Media Release December 10, 2009

Electricity changes may increase hydro spills

Critics of the new energy law changes say the overhaul of the electricity sector may not have the desired effect of getting prices down, or even constrain price increases.

Waikato University’s Earl Bardsley says the proposed changes have some unusual aspects. Associate Professor Bardsley from the Department of Earth and Ocean Sciences says it seems strange, that at the time of the Copenhagen Conference, the carbon-neutral status of Meridian Energy will be compromised by having to take on the Whirinaki diesel power station.

“Furthermore, taking Tekapo A and B power stations from Meridian and giving them to Genesis means Meridian must now rely on a rival company, through some kind of protocol, to provide a significant amount of the water inflow to Lake Pukaki, which supplies Meridian’s line of Waitaki River power stations.”

Associate Professor Bardsley says given New Zealand’s limited hydro storage capacity, the obligation to compensate consumers when power cannot be provided amounts to imposing a fine on the power generators if the weather is dry. “The hope is that this market device will give better security against dry years. In reality, it may lead instead to increased electricity wastage through more conservative operation of the main hydro lakes.”

Meridian and Genesis are likely to seek to maintain summer water levels as high as possible in Lakes Pukaki and Tekapo to maximise storage and so minimise their risk of being hit with the new penalties from any winter shortages.

“But any large summer floods will then flow into already-high lakes and create spill losses at all the downstream power stations. Even without the impact of the reforms there was considerable water spill earlier this year in the South Island, representing both lost power and lost water resource that might have gone to irrigation.”

Associate Professor Bardsley says the biggest electricity issue in New Zealand is the lack of storage capacity to offset dry years. He says future dry years will still require energy conservation campaigns and imposing penalties on the generators will do nothing to change that. “Perhaps it is time for the private sector to take matters into their own hands and Contact Energy and the major electricity users could come together to build a major pumped storage scheme in the South Island to finally end the era of conservation campaigns and price spikes in the spot market.”

ENDS

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