Minister to confirm she wasn't trying to imply some improper motive to Genesis as she was just trying to describe what in fact happened.Can I raise a couple of other shibboleths. This problem has not been caused by New Zealand's reliance on renewable energy. That's just factually incorrect—Barbara Kuriger: It will grow. It will grow because of it.Hon DAVID PARKER: —and I think the inquiries will bear that out. Beg your pardon?Barbara Kuriger: It will grow because—Hon DAVID PARKER: It will grow. The member Barbara Kuriger said it will grow as we push towards 100 percent renewables. Yes the system will become more reliant on renewables but properly designed the system can cope with that as it used to in yesteryear. Actually if you go way back we had far higher percentage of renewables than we had following the discovery of the big Maui gas finds in the Taranaki region in the 1970s and 1980s. We can have ever-higher percentages of renewables and have security of supply. That same argument used to be run at me when I was Minister of Energy in the 2005 to 2008 period by the Hon Gerry Brownlee who said we shouldn't have had a target of 90 percent renewables because that would put at risk security of supply. That wasn't correct and we're actually up to about 85 percent renewables and doing very well. It was actually good of the prior National Government to continue with that ambition.In respect of the issue as to gas versus coal at Huntly you know there's something in that. You know gas can be brought on more quickly than coal and I'm sure that's an issue that should be looked at by the planners of the system. That doesn't mean to say that we shouldn't be pushing towards higher levels of renewable but there are proper questions to be asked as to whether the system if it does need Huntly for the next few years to sit there as a dry-year reserve—as to whether we should have a pool of gas reserved for that purpose as opposed to a reliance on coal which might according to the member take longer to kick into action. A final point: some of the retailers have already said that they're going to pay some compensation to people who were disconnected for a period. I'm not sure whether others will follow but that's a matter for them. But I absolutely agree that this issue ought to be inquired into properly and that it ought not to have occurred."