More wind generation less power

April 11, 2014

If renewable energy good is more better?

What if more renewable generation results in less power?

Household fridges and freezers will need to be automatically switched off at times when Britain’s electricity demand is high, in order to keep the lights on as Britain becomes more reliant on wind energy, experts say.

The current electricity grid will struggle to cope with the number of wind farms expected to be built by the early 2020s because the power they produce is so intermittent, according to a report from the Royal Academy of Engineering.

A radical overhaul of the way the electricity system is managed – including a “smart grid” that can control household appliances to reduce demand when power supply is inadequate – will be needed, it finds.

Britain will also need to build more power import and export cables to the continent to help manage variable wind power output, and develop storage technologies to keep surplus power for times when there is a shortfall.

The measures will be necessary to avert blackouts under a vast expansion of wind power – unless Britain instead builds an expensive new fleet of reliable power stations to be fired up as backup when the wind doesn’t blow, it found. . .

Most of New Zealand’s renewable energy comes from hydro generation.

That is at risk from low precipitation but it is generally easier to monitor it and manage its consequences than it is to predict and manage shortages of wind.

For all that people say they support renewable generation, I wonder how many would continue to do so if it meant a less reliable supply and higher prices?

 


UN warns biofuels do more harm than good

April 4, 2014

The United Nations has admitted that growing crops to make “green” biofuel harms the environment and drives up food prices.

A leaked draft of a UN report condemns the widespread use of biofuels made from crops as a replacement for petrol and diesel. It says that biofuels, rather than combating the effects of global warming, could make them worse.

The draft report represents a dramatic about-turn for the UN’s Intergovernmental Panel on Climate Change (IPCC).

Its previous assessment on climate change, in 2007, was widely condemned by environmentalists for giving the green light to large-scale biofuel production. The latest report instead puts pressure on world leaders to scrap policies promoting the use of biofuel for transport.

The summary for policymakers states: “Increasing bioenergy crop cultivation poses risks to ecosystems and biodiversity.”

Biofuels were once billed as the green alternative to fossil fuels, but environmental campaigners have voiced concern about them for some time.

They note that growing biofuel crops on a large scale requires either the conversion of agricultural land used for food crops or the destruction of forests to free up land, possibly offsetting any reduction in carbon emissions from the use of biofuels.

Other concerns include increased stress on water supplies and rising corn prices as a result of increased demand for the crop, which is fermented to produce biofuel. . .

Growing plants especially to make biofuels is an example of a supposedly environmentally   friendly practice which isn’t, and it makes food more expensive too.

Z Energy’s plans to make biofuel from beef tallow might stack up better.

Z Energy has announced plans for a $21 million biodiesel plant that will produce fuel from inedible tallow feedstock.

The listed company said the investment would be made over the 2015 financial year and would produce 20 million litres of sustainable biodiesel a year.

It would be manufactured from inedible tallow feedstock, essentially beef fat, and satisfy New Zealand and European fuel specifications.

The plant would be built in Auckland. . .

Tallow is used for making candles and soap not food.

 

 

 


Let there be light

March 29, 2014

Tonight some people will be celebrating Earth Hour by turning off their lights.

Some won’t because they don’t have lights to start with.

Others could but won’t.

Among the latter group is Ross McKitrick, Professor of Economics at the University of Guelph.

In 2009 I was asked by a journalist for my thoughts on the importance of Earth Hour.

Here is my response.

I abhor Earth Hour. Abundant, cheap electricity has been the greatest source of human liberation in the 20th century. Every material social advance in the 20th century depended on the proliferation of inexpensive and reliable electricity.

Giving women the freedom to work outside the home depended on the availability of electrical appliances that free up time from domestic chores.

Getting children out of menial labour and into schools depended on the same thing, as well as the ability to provide safe indoor lighting for reading.

Development and provision of modern health care without electricity is absolutely
impossible. The expansion of our food supply, and the promotion of hygiene and nutrition, depended on being able to irrigate fields, cook and refrigerate foods, and have a steady indoor supply of hot water. Many of the world’s poor suffer brutal environmental conditions in their own homes because of the necessity of cooking over indoor fires that burn twigs and dung. This causes local deforestation and the proliferation of smoke- and parasite-related lung diseases.

Anyone who wants to see local conditions improve in the third world should realize the importance of access to cheap electricity from fossil-fuel based power generating
stations. After all, that’s how the west developed.

The whole mentality around Earth Hour demonizes electricity. I cannot do that, instead I
celebrate it and all that it has provided for humanity. Earth Hour celebrates ignorance,
poverty and backwardness. By repudiating the greatest engine of liberation it becomes an hour devoted to anti-humanism. It encourages the sanctimonious gesture of turning off trivial appliances for a trivial amount of time, in deference to some ill-defined abstraction called “the Earth,” all the while hypocritically retaining the real benefits of continuous, reliable electricity.

People who see virtue in doing without electricity should shut off their fridge, stove, microwave, computer, water heater, lights, TV and all other appliances for a month, not an hour. And pop down to the cardiac unit at the hospital and shut the power off
there too.

I don’t want to go back to nature. Travel to a zone hit by earthquakes, floods and hurricanes to see what it’s like to go back to nature. For humans, living in “nature” meant a short life span marked by violence, disease and ignorance. People who work for the end of poverty and relief from disease are fighting against nature . I hope they leave their lights on.

