In our last episode, Sheriff Cabinet Ministers, in the wild west town of Aeotearoa, turned away from using his trusty ETS sidearm to confront the destructive Climate Breakdown Gang.  Things have changed since then.  There is a new mayor in town and the Breakdown Gang has wreaked havoc on the Hawkes Bay grocery, the Auckland livery and the Northland Ranch.  They’ve slashed up Tairāwhiti.  Will he confront them this time?  We’ll see in this next, exciting episode.

Camera zoom into the sheriff’s office on Main Street…

Sheriff Ministers is having his toast and tea when Deputy Greenie Shaw bursts in.

Greenie: “Sheriff, it’s a mess out there.  The grocery and the livery are all bashed up and now I’ve got Commissioner Carr asking why we didn’t use the ETS on the Breakdown Gang.”

The sheriff leans back and takes a bite of toast, “Just tell Carr that it’s complicated, we gots lotsa irons in the fire”. 

Greenie: “That’s what I told him before, but he wants more spe-cifics.  Should I tell him about the…”

Sheriff: “No, don’t mention nothin’ ‘bout the ‘lection.  He’ll just think we’re a pack of coyotes who think ‘bout nothin’ more than holding on to our day jobs and sounding ‘portant.” 

“Besides, that ETS don’t seem to work anyway.  I took it out to the Unit Auction for a test fire and it didn’t work.  Didn’t get a single bid.  I think it was maybe a problem with the reserve price…”

Shaw looks incredulous, “Didn’t work?  What are we going to use against the Breakdown Gang? 

Shaw takes his hat off and sits down, pressing his temples.

“How about the Biofuels Mandate?”

The sheriff sips his tea, “Nah, Mayor Hipkins nixed that.”

“The Cash for Clunkers deal to get the high emissions vehicles off the street?”

Sheriff: “Gone too.”

Greenie: “Expansion of public transport?”

Sheriff: “Nope”

Greenie: “Maybe the light rail for Auckland?”

Sheriff: “History”

Greenie: “Surely, we could at least put back the petrol tax.  You know, cheaper petrol is playing right into the Breakdown Gang’s hands.”

Sheriff: “Not gonna to happen.  Hipkins has made some changes round here.”

Greenie: “So, what we gonna do?  The situation’s getting dire out there!  People are hurtin’!”

Sheriff: “Well, the mayor has sent around some bread and butter.  Maybe that will help. It’s awful good.  Here, try some…  If he keeps giving these out, maybe he’ll win that ‘lection.”

The sheriff hands Deputy Shaw a slice of toast.  Shaw looks on in stunned silence. 

Camera fade to credits.

So, dear reader, the situation in Aotearoa is looking grim.  As you will recall, cabinet decided in December to ignore the Climate Commission’s advice and kept the Emissions Trading Scheme (ETS) price settings low for this year.  As a result, the price of emissions credits fell so low that last quarter’s unit auction actually failed.  None of the bids achieved the minimum price set by the Ministry.  No emissions credits were sold.

Compare this to last year, when a quarterly auction hit the cost containment reserve price triggering the release of extra credits and emissions unit prices were at an all-time high.  The price of emissions units has been steadily rising in the last few years, as intended.

A failure of the auction is a little bit of good and a lot of bad.  Good because it means industry will need to buy the credits they need to surrender for their emissions from the secondary market, soaking up some of the surplus units that Climate Commission has been worried about, but bad because the government didn’t raise any revenue for the Climate Emergency Response Fund like it expected.

It’s also bad because the price for a tonne of CO2 emissions has fallen from a high of around $85 late last year to a low of $60 now.  Releasing greenhouse gas into our atmosphere has just gotten a whole lot cheaper.

