Brownlee Gerry: Electricity Industry (Small-Scale Renewable Distributed Generation) Amendment Bill — First ReadingText is incorporated into the Bound VolumeBrownlee Gerry: Electricity Industry (Small-Scale Renewable Distributed Generation) Amendment Bill — First Reading[Sitting date: 14 October 2015. Volume:709;Page:7276. Text is incorporated into the Bound Volume.]Hon GERRY BROWNLEE (Minister for Canterbury Earthquake Recovery): I think it is very interesting that the member Gareth Hughes makes an impassioned plea for New Zealand to move progressively towards more renewable energy. What I want to say to him is that in 2010 there were very significant changes to the electricity industry marketing arrangements that were designed to encourage greater use of renewable energy and in 2014 we saw that figure soar just a little above 80 percent of all our electricity being generated from renewable sources. We are on track to have that generation reaching 90 percent by 2025 so there has been a fundamental shift—probably the biggest shift—in the way in which electricity is dealt with in this country during the last 5 years. There is no question about that.The bit I disagree with the member on is the assertion that unless there is a higher price paid or a fairer price paid more people will go off the grid. The reality is that to stay on the grid at the moment represents a good deal for anyone who chooses to have some supplementary arrangements around generation for their particular home. I know a little about this because I am doing this myself. I expect that some of the household costs that I might face will be reduced because I will have a system where generated electricity will first meet demands at my own property and any surplus will then be exported over the import/export meter and as the member said picked up by perhaps a neighbour or someone else simply because it is the shortest distance for any of the electrons to particularly travel. But that does not take away the need for there to be a reliable grid for the times when there are not huge amounts of sunlight when there is not sufficient electricity generated from a roof space to supply either the needs of the particular residents or perhaps anybody nearby as well.So the issue is then what the balance is between a wholesale price that is struck for electricity which remember is struck on a market mechanism and the price that is paid for delivery of electricity to your home. At the moment if you look at it if someone has a solar system—and that is largely what we are talking about because there is not enough embedded wind for us to really get comparative figures on it at the present time—then if someone is with Contact Energy they will get an 8c a kilowatt hour payback for exported electricity. If they are with Genesis it is 5.46c a kilowatt hour. If they are with Mercury Energy it is 8c a kilowatt hour. If they are with Meridian Energy it is a 7c summer rate and a 10c winter rate. If it is TrustPower it is 7c across the year.The point here is that if you go to the deepest darkest part of winter this year 2015 the wholesale electricity rates—if you take just one day that is reasonably average for the days in July then you will get a wholesale electricity rate of somewhere around about 4 to 4.5c per kilowatt hour. The electricity companies will be buying at that rate and they will be selling at a higher rate but they have all of the infrastructure that is necessary to generate that electricity in the first place the infrastructure to monitor how much of that is being used and to actually be able to put a price on it. I do not think it is reasonable to say we want to have a structure that says that that price cannot fluctuate.The suggestion that somehow the Electricity Authority is going to come up with an algorithm that will deal with the embedded rate on a daily basis alongside some sort of spot price I think is hopeful thinking. What it will lead to is higher prices because you cannot have a demand for electricity in New Zealand that is relatively constant in its growth rate—although substantially reduced on what we faced in 2009. In 2009 we were looking to have to add about 150 megawatts per year of generating capacity to the system each year. We are nowhere near that now because there has been this different way of dealing with electricity. But to say that the next step is to tie the feed-in tariff effectively to some sort of formula struck by the Electricity Authority I think will not lead to lower prices. It will lead to higher prices in fact because the higher you go with that price if it is struck at a reasonable rate the greater the burden it is—or you become as the generator in my case—on everybody who takes a little bit of that electricity.So I think also then you look at market trends. Right now it is virtually impossible to watch peak-hour television without seeing solar energy companies advertising their products at pretty attractive rates. I have got to say that there is quite a difference between those attractive rates and what you end up paying because of the relatively small size of the systems that are being advertised in the first place. None the less the take-up rate is extraordinary.If we just look at that solar energy in New Zealand has in the last 3 years in fact gone up by three times. So people are making choices about their energy security about their energy supply definitely not based on price but based on what they perceive as being a good contribution they can make to good environmental outcomes in New Zealand. I would ask myself: why would we want to disrupt that? Why would we want to be saying that we must have some compulsory system that makes it so attractive that everybody will automatically go out and sign up to it? Because that is what the member is asking for. He is asking for authority in this bill for the Electricity Authority to come up with some sort of algorithm or whatever it might be to determine what the daily price is—or the monthly price or the yearly price—for electricity.I cannot see how it is a good thing to say to schools—for example which can buy their electricity through say Meridian Energy spot-price planning that might take them down as low as 3.5c on some days in the winter and even lower in the summer—that in fact by having a feed-in tariff that is at a much higher level even though it will not provide all of the services to that school there is going to be such an encouragement that they will go out and make that sort of investment. They will not do it for that reason because we are a long way from a point where the investment in solar energy is rational enough for people to get economic benefit from it.If the member was prepared—Stuart Nash: No that’s not true.Hon GERRY BROWNLEE: The member over there Mr Nash calls out across the House: “That’s not true.” Well I look forward to him making his speech that will give the figures that will indicate that it is an economically rational decision to put in sufficient photovoltaic panels on the roof of a house to run that house and provide a bit of surplus and for that surplus to actually pay for the capital investment over a reasonable period of time. If it is over 25 years it might happen. If it is over 30 years it definitely will happen. But if it is over 10 years it will not happen and no amount of mucking around with the price is going to change that. The reality is that the more people who are taking electricity out of an embedded system the higher the price for anyone else who has to take it from a network system. There is no getting away from that fact at all.I am not surprised that we are getting that from Mr Nash. He was a man who was supportive of some of the dopey electricity reforms of the Labour Government the last time that it had the opportunity to be in Government. He was a strong supporter of all of the compulsory arrangements around solar energy and everything else.Stuart Nash: What? I wasn’t in Government.Hon GERRY BROWNLEE: Well he says now he was not there but we know he was out knocking on doors telling people to vote for the Labour Party. He was at the time.This is not a bill that I or the National Party will be supporting. [Bell rung] Two minutes? I have got 2 minutes. That is good because there is a lot more I want to say about the dopey policies of the Labour Party during that time. In a 9-year period we had no fewer than four electricity crises—four. Four times the Government went to New Zealanders and said: “There’s a problem. The lakes are too low. We are going to have to ask you all to conserve electricity and by the way we are going to have to build this massive white elephant the reserve generation capacity. We are going to spend $90 million building it and another $90 million feeding it with diesel fuel—very very clean for the environment.” It took simply a reform of the electricity marketing arrangements to ensure that in the last 7 years there has not been an electricity crisis. We are now seeing electricity prices fall and in 2014 we saw the driest year in New Zealand’s history and not one flicker of the lights.So this is one of those nice feel-good ideas that will cost people who have the least capacity to buy into it a great deal more than they are paying at the moment.