Here in Ontario, through the use of pollution control technology and advanced engineering, our air quality has dramatically improved since the 1960s, despite the expansion of industry and the power supply.

If, after all this, we are going to take the view that the remaining air emissions outweigh all the benefits of electricity, and that we ought to be shamed into sitting in darkness for an hour, like naughty children who have been caught doing something bad, then we are setting up unspoiled nature as an absolute, transcendent ideal that obliterates all other ethical and humane obligations.

No thanks. I like visiting nature but I don’t want to live there, and I refuse to accept the idea that civilization with all its tradeoffs is something to be ashamed of.

Let there be light and heat and all the other benefits electricity brings us and let those who wish to make change a reality find a more positive and useful way to do it.

Celebrating Human Achievement Hour could be a good way to start.

Hat tip: Carpe Diem

 

 


Rural round-up

February 19, 2014

Working group set to improve dairy traceability:

Primary Industries Minister Nathan Guy and Food Safety Minister Nikki Kaye today announced a working group set up to improve dairy traceability.

“The independent Government Inquiry into the Whey Protein Concentrate (WPC) Contamination Incident highlighted the importance of effective systems for dairy traceability,” Mr Guy says.

“The Inquiry recommended lifting the dairy sector’s ability to trace products and ingredients through a working group focusing on regulatory and worldwide best practices.”

“Improving the traceability of dairy products will further protect the public in the event of a suspected food safety issue,” Ms Kaye says. . .

Bob Ingham delivers golden egg in final year of NZ poultry production – Suze Metherell:

(BusinessDesk) – Bob Ingham, former owner of Australia’s biggest poultry producer Inghams Enterprises, achieved a record profit from his New Zealand operations in 2013, the final year before private equity firm TPG acquired the Australasian business.

Inghams Enterprises (NZ) lifted net profit by 19 percent to $27.2 million in the 12 months ended June 30, according to the annual report filed with the Companies Office. Revenue rose 5 percent to $336 million.

The Australian parent company was family owned for 94 years when sole shareholder Bob Ingham, grandson of the original founder, sold to TPG for A$880 million in June last year. The Ingham family retained bloodstock assets and some properties including the family farm. . .

Esquires may source milk from NZ:

Cooks Global Food is looking to start sourcing its supply of milk from New Zealand for its Esquire coffee houses around the world.

Cooks, which is listed on the NZX’s alternative market, has signed a master franchisee agreement in Oman and Qatar which will mean at least 16 new Esquires Coffee Houses opening.

The new deal means it has commitments for more than 80 coffee stores in the Middle East. . .

Defending champion returns:

Defending Tasman champion, Reuben Carter, is the first Grand Finalist to be named for the 2014 ANZ Young Farmer Contest.

The thirty year old agronomist took first place at the Tasman Regional Final in Murchison at the A&P Show over the weekend, Saturday 15 February.

Mr Carter had a dominant performance leading for most of the day and took out both the Silver Fern Farms Agri-Sports and Ravensdown Agri-Skills Challenges giving him solid platform going into the evening show. . .

Young Farmers heading south:

The ANZ Young Farmer Contest heads south for the second Regional Final in Otago/Southland, Saturday 22 February in Alexandra.

It will be a full on day with practical events at Pioneer Park where competitors will be tested on a variety of hands-on, physical and theoretical challenges – all with an agricultural and farming focus.

The day’s events will be followed by the entertaining evening show and quiz round at the Alexandra Community Centre where a cool head and quick wits are vital. Tickets for the evening show can be purchased at ANZ Tarbert Street, Alexandra. . .

Biogas generation systems for rural Samoa:

The Samoan government says it is developing bio-gas generation systems which will use green waste to provide power in rural areas around the country.

It has received 300,000 US dollars from the Secretariat of the Pacific Regional Environmental Programme, or SPREP, to do so.

The assistant CEO for energy at the Ministry of Natural Resources and Environment, Sala Sagato Tuifiso, says biogas generation systems are more cost effective than other renewable energy sources. . .


How green is your policy?

February 17, 2014

If you want to be green you should recycle, right?

Not necessarily.

Recycling does reduce the amount of waste going to landfills. But that is only one measure of environmental impact.

If recycling uses more energy and/or causes more pollution dumping could be the greener option.

Alternative forms of energy might look greener but as Andrei and Gravedodger pointed out yesterday appearances can be not just deceptive but dirty.

They were commenting on the Green Party policy to provide cheap loans for the installation of solar panels.

When we altered our house 12 years ago we looked into installing solar panels but were advised it would cost too much for too little power.

We investigated solar panels again before undertaking further  alterations a couple of years ago and were told the technology still wasn’t good enough to be worth it this far south.

There might be a better ratio between the cost and benefits further north but that still doesn’t counter the criticism about the environmental cost of making and disposing of solar panels and batteries.

Then there’s the Green’s mistaken assertion that there are no government subsidies involved.

The Green Party’s belief in their ability to make money magically appear seems to have no limits says Energy and Resources Minister Simon Bridges.

“The Greens’ solar power policy creates low interest loans that make expensive solar power suddenly a cheaper option for kiwi families, with ‘apparently’ no government subsidy involved.

