Electricity prices would be 10 to 20 per cent higher under the Government’s new environmentally sensitive energy strategy, an energy consultant says.
Energy Minister David Parker challenged those figures but acknowledged there would be some increase to electricity consumers longer term as a result of the strategy.
He released the draft energy strategy and accompanying papers yesterday saying the Government wanted all new energy generation to be renewable, unless other means were necessary for the security of electricity supply.
The most likely renewable energy sources were wind, hydro, geothermal and wave and tidal power.
The Government favoured a carbon emissions trading system as the best way to encourage clean energy and the option of a narrowly focused carbon tax on energy producers remains an alternative.
Carbon dioxide produced by human activities is widely, although not unanimously, considered to be contributing to the warming of the world.
Among those skeptical about the role of the gas in heating the Earth is electricity consultant Bryan Leyland.
His “reasonably informed guess” was that electricity generated through an approach based on “pragmatic, least cost” generation and supply would be 10 to 20 per cent cheaper than would result from the Government’s energy strategy, he said.
“We would for sure finish up burning a lot more coal. We would for sure finish up with a lot less wind, and our transmission costs would probably be lower.”
The real cost of wind power was higher than the apparent cost, Mr Leyland said.
While a geothermal station running 95 to 98 per cent of the time provided practically complete supply security, wind power systems would often generate power when not needed and would not produce it when it was needed.
To give a fair comparison between a geothermal plant and a wind plant, the cost of backup thermal generation for the wind power needed to be included in the cost.
Mr Leyland also challenged comments by Meridian Energy chief executive Keith Turner that the world was inevitably going to have to place a cost on carbon.
Dr Turner said that in such a world, New Zealand’s renewable energy resources offered a competitive advantage few countries, if any, could match.
“If we can follow this strategy successfully, New Zealand can be an extraordinarily technology-smart country with a low climate change imprint and one other countries rely on for technology transfer,” he said.
Mr Parker told National Radio today that the cost of renewable electricity sources was now “very close to the price, if not cheaper, than the cost of new gas-fired power stations”.
“So I don’t see that (renewables) as a more expensive option for New Zealand. In fact I see it as a cheaper option,” he said.
“If we do this smart, because we’re so lucky in New Zealand that we’ve got a richness in renewable resources, the cost might not be that material.
“It might go up by something like 1 per cent per annum as a consequence of this in addition to what the other price rises would naturally have been.”
As former World Bank chief economist Nicholas Stern had pointed out in his report released last month, the costs of not reducing emissions as climate change worsened were far higher, Mr Parker said.
Contact Energy chief executive David Baldwin, and his Genesis Energy counterpart Murray Jackson said the Government was underestimating the cost of wind power.
In September, Genesis announced it had decided against developing a small wind farm at Awhitu in south Auckland because of soaring wind turbine costs.
Genesis spokesman Richard Gordon said today that at current costs, and based on projected prices for the next 20 years, the Awhitu wind farm would not make an acceptable return on investment and therefore was not being built yet.
Contact Energy spokesman Jonathan Hill said Contact was looking hard a wind power and its assessment of the cost of wind power was somewhat higher than those in the strategy.
PricewaterhouseCoopers climate change team leader Julia Hoare said the energy strategy looked likely to mean increased prices for consumers, as that was a natural consequence of the outlined changes.
Despite that, the strategy had positives for business, and would provide many with an opportunity for technological advancement in moves to new types of carbon-aware businesses and business models, Ms Hoare said.
But it was also critical that businesses set to face increased costs were not made uncompetitive.
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