The New Zealand
Climate Science Coalition

21 September 2007 FOR IMMEDIATE RELEASE

Carbon price no inducement to power generators to reduce use of coal

The carbon price will not induce electricity generators to reduce the use of coal, so why should anyone expect it to reduce carbon emissions, asks Auckland power engineer Bryan Leyland, who is also chairman of the economics panel of the New Zealand Climate Science Coalition.

“Overall, the higher the carbon price, the higher will be the profits of the electricity generators. As an example, Genesis will have to purchase carbon credits to cover emissions from Huntly coal fired station and its gas fired stations but overall, a higher carbon price will give it a bigger profit because of the windfall profits from its hydropower stations.”

Mr Leyland said it should be noted that the government does not predict that carbon trading will increase domestic power costs by $7/month. “All it says is: if the carbon price increases electricity costs by 1c/kWh, it will cost the average householder $7/month. What they don't say is if the price is $20/tonne, the power price will increase by about 2c/kWh and if it is $45/tonne (the price that, according to the Electricity Commission, is needed to make renewables break even with conventional generation) the power price will increase by 5c/kWh, or $400 pa for the average household.

“Solid Energy has calculated that a carbon price of $20/tonne will increase the cost of power by $800m pa. Of that, $600m will be windfall profits to electricity generators and $400m pa will finish up in the government's coffers as dividends from Meridian, Mighty River Power and Genesis and taxes on windfall profits of Contact and Trustpower. This is all because of the way our electricity market works, and I am sure that the government understands this,” Mr Leyland concluded.

ENDS

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