“I have news for the Greens — if it’s a lower interest rate than normal, it must involve a government subsidy. And if it makes the cost of solar power cheaper for families than existing power options it also must involve a subsidy.

“Everyone wants something cheaper but someone has to pay. Solar is about three times more expensive than grid-scale generation from wind, hydro or geothermal power stations. If solar power was to be made more affordable other taxpayers and power users would have to pay for it.

“There is certainly a place for solar in New Zealand, but given the abundance of lower cost renewable alternatives, it can’t be a priority to subsidise solar power or change the rules to suit a specific technology.

“We’ve seen that with expensive solar subsidies in other parts of the world, including Germany and Spain. The irony is that New Zealand already generates 75 per cent of our electricity from renewable sources and the percentage is moving higher without any need for government subsidies.

“No matter how you dress it up the Greens’ grab bag of power ideas, which also includes nationalising power purchasing and a more expensive ETS, will heap higher prices on Kiwi households.

“If the Greens are serious about their policies, they need to front up and explain who pays for all of this, or whether they would roll out Russell Norman’s printing press again.”

David Cunliffe made a mess of his party’s big baby bribe announcement by saying one thing and meaning another.

Norman’s assertion that there are no government subsidies involved is not just misleading, it’s wrong.

If the environmental impact of the materials, manufacture and disposal of everything involved in solar energy is taken into account the claim that this policy is clean and green is also wrong.

 

 

 

 


LabGreen power play threatens renewable energy

February 14, 2014

There’s another flaw in the LabourGreen power play  – it would threaten investment in renewable energy:

Labour and the Greens have jointly proposed scrapping the wholesale energy market in favour of a single state-operated buyer of electricity, called NZ Power, claiming the move would save hundreds of millions of dollars on consumer power bills.

Today Mark Binns, chief executive of Meridian Energy, told the commerce select committee that while a lack of detail meant it was hard to properly analyse the plan, Meridian believed it would favour thermal generation over renewable plants such as wind farms.

“Our view is it would potentially impact on renewables because it would make thermals, particularly gas plants – which are easier to consent and easier to put in place quickly – more viable in that environment,” Binns told MPs..

“If you have a central buyer, the Crown has the responsibility for deciding the next wind farm or other power that is required, and wind farms take between five and 10 years to consent.

“Why would we keep investing in developing renewable options, given the uncertainty around central buyer?

“The reality is it’s much easier for someone like Todd Energy to basically get a piece of land with gas to the front door, and strap on a jet engine to a lump of concrete and generate electricity.” . . .

Questions over the economic credibility of Labour and Green policies aren’t new but there’s more than a little irony in this very serious question over the environmental impact their power play would have.


LabGreen power plan would be worse

February 11, 2014

The LabourGreen power plan would be worse for consumers than the current system.

The electricity market in New Zealand is extremely competitive, with consumers able to switch retailers to gain lower prices, and more consumers using metering and home energy management systems to save more. But the electricity proposals of the Labour and Greens parties would be less able than the current market to meet consumer needs.

These are among the key findings of an analysis of the electricity market commissioned by BusinessNZ and undertaken by Sapere Research Group.

BusinessNZ Chief Executive Phil O’Reilly says it is valuable to get rigorous analysis on a sector that is complex and sometimes poorly understood.

“The electricity market was established in 1996 and has operated under changing rules since then. The research makes it clear that under the current 2010 rules, the electricity market is developing towards a highly competitive, well-functioning market.

“The electricity market’s greatest problem has been a lack of transparency around prices. Energy companies have not explained price changes clearly enough, and this has led to doubts about whether prices have been unnecessarily high in the past. BusinessNZ is recommending that energy companies ensure that the reasons for future price changes are meticulously itemised. We also recommend investigating whether we should have rules for information disclosure around price setting.

“The Sapere research also notes that a segment of the market may be experiencing energy hardship in having to spend too great a proportion of their income on house heating. BusinessNZ recommends investigating options for policies within the market and the social welfare system to help alleviate this,” Mr O’Reilly said.

Sapere found the electricity market is achieving positive outcomes against five key criteria:
1. Secure supply of electricity
2. Efficient operation and market transactions
3. Efficient investment in assets
4. Social requirements
5. Environmental requirements

Sapere also analysed NZ Power proposals (Labour and Greens policies) against the same criteria. Sapere concluded that these policies would be less able than the current market to meet the five criteria, and would not resolve transparency or energy hardship problems. . .

The Labour Green power plan would make the electricity supply less secure, lead to less efficiency in operation and market transactions, less efficiency in investment, poorer social requirements and poorer environmental requirements.

Rather than fixing any problems, real or perceived, it would exacerbate them and the people who would be most disadvantaged by the added costs and poorer efficiency would be those least able to afford them.

That isn’t unusual when ideology comes before practical considerations.

