Hydro exemption from water standards risks two-tier regime

Hydro exemption from water standards risks two-tier regime - Trustpower

By Gavin Evans

Sept. 9 (BusinessDesk) - Exempting the country’s major hydro catchments from new controls on fresh water quality appears arbitrary and runs the risk of putting disproportionate scrutiny on smaller schemes, Trustpower chief executive Vince Hawksworth says.

The proposal – to allow councils to accept lower water quality in rivers hosting major dams – is intended to maintain flexibility for the country’s biggest providers of renewable energy. But officials acknowledged the move is a compromise that could be unfair to producers of about 10 percent of the country’s hydro-generation.

Hawksworth says everyone has a part to play to improve water quality and most also share an ambition to make greater use of renewable energy to counter climate change.

But he says the government’s “somewhat crude” initiative misses an opportunity to align those desires with the way policymakers and communities think about the generation assets that use the country’s “very valuable” water resource.

“It does send a bit of a message that not all renewables are equal, which in our view is a little bit concerning,” he told BusinessDesk.

The new water management regime proposed by the government last week will require regional councils to have new fresh water plans in place no later than 2025. Interim controls will be imposed in at-risk catchments and options on water allocation will be developed through 2020.

The papers, open for discussion until Oct. 17, acknowledge the importance of hydro generation to meeting the government’s renewable energy targets but also the fact that dams have altered natural flows and tend to reduce the flood flows that clean river beds and clear sediment.

The government’s proposal would give councils the option to set water standards below national minimums in the biggest hydro-electric catchments – the Waitaki and Manapouri schemes operated by Meridian Energy, the Tekapo, Tongariro and Waikaremoana schemes operated by Genesis Energy, Contact Energy’s Clutha scheme, and the Waikato hydro system operated by Mercury NZ.

Officials admitted that limiting the exemption to major hydro schemes was a “pragmatic” option, given the preference among Kahui Wai Maori – the Maori fresh water forum – for exceptions to be kept to a minimum and the need to maintain “stakeholder confidence” in the new fresh water policy.

Making the exemption available for all hydro schemes would have treated all generators fairly and avoided “market-distorting” effects, officials said. But it would have probably had little impact on councils or operators as smaller hydro-generation is usually ‘run-of-river’ with little storage, so tends to do less harm to water quality.

Members of the Independent Electricity Generators’ Association operate about 200 megawatts of capacity around the country, most of it renewable and most of it hydro.

Alexandra-based Pioneer Energy operates a string of small hydro schemes in the lower South Island and also co-owns the 25 MW Aniwhenua scheme southwest of Rotorua in partnership with Electricity Invercargill and Southland electricity distributor The Power Company.

Pioneer chief executive Fraser Jonker said it’s unreasonable for the government to “randomly select” some catchments for exclusion from the new fresh water rules, given the “obvious preferential treatment” that confers on the major generators.

Mary Ann Mitchell, secretary for the IEGA, says all its members try to be good corporate citizens and generally work well with regional councils on water quality issues.

But she said the cost of Resource Management Act processes are already disproportionately high for IEGA members, given most are relatively small. The government’s proposal will compound that.

“It creates quite an uneven playing field for the different generators that are all competing in the same market,” she told BusinessDesk.

And some of the schemes not covered by the exemption are significant.

King Country Energy operates the three-dam, 40 MW Mangahao hydro scheme in Horowhenua. Trustpower’s biggest hydro assets include the 80 MW Matahina dam on the Rangitaiki River, the 83 MW Waipori scheme west of Dunedin, and the 32 MW Cobb station near Takaka.

Hydro schemes are already controlled under regional council consents. Many of those have been renewed in recent years, to include more sophisticated rules on minimum flows to improve water quality downstream. Some generators have also gained more flexibility at times of the day or year to generate more at periods of peak demand.

Trustpower operates 38 hydro generators around the country, accounting for about 8 percent of national hydro capacity and delivering about 5 percent of the country’s electricity.

Hawksworth said it's very early days in the government’s consultation process. Water is a difficult topic with lots of interests to balance and Trustpower is keen to be part of that discussion.

Generators have generally worked well with councils, and he said and it’s not clear whether the proposed regime would greatly change the approach councils take.

What’s also unclear for Trustpower is whether the “carve-out” for the bigger catchments would create a counter-factual that implies that smaller operators are subject to greater scrutiny of the environmental impacts and community benefits their schemes provide.

It’s not that the big schemes aren’t important, he said.

“But once you set up a two-tier programme, does that then create a two-tier level of analysis?

“That’s an open question.”

(BusinessDesk)

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