Hodgson Pete: Urgent Debates — Energy—Project Aqua Cancellation 
Hodgson Pete: Urgent Debates — Energy—Project Aqua Cancellation 
[Volume:616;Page:12057] 
Hon PETE HODGSON (Minister of Energy) 
: 
 I want to thank the member who has just resumed his seat for what I thought was a really thoughtful contribution on what is an emerging issue of some consequence. There is no doubt that this country faces a challenge in the security of its electricity supply or as the member more correctly puts it its primary energy source of supply. That was created in part by the earlier rundown of Maui gas and in part by the fact that for the past three decades this country has had an ability to rely on one of the largest gasfields in the country—and I am sorry to say with the wisdom of hindsight to squander that—and it is now augmented by the fact that Project Aqua will not go ahead. 
As Minister of Energy for the past couple of years I have lived with two possibilities—one that Project Aqua would proceed and the other that it would not proceed. My position the Government’s position—the position we held right through that time until now until we knew—was as follows. Firstly if Project Aqua is to proceed please let it proceed on time and not 5 years after the event. People need to know with certainty what new generation is coming on and roughly in what new year. Secondly if it is not to proceed could we please know as soon as possible? Meridian’s somewhat surprising announcement yesterday has certainly achieved the second of those two aims. 
We have the ability as a country to rearrange the generation projects that are on the drawing boards—to bring to the front-burner those projects that were on the back-burner until yesterday. I am sure that over the next 12 months—in fact quite possibly over the next 24 hours—we will see various statements by various people as to what they intend to do. It is of critical importance to the economy that we have a reliable supply of electricity and a reliable supply of energy. It is critically important to any economy. The problem of not having a reliable supply has faced California a number of South American countries Western Australia a number of European countries—including Germany France and Italy—North America and Canada in recent months with a transmission outage and so on. Modern economies require a modern reliable high-quality security of supply for energy and for electricity in particular. 
The member went on to say that this country needs cheap energy. I suggest to the member that cheap energy is a good idea but it is not necessarily possible within the framework of security of supply. That is to say it is not possible to continue to build electricity generation and not have the price go up because the best sites and options have already been exploited. That is in the nature of the industry. 
I do not think the member is suggesting that the taxpayer should subsidise the electricity user. No he is shaking his head. I think we have to have fairly priced electricity. I do not think we should put up with anything that resembles overpricing of electricity or even the possibility of overpricing but I think we are starting to move beyond the idea of cheap electricity which is something that existed in this country in earlier times—probably in the second half of last century. 
In other words we have seen an increase in the last 4 or 5 years of from memory a little under 10 percent real. I think we are likely to see an increase of that ilk over the next 10 years or so as we move from being the very lowest in the world to nearly the lowest. That would be my best guess. It may be that some states in Canada will come under us that Queensland will come under us briefly as it moves into a relative oversupply situation but cheap electricity over the long term is I think unlikely. 
In respect of the Dobson scheme I will make two brief comments to the member. First it is an ecological area and the member needs to decide whether he thinks drowning ecological areas is a plausible idea. Secondly the larger area that was offered up is itself not threatened. So there is no gain. 
In respect of coal I decided to front coal because I am sure every ACT party member National Party member and possibly New Zealand First Party member will want to know why we cannot be nice and bad and dig a whole lot of coal out of the ground and set fire to it. I say that we are burning a lot of coal in this country at the moment at Huntly. Thank goodness because Maui has a shortfall. The Huntly power station is dual-fuelled and I am grateful for the fact that we are able to burn coal when we need to especially in wintertime. 
Further there are plans for more coal and electricity production all over the place. I have heard of them in Buller Canterbury Southland at Marsden Point—in fact I have heard of about three at Marsden Point—and in Huntly again. I say to members who will be asking why no new coal generation has been built that the answer lies in price. Generally speaking South Island coal which is a little cheaper than North Island coal is none the less a little more expensive with or without a carbon charge than other alternatives. North Island coal which we are using a little in extremis at the moment is more expensive still. 
It is true and it needs to be said nice and openly that some people disagree with the figures the Ministry of Economic Development has put out. Those people who have an interest in coal say that those figures are no good. I say: “Go and build the station.” We have very large amounts of coal in this country but the truth of the matter is that renewables are cheaper. When the carbon charge comes on that will put up the price of coal again by about 1.5c but think about the flipside of that. The idea of having a carbon charge through the economy is that it augments renewables but not only that one can use carbon credits to augment them further. 