Key findings of the report are:

• Outcomes under all of the public policy goals are for the most part positive but there are some areas where more effort should be applied
• Security of supply has improved under the market, and investment in generation, transmission, and distribution assets is keeping ahead of demand without government subsidy or direction
• Retail electricity price increases have not been transparent enough
• There appears to be insufficient action to address energy hardship experienced by some consumers who live in houses that are too cold and damp
• The NZ Power proposal would be less able than the current market to deliver against the five goals, and would not resolve transparency or energy hardship problems

BusinessNZ recommendations:
• Retain current electricity market framework as superior to the alternatives across a range of desirable policy objectives

• Aggressively pursue net-benefit positive improvements to the efficiency of the current market arrangements by improving price transparency:
i. Investigate rules for information disclosure around price setting
ii. Fast-track Electricity Authority and MBIE workstreams on price transparency

• Confirm the nature and size of the issue of energy hardship, acknowledging that efforts by the electricity market will benefit those affected only marginally

• Implement options to aid those experiencing energy hardship, in a systematic, whole of-government way (including the appointment of a lead agency), such as:
i. Requiring landlords who receive state money to make their houses available for social housing to submit their houses to a ‘warrant of fitness’
ii. Replacing the poorly targeted Low Fixed User Charge with a better initiative
iii. Reviewing initiatives in health and welfare that can help address energy hardship

The full report is here.


Challenge

February 6, 2014

Prime Minister John Key has issued a challenge to people protesting against oil exploration:

. . . Mr Key said protesters have been misled over the deep sea drilling issue. He told reporters he didn’t see the hikoi, but did hear from its leader inside the whare and much of what they said was ill-informed or wrong.

“The comments I made in rebuttal were to the leader look, come to Wellington, spend a week with my ministers and their ministries. If at the end of that week you’re proved to be right in the assertions you’re making, I’ll join your protest.

“But if you’re proved to be wrong, go out there and tell the protesters, because many of the things he was saying were just simply and utterly not correct. And that’s why those people are protesting – because they’ve effectively got misinformation.” . . .

They also have mixed messages from Labour leader David Cunliffe:

  MIKE HOSKING:  And you are – they’ve got an anti-mining message – you’ve come out – I mean a slightly different way I know, but nevertheless you’re pro-drilling and pro-mining in that sense…

DAVID CUNLIFFE:        No [laughs]…

MIKE HOSKING:  Are you expecting some heat?

DAVID CUNLIFFE:        Oh no there’s a bit of license in that one Mike.  Our position is that there may be a place for some exploration as a transitional measure offset.  We’re not opposed in principle.  It’s got to be done as it’s done to world best practice environment standards including clean up and liability cover.  It ain’t there yet buddy and there’s a whole lot of tightening up to do on the law before we would allow it.  So it would be wrong to say we are pro-drilling.  We’re not opposed in principle but there’s a long way to go in terms of the regulatory framework. . .

That sounds awfully like a Clayton’s answer – the one you give when you’re not giving one – which is what you might expect from someone with a growing reputation for being a tricky.

 


Cow burps and farts cause explosion

January 28, 2014

Methane gas released by dairy cows has caused an explosion in a cow shed in Germany, police said.

The roof was damaged and one of the cows was injured in the blast in the central German town of Rasdorf.

Thanks to the belches and flatulence of the 90 dairy cows in the shed, high levels of the gas had built up.

Then “a static electric charge caused the gas to explode with flashes of flames” the force said in a statement quoted by Reuters news agency. . . 

Is there an alternative energy opportunity in this?

Instead of all that methane going to waste and creating the potential for explosions, could it be harnessed to produce electricity?


Red-Green split over oil

January 23, 2014

The political year hasn’t even warmed up and already there’s a major policy difference between Labour and the Green Party whose support it will need if it’s to have any chance of leading a government.

. . . While Prime Minister John Key is busy building coalition bridges, David Cunliffe today dynamited a big one on the left.

He has announced a Labour-led government will carry on deep sea drilling off New Zealand’s coast even though its most powerful partner, the Greens, are vehemently opposed.

“We are not opposed in principle to deep-sea oil exploration – be very clear about that. We want to work with the industry,” says Mr Cunliffe.

The Greens still say they are “against” the idea. . .

Helen Clark could have invited the Green Party into coalition but chose not to for good reason.

Two of her other coalition partners – Peter Dunne and Winston Peters – were strongly opposed to being in the same government as them.

And Green policies were far too far to the left.

While Cunliffe has been trying to out-red the Greens, at least to his supporters, the Green Party still has a lot of hard-line left policies.

Many of these anti-progress and one of the strongest is opposition to oil use and extraction.

Cunliffe has fired a shot across the Green’s bow.

But he knows that unless Labour gets a substantial increase in its own support it won’t have any chance of governing without Green Party support in one form or another.


Dunedin has a choice

January 21, 2014

Dunedin City councillor Andrew Whiley writes:

The residents of Dunedin have a choice to either embrace the concept of the city being a hub for offshore gas companies or accept the alternative and encourage the companies to set up their hub in Invercargill.

Neither the residents of Dunedin nor the Dunedin City Council are in the position to say if gas exploration goes ahead off the coast of Otago.

That decision has already been made – like it or not. The decision in our control is where these exploration companies will base themselves.

Will it be Dunedin or Invercargill? Which community will reap the rewards of playing host? The residents of Dunedin, the DCC and the council’s economic development unit must support and embrace all new businesses keen to establish in our city.

The employment opportunities and family and economic benefits this exploration hub would bring to the city are significant. . . .

