Brownlee Gerry: Electricity (Renewable Preference) Repeal Bill — First Reading 
Brownlee Gerry: Electricity (Renewable Preference) Repeal Bill — First Reading 
[Volume:651;Page:864] 
Hon GERRY BROWNLEE (Minister of Energy and Resources) 
: 
 I move  
That the Electricity (Renewable Preference) Repeal Bill be now read a first time. 
 The previous Government inserted Part 6A into the Electricity Act 1992 making the connection of new thermal generation plant above 10 megawatts 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 but those regulations have not yet been made. This bill repeals Part 6A of the Electricity Act 1992. 
Let me first outline the circumstances in which Part 6A was added to the Electricity Act. The previous Minister of Energy the Hon David Parker added the thermal ban provisions to the bill that introduced the emissions trading scheme at the very last minute. The provision 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 of the bill and was somewhat deficient. At the 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 bill in September of this year. 
The current Government has listened to the experts agrees with the criticism of the ban and is now moving to repeal it. I will outline the specific reasons why the Government is repealing the thermal ban. 
The first reason is that the ban was totally unnecessary as an intervention in 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 decision being ruled out through the command and control style reflected by the ban. If a price is put on carbon it will incentivise the uptake of renewable generation technology because thermal generation will be subject to carbon charges while renewable generation will not. It therefore surprised us that the previous Government felt it necessary to advance the thermal ban. This raises two questions. The first is whether the previous Government ever had confidence in its emissions trading scheme and I have to say that it looks to us that it did not. If the Government did have that confidence that raises the second question which is whether the ban is in that case 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 plants generate about one-third of our electricity each year. Without those two fuels the lights would not stay on. This was made clear to the whole country in this winter of 2008 as it has been in three winters since the year 2000. Gas and coal plant were at times supplying over 50 percent of New Zealand’s electricity needs due to low hydro lake levels. Thermal generation then 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 the e3p plant built that it chose to underwrite the gas contract to ensure that the plant had the fuel. More important thermal plants like e3p can run round the clock and produce large amounts of electricity. It is then in our view foolish for New Zealand to close off the option of more plants like the e3p plant if gas is available and the electricity system needs bolstering. Further 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 carte blanche the types of plants that might be built. 
I do want to make it clear now that the Government does not expect the repeal of the thermal ban to lead to new coal-fired power stations being built. That was not the situation before the ban came into force 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 the Huntly plant that 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—should it have survived—ensured that for the foreseeable future Huntly’s coal-fired boilers would be fired up each winter to belch out very intensive carbon dioxide emissions. That to us 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 carbon dioxide per megawatt of energy produced compared with the Huntly plant when it is running on coal and about 20 percent less compared with the Huntly plant when it is running on gas. 
The fourth reason why the Government is repealing the ban is that it disincentivises oil and gas exploration in New Zealand. Already the ban in the short time it has been in existence is seeing some explorers and investors shy away from New Zealand. Under the current ban explorers have less opportunity to offset exploration risk and costs against potential gas sales. If New Zealand bans sales for new electricity generation we are not likely to see the exploration that this country could do with. Repealing the ban removes the risks for the explorers. 
As I said at the outset the current Government has listened to the experts and agrees with the criticisms of the ban. This is why we are now moving to repeal it. To make it very very clear exactly what our intentions are let me say this: when we look at the emissions profile from electricity we see one glaring place where there is an extreme amount of emission and that is the coal-fired plant at Huntly. We would note that there is a lot of renewable generation coming along. We are committed to the 90 percent renewable energy target and we do want to see more of that renewable generation developed. The fact is that there are times when we do have low lake levels. There are times when the wind does not blow. At those times there is a heavy reliance placed on the thermal capacity that this country has. So our simple view of this is to ask why we would shut out a fuel like gas as a potential source for electricity generation in the future when we know that even with much enhanced capacity in renewable generation there will be times when thermal generation is needed. During this winter it was about 50 percent of the time. It may drop during other winters but I do not think anyone in this House would be comfortable about telling New Zealanders two things: first that we are going to continue to burn coal at the rate we are and second that should renewable generators have those little down patches there is no thermal back-up for them. 
The thermal ban was a piece of political symbolism and we are repealing it today. I commend the bill to the House.