Indeed that has already happened. Later this week I will announce the results of 4 billion tonnes of carbon dioxide going out as carbon credits. In fact I draw to the attention of the House that in the last Budget—for the first time—we had two currencies one was the New Zealand dollar and one was carbon credits. Those 4 million carbon credits were used to bring on a lower carbon dioxide future—for example through renewables—than we would otherwise have using plants that would not otherwise have been built because they are not economic because we have not internalised the externality of environmental damage. A great deal of generation will occur as a result of that project. I will announce the details later this week but roughly speaking we are talking about one-third of Project Aqua from 4 million tonnes of carbon dioxide. What is more we will do it again next year because I hope to secure further tonnes of carbon dioxide in the form of carbon credits in the forthcoming Budget. 
For those people who think that there is no energy resource in this country I refer them again to  
New Zealand Energy Outlook to 2025 
 produced by the Ministry of Economic Development. It states that we have an awful lot of resource available—that is to say not in conservation estates and in areas where one is unlikely to get the go-ahead. For example in the hydro arena about 1600 megawatts still remains to be developed excluding Project Aqua mostly in small hydro stations. 
In the geothermal area the estimate from the Ministry of Economic Development is 5200 megawatts. We use only 8000 now. Not all will go ahead—I acknowledge that this is potential. In the area of wind a further 4000 megawatts can go ahead so this country can look forward to a renewable future without having to go to the new technologies of wave tide photovoltaics and on it goes. There is no need to do that at least no need yet. By the time those prices come down this country will be able to augment its energy needs as necessary. 
The other thing I want to talk about is electricity demand and say in a fairly matter of fact way that California which ran into very serious problems across two summers—with blackouts right across one of the most advanced pieces of civilisation on the planet—has subsequent to that event achieved all its gains by conservation efficiency and renewables. I am advised that not one non-renewable plant has been built in California since then. That is a really interesting prospect because it means as the leader of the Green Party said during question time this country could improve its efficiency we think by about 20 percent. What is good about the inefficient use of energy? Is it remotely useful to waste the stuff? Regrettably we do. Why is that? It is because of a lack of a regulatory framework it has been cheap and we have not paid attention. There are all sorts of reasons so there are very significant gains to be made there. 
That said this country will always need more supply. Each year for as long as I can foresee there will need to be some supply. It is true that we currently think we need 150 megawatts. We should check the figures to see whether 150 megawatts a year is coming. In the 12 months ending this winter the new addition will be 220 megawatts. We need 150 megawatts and 220 are coming. Before next winter we will need 300 megawatts and 350 will come. If we go out 4 years we will need 600 and a total of 800—not including Aqua—will come already consented fuelled and on the front-burner. We need not be concerned about the immediate future but we should always think further out. If we think further out this country has many resources. However they will not be available cheaply. 
In respect of the reforms by Max Bradford I say to the member in relation to his comments that I have signalled very clearly that the threshold should come up. I have suggested five-fold. If the member wants to raise it ten-fold in the select committee I am open to that. That would become a select committee decision. In respect of gas exploration within a month this Government will answer the following question: should we or should we not further induce gas exploration? It is increasing quickly but it probably needs to increase more. 
This debate will no doubt degenerate before too long so let me get under way. In relation to Project Aqua Bill English said: “National cautiously supports Project Aqua.” Nick Smith said: “National opposes the special Project Aqua legislation.” Don Brash said: “No political party should be saying yes or no.” Those are the viewpoints of the National Party none of which has come from Roger Sowry. I have pages of National Party quotations. I learn that the Opposition spokesperson on energy is Mr Sowry but we do not have a quotation from him. We had hardly a question from him and in case Mr Shirley decides to get to his feet later on Mr Shirley said earlier that the Government’s “appalling” attempt at fast tracking the project was akin to its National Development Act Repeal Act. Believe it or not Mr Shirley said yesterday that for political reasons shareholding Ministers had directed Meridian Energy to drop Project Aqua. What sort of a viewpoint does that member have that lasts for about 5 minutes? Not much at all! We are talking about a 180-degree turn. 
I thank the member for introducing the debate to the House and I thank Mr Speaker for allowing it. It is an important debate. The Government is aware that the energy future of this country needs to be paid close attention to. It is being paid close attention to and I invite other members to take part in the debate—I hope without reaching for the calamity word or the hoary old chestnuts that have dogged the debate so far. Hope does spring eternal.