And, there’s a whole lot more uncertainty in the ETS market right now.  Companies planning to upgrade coal boilers to electricity or wood chip will now look at their balance sheets and wonder if it is still a good idea.  It’s maybe going to be cheaper just to pay for more credits, if the price stays low.  Yet another delay in the transition to a low emissions future.
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So, the Climate Breakdown Gang appears to have won this round in Aotearoa, and will have plenty of rein to continue its havoc.  I suppose we can all thank the new mayor for our bit of bread and butter, at least until the Climate Breakdown Gang comes back.  And, you can rest assured, they will be back.

Now we hear from MPI that the Lake Onslow pumped hydro scheme – meant to store enough hydropower for the nation’s electricity shortfall in the event of a “dry year” – is projected to cost 4 times more than initially anticipated – a new price tag of $15.7 billion dollars!  In its 16 March newsletter, MPI says it is investigating alternatives.

This setback to the Lake Onslow project isn’t bad news to the many critics of the scheme.  It would be a massive engineering undertaking, with a fair risk of becoming an expensive drain on the nation’s resources. There is no estimate yet on how much it would cost, year to year, to keep it topped up to offset losses from evaporation and leakage. 

The intent of the scheme is noble; to reduce the need to burn fossil fuels for electrical generation during a dry year.  But, it’s overall premise seems to violate common sense; why build a massive hydroelectric scheme to address a problem caused by a lack of water?  Mother always taught us not to put all our eggs in one basket.  Would it not be more logical to focus on other forms of electrical generation that don’t depend upon a scarce, vital resource like water?  Maybe a Lake Onslow scheme would get the country through a dry year, but what about two?  Or, a dry decade?  Global warming isn’t done surprising us.

So, what are the alternatives MPI is looking at?  Some are seem reasonable, like building a smaller pumped hydro-storage scheme in the central North Island or burning charcoal pellets instead of coal at the Huntly Power Station.  

It is clear they haven’t thought very hard about the other alternatives.  Hydrogen, presumably generated by electrolysis of water and stored underground or as ammonia, still comes up, even though it has dismal efficiency compared to pumped hydro. 

MPI also mentions something called “flexible geothermal energy” which, to someone who spent a career in the geothermal industry, sounds like an oxymoron (like “open secret”).   Due to the thermodynamics of hot water and steam, the operation of geothermal power plants is highly inflexible, otherwise it risks accelerated damage to its most valuable asset – the geothermal wells.

What they don’t consider is accelerated development of renewable power sources, such as wind, solar and tidal power.  An abundance of these affordable, renewable power sources, along with charcoal at Huntly and a few pumped hydro-storage projects around the country, would fit well with an “eggs in different baskets” strategy. 

MPI fears that overbuilding wind and solar would lead to higher market prices for electricity.  How too much electricity leads to higher prices isn’t clear.

Perhaps the problem is actually the power market itself.  I ask you, which would give better bang for buck: $16 billion for a pumped hydro project at Lake Onslow or reforming the New Zealand electricity market to promote an abundance of wind, solar and tidal generation?

The present generation spot market is dominated by a quasi-monopoly of four big, highly profitable companies.  The market incentivises shortages by setting higher prices when electricity supplies are short, which has resulted in retail electricity prices rising faster than inflation.  The 1998 Bradford reforms, which were supposed to deliver cheaper electricity to consumers, has resulted in ever increasing energy bills for residential customers and ever fluctuating power prices for industrial customers.  It has clearly failed to deliver on its promise of cheaper power.  Reform is well overdue.

How about, instead of looking to build giant infrastructure projects like the Lake Onslow scheme, the government focus on reforming the electricity system so that it provides the generation needed to get us through a dry year (or decade).  That reform might also look to provide reasonable and stable power prices to consumers and industry, instead of the escalating prices we are seeing now.

The Interim Climate Change Commission has pointed out that lower retail electricity prices will also act to reduce greenhouse gas emissions, by further incentivising industry to replace fossil fuel in process heat and transport with electricity.  Reportedly, that uncertainty in the future price in electricity is holding many companies back from making the transition. So, low and stable electricity prices will help abate carbon emissions too.
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And for Kiwis struggling to make ends meet, a lower, more certain electricity bill would be a welcome sight.