Industries such as ship repair, provedores, construction, engineering, helicopter services, software and IT will all increase as will road and rail freight movements and airport and port traffic.

There will be strengthened links to Otago University in health sciences, earth science and surveying plus more dollars spent in the city’s accommodation, entertainment and hospitality industries.

Dunedin has been lamenting the loss of businesses and jobs, it now has the opportunity to gain many more back.

But what about the ethical debate about using fossil fuels, climate change, greenhouse gas emissions and the future of the planet?

These are all serious issues and ones that governments, corporations, scientists and universities around the world are all working on to address. Globally, most of us are now aware of these challenges and are worried about the role of CO2 in climate change.

We should actually welcome exploration and production of natural gas as it can contribute to a significant reduction in those emissions. According to a report from the Centre for Climate and Energy Solutions issued in June 2013, ”Increased use of natural gas in the US energy supply is contributing to a decline in greenhouse gas emissions”. . .

Dunedin is ideally suited to play host to the support industries for offshore exploration and we will see a dramatic increase in smart minds staying in Dunedin to be a part of the future in the energy and engineering sector.

These minds will look outside the box and will look at positive alternatives that can make for a cleaner and greener future.

So a plea to the Dunedin and Otago region: let’s embrace the opportunity to play host as the southern exploration hub for the companies that are coming.

If it isn’t Dunedin then it will be Invercargill!

The south will benefit wherever the base is but Dunedin could make itself the more attractive option if the city, and its leaders, made the company welcome.

 


Labour will meddle in power market

January 17, 2014

Labour is planning to follow through on its policy to meddle in the power market if it is in government:

. . . Labour and the Greens unveiled plans to overhaul New Zealand’s electricity market on the eve of the government’s MightyRiverPower selldown last year. The operator of nine hydro stations on the Waikato River has traded below its $2.50 IPO price since just after the sale last May.  Meridian Energy, sold in October, is hovering around its listing price.

The opposition parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate excessive power company profits and pass savings onto consumers through cheaper electricity prices.

“A wise investor will be aware if the pricing model changes, in this case to stop the profiteering of public rivers, that will change the companies’ profits,” Parker, who would be finance minister in a Labour government, told BusinessDesk.

“Investors are already discounting those stocks because of what might happen if we win,” he said. “It’s actually a good example of how the market works.” . . .

If they can reduce the value of companies and the wealth of investors this much when they’re in opposition, they will do much worse in government.

Investors have already assessed the threat. The New Zealand stock exchange energy group index, which includes all listed power companies along with Z Energy and NZ Refining, has dropped 9.6 percent in the past 12 months, while the NZX 50 Index has rallied about 17 percent.

“Some people just won’t touch them because they are scared of a Labour-Greens government,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “Others say because they’re dirt cheap people are pessimistic. If National got re-elected they’d go up again.”

A potential change of government may pose risks to other sectors as well, he said.

“Regulatory risk is weighing on those sectors which could be in for attention from a Labour government,” Lister said. “The market is aware of the sectors susceptible to regulation – SkyCity, the electricity sector and Chorus have a cloud hanging over them, which will continue to the election.” . . .

If there’s a Labour/Green/New Zealand Firs/Mana and whichever else party after the election that cloud will darken.


Irony or hypocrisy?

January 12, 2014

Pro Oil and Gas Otago, commenting on a very small flotilla protesting against Shell’s plans to drill for gas in the Great South Basin:

Not many protesters on the water, but the carpark is full!

Not many protesters on the water, but the carpark is full!

Is that irony or hypocrisy?


Case for optimism

January 9, 2014

At this time of year when people are making predictions on what the next 12 months will bring, it’s instructive to look back at what people were predicting a few decades ago.

In The Case for Optimism, entrepreneur Fabrice Grinda writes:

Let me take you back in time to the late 1970s for they seemed to mark the beginning of the end of Western Civilization. OECD countries were suffering from stagflation with inflation and unemployment above 10%. We had suffered from 2 oil shocks. The US had lost Vietnam. The Shah had fallen in Iran. The Soviet Union had invaded Afghanistan. Dictatorships were the norm in Eastern Europe, South East Asia, Latin America and even Southern Europe. The Club of Rome had made dire predictions that the world would run out of oil, coal and many natural resources within 40 years.

No one predicted that over the next 40 years there would be democracies across Latin America, Eastern Europe and Southern Europe; that inflation and unemployment would fall dramatically; that we would see the greatest creation of wealth in the history of humanity as 1 billion people came out of poverty. 650 million came out of poverty in China alone, completely changing urban landscapes across the country as a whole. Despite 40 years of record consumption of oil and natural gas we now have more reserves than we did then. The way we work and live has been profoundly transformed by computers, the Internet and mobile phones.

If we take a further step back, we can see that over the last 100 years economic downturns, be they recessions that occur every few years or bigger crisis such as the great depression, as painful as they are while we live them, barely register in a background of unabated economic growth. In fact over the last 100 years human lifespans have doubled from 40 to 80, average per capita income has tripled and childhood mortality has divided by 10. The cost of food, electricity, transportation and communications have dropped 10 to a 1,000 fold. Global literacy has gone from 25% to over 80% in the last 130 years.

