When NZ needs to build a new wind farm every nine months, now is not the time for ministers to impose ‘experimental resets’ to the energy market, says Mercury chair.
Power company Mercury has hit back at “unworkable environmental limits” and the threat of energy sector reforms, saying they jeopardise further investment in renewables.
In a speech to shareholders at the company’s virtual annual meeting, Mercury chair Prue Flacks acknowledges that every passing day brings another tangible demonstration of the devastating impacts of climate change.
She accepts that time is running out to address climate change which, as the Government says, is “one of the greatest challenges of our time”.
“That is true. But we seem to be making it more of a challenge than it should be.”
Flacks expressed concern about the proposed RMA reforms, “We see a very real risk that any renewable energy project of size will struggle to ever get off the ground, if unworkable environmental limits are imposed.”
Mercury wants power companies to be allowed to compensate for the cost of other environmental impacts they may cause in building wind and geothermal power.
“Future decisions should account for the climate change benefits of renewable energy projects and enable offsets or compensation for other environmental effects as we chase the big decarbonisation goal. The RMA reforms could be an opportunity to practically address New Zealand’s response to climate change. It should not be a barrier.”
“It is perhaps unfortunate that a handful of voices are calling loudly for radical upheaval of the market. One of the biggest risks facing the sector is the risk of a political response to these calls resulting in regulatory intervention with unintended consequences.”
– Prue Flacks, Mercury chair
Flacks says the transition to net zero carbon must be fair. “Electricity must be affordable and the lights must stay on.”
She acknowledge the recent challenges experienced by some industrial customers and electricity retailers as a second dry year in succession, and constrained gas supply, have led to some high wholesale prices in both the spot and contracts markets – but insists it’s not the right time to reform the market structure.
“There are more than 40 retail brands for customers to choose from, and almost one in five customers change their electricity supplier every year. It’s very competitive – much more so than other sectors,” she says.
“Given these results – which are enviable compared to most other countries – it is perhaps unfortunate that a handful of voices are calling loudly for radical upheaval of the market. One of the biggest risks facing the sector is the risk of a political response to these calls resulting in regulatory intervention with unintended consequences.”
“We need to be very clear. In the context of the investment the Climate Change Commission believes is needed to achieve net zero carbon, one new wind farm must be built every nine months between now and 2050. That’s an extraordinary amount of investment, requiring stable policy settings which support the end objectives.”
Any proposal to change market structure should be well thought through and soundly based, she said. “Given what is at stake it is not the time for an experimental reset, especially when the current structure has delivered such strong results.”
New Zealand’s renewable energy doesn’t come cheap, she indicated. Over the past 20 years Mercury has spent more than $1.4 billion on geothermal assets alone, Flacks says, much of this through joint ventures with Iwi land trusts. Its dams require constant work and major capital investment, too: it has invested $300 million in itsWaikato hydro assets over the past decade.
More than $1.5 billion spending is already committed to new generation by companies like Mercury, including the Turitea windfarm which will be New Zealand’s largest. All this new generation being built means more than 90 percent of electricity in New Zealand will be from renewable sources by 2025.
“And that’s just the start,” she said. “There is a bright future, with wind farms, geothermal and some solar complementing New Zealand’s backbone of hydro generation.
“Mercury is committed to playing a leading role in New Zealand’s decarbonisation. I encourage our policy makers to focus on how they can continue to ensure a market structure that incentivises the investment New Zealand needs, and which is essential to our country’s response to climate change, in a way that keeps electricity affordable and secure.”