We have redefined what poverty means. Today 99% of Americans in poverty have electricity, water, toilet and refrigerator. 95% have a television. 88% have a mobile phone. 70% have a car and air conditioning. The richest people 100 years ago could only dream of such luxuries.

We are also living in the most peaceful time in human history; not just of recent history, but in the history of humanity. We are truly living in extraordinary times. . .

He goes on to look at improvements in technology, health, public service, education , transportation, communication and energy and concludes:

. . .  Think about it. Computing power was so expensive we had to limit access to it. Now it’s so ubiquitous we use it to play Angry Birds or check Facebook. Its very cheapness has unleashed an extraordinary wave of innovation.

The same will happen with energy. Once it’s cheap many of our other problems go away. The idea that we will face a fresh water shortage is also ludicrous. The earth is 70% covered by water. The issue is once again accessibility as only 1.3% of it is surface fresh water. However in a world of unlimited energy it’s easy to desalinate salt water. In fact we may not even need to wait that long as new innovative devices like the Slingshot are coming on stream that can generate 1,000 liters of pure water per day from any water source, even saline or polluted.

Once fresh water is abundant food also becomes abundant as you can grow crops in the dessert – and that’s not taking into consideration an agriculture productivity revolution that could come from urban vertical farms.

As people we are truly blessed to be living in this amazing time. As entrepreneurs and investors we have the privilege of helping create this better world of tomorrow, a world of equality of opportunity and of plenty.

Closer to home, Lindsay Mitchell notes 10 positive trends in New Zealand: Assaults in police, incidents of sudden infant death, recorded crime,  smoking, abortion, teenage pregnancies, road deaths, child mortality, Maori suicide and rheumatic fever have all declined.

Of course there are still major problems at home and abroad but both writers provide strong cases for optimism.

 


Shell to drill Great South Basin

January 8, 2014

Shell plans to drill for gas and oil in the Great South Basin off the coast of Dunedin.

Great South Basin joint-venture parties Shell New Zealand, OMV New Zealand and Mitsui E&P Australia will drill an exploration well in the PEP 50119 block (see map).

The western edge of the permit area is about 100km off Dunedin and it stretches down to the south west of Stewart Island and the area borders a marine mammal sanctuary off the the Catlins in Southland. 

The drilling programme will most likely target the early 2016 summer period. . .

The Moeraki runanga is supportive of the plans.

Te Runanga o Moeraki upoko (appointed traditional leader) David Higgins said the permit holder had previously indicated the area was likely to yield ”99% gas”, rather than oil.

The Government had awarded the permits – in this case the Clipper-1 in the Canterbury Basin – and ”there is no way we are going to stop them”.

”But whatever we can achieve for the community, whether it is coastline restoration or whatever, then it is good for the community.”

”We are very proactive about this. You can sit on your laurels and moan and groan about this sort of thing happening.”

”You will find the Ngai Tahu stance is pretty pragmatic. We have always been that way inclined and whatever the tribes do up north, that is fine with us, too.” . . .

Others are less welcoming, including the usual suspects which prompted this tweet:


Rural round-up

December 28, 2013

Huge solar power system to milk cows - Gerald Piddock:

Hugh and Sue Chisholm are turning to solar power to help run a more sustainable dairy business.

The Putaruru farmers are installing one of the country’s largest solar powered systems ever to be used on a dairy farm on their dairy shed near Putaruru.

The 28kW photovoltaic (PV) system has 112 solar panels on the roof of the Chisholm’s 64-bale rotary shed as well as two Fronius IG 150 V3 inverters.

Chisholm said the capital cost of the system was a smart investment, and part of an improvement plan for their farm. . .

Sharemilkers not bad people, just bad bosses - Jon Morgan:

Immigration adviser Lyn Sparks is blaming a rise in corporate-owned dairy farms for an increase in workers’ complaints about poor working conditions.

The Christchurch-based adviser says the biggest offenders are some corporate-owned farms run by sharemilkers.

However, he believes there are more good employers than bad in dairying.

“The bad ones are not bad people,” he says. “They just don’t know how to manage.”

But a contract milker says there are just as many bad employees in dairying as bad employers. . .

Sorry tale of swaps no one understood - Fiona Rotherham:

It has been a victory – of sorts – for farmers with the Commerce Commission last week saying it intended filing court action next March against the ANZ, ASB and Westpac banks for “misrepresenting” the sale of interest rate swap loans to rural customers.

I say a victory of sorts because there’s a lot of water under the bridge yet to get compensation for farmers, some of whom ended up more heavily indebted and losing their land.

Sold between 2005 and 2008, interest rate swaps were marketed to farmers as a way to beat rising interest rates. When the global financial crisis hit in 2008 farmers with swaps saw the interest they were paying rise when rates were falling rapidly elsewhere. The banks charged huge break fees for those wanting to exit the swaps. . . .

Bank claims farmer swaps compo call ‘too late’ - Rob Stock:

ANZ says the three-year limitation period has passed under the Fair Trading Act for the Commerce Commission to obtain compensation for farmers who were mis-sold interest rate swaps.

That, the bank warned, meant the commission “will now have to attempt a novel and uncharted method to obtain compensation if it takes the court route.”

The bank’s written statement comes in the wake of the news last week that the commission would launch legal action next March under the Act against ANZ, Westpac and ASB for the sale of the swaps between 2005 and 2008. It is also investigating another bank, not yet named, that also sold swaps and may be joined to the action. . .

Postie’s long run of deliveries nears an end - Lauren Hayes:

After 53 years, millions of kilometres, thousands of early mornings and an unthinkable amount of petrol, a Winton postie is calling it a day.

At 21, Ray Cosgrove used his savings to buy into a Central Southland rural delivery run, and began loading letters into a Hansa station wagon. The Hansa might be long gone and the delivery route altered but, more than half a century later, Mr Cosgrove and his wife, Debbie, are still delivering mail to rural Southlanders.

Mr Cosgrove bought the rural run in September 1960 and stepping into the role was not as easy as many people, including the urban posties, often thought, he said. . .

Year in review – March – Rebecca Harper:

The drought was really hurting rural communities and the bill started to mount for the primary sector with drought declarations coming thick and fast. The entire North Island was eventually declared as being in drought along with the West Coast of the South Island. Dairy production took a hit and the first talk about a merger between the two largest meat co-operatives, Alliance and Silver Fern Farms, started, as farmers looked for the causes of low lamb prices.

This was quickly followed by a call from the newly-formed Meat Industry Excellence Group, a group of lower South Island farmers, for meat-sector consolidation. A meeting in Gore to gauge support and discuss possible reform of the red meat industry attracted 1000 farmers and Alliance chairman Owen Poole put the cost of consolidation at $600 million. . .


More warning on danger of LabourGreen power play

November 1, 2013

Meridian Energy’s partial float was given an initial thumbs up by analysts but they warn the share price is likely to be volatile heading into next year’s general election.

One fund manager said the difference in share price between Labour and National could be as much as 90 cents. . . 

Analysts agreed that day one of the float was successful and the closing share price was in line with expectations.

Devon Funds Management equity analyst Phillip Anderson said new investors would be pleased. “It’s enough for the new investors to be happy – they are feeling good about it – but not so much that it looks like the seller left a lot on the table.”

The general feeling among analysts was that institutions which had their share quotas scaled back had created strong demand for Meridian shares.

But the analysts warned that the general election could affect the share prices of both Meridian and Mighty River Power, which was partly privatised this year.

“My valuation for . . . [Meridian] as a whole is . . . around $1.10 if the Labour Party wins, but business as usual under National at around two bucks,” Anderson said. . .

That loss in value isn’t just for the wealthy for whom the left show no concern.

It is loss in value for ACC, Kiwi Saver accounts, the New Zealand Superfund, other pension and savings funds, and of course in the 51% of the company the state still owns.

The best way to keep the value up is to get National back into government.

The #gigatownoamaru campaign doesn’t hold political views.


Trashing family silver

October 24, 2013

The opposition harps on about selling the family silver when criticising the partial sale of a few state assets.

They’re wrong these energy companies are not national treasures.

They are however, investments for the state and individuals and Matthew Hooton points out that Labour and the Green Party are damaging them:

. . . No doubt as intended by Green/Labour, there has been vast destruction of value in these four companies and it is likely only to get worse if the polls continue to trend towards Green/Labour. Ironically for parties who tell us they want to save the family silver, the main loser from the destruction of wealth has been the state. All the wealth destruction so far in Meridian and Genesis has been suffered by the Crown and at least half of it in the case of MRP. Even with Contact, both ACC and the Cullen Fund are among the top 20. . . .

Labour and Greens regard SOEs as family silver but they’re not only trashing them they’re devaluing public and private savings.

It would also damage other companies:

If Labour and the Greens imposed their proposed power policy Contact Energy would be forced into a complete restructure, chief executive Dennis Barnes says.

Earlier this year, the parties announced plans to set up a single buyer, NZ Power, to buy all electricity generation at a fair price, promising to cut the average New Zealander’s power bill by up to $330 a year.

Speaking to The Press after the company’s annual meeting in Christchurch today, Barnes said the policy would require a structural change for Contact’s business and the electricity industry.

It would “change the face of Contact from a risk manager and a retailer to a business which has got the Government as its customer”, he said.

“It’s likely that a lot of the people we have working in the risk aspects of our business wouldn’t be needed anymore. I believe that innovation would stop and the Government would have to fund that.

“The biggest change is that the Government then becomes responsible for security of supply development of the industry rather than the market; that’s a whole different dynamic.”

Barnes indicated that power price increases in the last couple of years did not come from generators and retailers such as Contact Energy.

“A lot of the prices increases that you experience as a whole are transmission and distribution and charges that the generators and the retailers are not responsible for.” . . .

 

The threat of the policy is already doing damage, it would do even more damage should they try to implement it.


LabourGreen power policy already costly

October 24, 2013

Meridian shares will list at $1.50 which is at the bottom of the government’s indicative range and some of the blame for that can be laid on the threat of the LabourGreen power policy:

. . . Numerous factors combined to force down the price of Meridian shares. Chief among these were market fears that a Labour-Greens government, if elected next year, will gut electricity company profits to deliver large price cuts; and ongoing uncertainty about the long term future of the Tiwai Point aluminium smelter. . .

The Labour and Green parties have cost the country in opposition.

They’ll cost us all lots more if ever they get into government.


Govt. control costs consumers

August 21, 2013

The Opposition is touring the country peddling its power policy.

Dr Muriel Newman points out is has already cost us millions of dollars in sabotaging the Mighty river Power Float:

Just days before the listing, Labour and the Greens announced their intention to regulate the wholesale pricing of the electricity industry should they become the government in 2014. This announcement created such a shockwave that the sale of Mighty River Power had to be suspended to allow investors time to back out of the deal. As a result many tens of thousands of investors who had expressed an interest in investing did not do so and many tens of millions of dollars were wiped off the value of the government’s shareholding. Within two days of the Labour-Green announcement, the share market value of Contact Energy, Trust Power and Infratil had fallen by almost $600 million.  

It is fair to say that as a result of the greed of the Maori Council and the political uncertainty created by Labour and the Greens, New Zealanders lost out. The proceeds of the Mighty River sale were less than expected, so less investment money is available for spending on hospitals and schools than would have been the case if Labour, in particular, had not played politics.

The point is that people have come to expect the Greens to demonstrate their deep socialist roots and extremism when it comes to policy-making. In spite of their clever portrayal of financial credibility, even a cursory examination of their policy proposals reveal how ideologically driven and deeply flawed they actually are.

However, the markets expect Labour to produce a rational policy platform – one designed to take the country forward, not backwards into the dark ages. Yet, if their plan to re-nationalise pricing in the electricity industry ever became the law, industry experts warn that the power cuts of bygone years, would again become part of our future. . .

The architect of National’s electricity reforms, Max Bradford, compares power policies of different political parties:

The Labour and Green parties have announced a policy to effectively nationalize privately and publicly owned companies by controlling their prices and their profits. NZ First proposes to reacquire the generation companies and create one large state-owned generator like the NZ Electricity Department (NZED) once was. They believe they can force down electricity prices, while at the same time guaranteeing security of electricity supply and encourage investment in electricity generation and distribution.

National, on the other hand, believes that the electricity sector works best within a competitive market, with a mix of private and public ownership, and regulation where there is no competition in those parts of the sector where there can be no competition i.e. the local lines companies and Transpower. This is the best way to get the lowest electricity prices consistent with guaranteeing security of supply and sector investment to meet increasing demand.

These are dramatically different approaches.

Furthermore, it seems that the National Government will proceed to partially privatize Meridian Energy now that the uncertainty over the Tiwai smelter’s future has been delayed for a few years. This follows the successful partial float of Mighty River Power.

National’s approach is followed by the rest of the world and gets security of electricity supply and the lowest power prices possible consistent with a long-term viable sector.

It is my view too, not from any ideological perspective, but simply from what achieves the best practical result for consumers: New Zealand’s energy history and experience in world energy markets shows that government owned or controlled energy companies cost consumers – or taxpayers where subsidies are paid – far more than an efficient competitive energy sector, with well designed regulation where it is necessary to make the markets work. . . .

The opposition’s policies are a prescription for price rises, insecure supply, and power cuts.

. . . Some people in New Zealand believe that the electricity sector cannot be competitive, and prices will always be higher than in a state owned, politically determined industry. This belief is in spite of the fact that every other sector of the economy once owned by the government (e.g. telecommunications and airlines) is now operating in competitive markets, giving consumers choice and lower prices.

How many people would want the government to monopolize air travel or telecommunications again? Competition has produced palpable benefits for consumers, and has generated tax revenue for the government, whereas in the past taxpayers had been subsidizing these sectors. . .

The Bradford reforms were criticised from all sides but  when competition was introduced in 1998-99, real electricity prices fell on average for four years. That hadn’t happened in the preceding 20-30 years of state ownership and control.

. . . Prices fell more for some consumers than others: the commercial sector, and farming had been subsidizing households for years as prices were politically determined, with the result that very high non-household power prices helped make business and farming internationally uncompetitive.

Inflation adjusted prices for local lines distribution companies fell substantially for some years after 1999, as the regulator – the Commerce Commission – forced these monopoly companies to seek cost efficiencies and only allowed a reduced rate of return on capital because of the lower commercial risks they faced compared to competitive companies.

In 2002, the then Labour government began to re-regulate the market in a series of policy moves, although they didn’t move to change the structure of the market finally established in 1998 after a decade of reform.

The overall effect of these moves was to reduce the competitive pressures on the generators. Government policies reduced the ability of companies to build low cost thermal generation (such as low emission coal fired stations). There were other pressures as well that no government could avoid e.g. the ending of low cost gas supplies from the Maui gas-field, and the addition of increasingly expensive new generation capacity as lower cost alternatives were not available (such as wind power).

The result was a 72 percent increase in inflation adjusted power prices between 2002 and 2008. This had nothing to do with the structure of the market, but was principally the result of Labour’s policy mix where the market could not find the lowest cost generation capacity and the downward pressure on electricity prices of the 1998-99 reforms was eliminated by government policy.

During this time, the government also sought higher dividends from the state owned power companies, which in turn put upward pressure on prices.

After its election in 2008, National reinstated the policy pressures on competitive producers and retailers. Consumers were encouraged to shop around for alternative electricity suppliers, just as they do for air travel, mobile phones, or petrol, with initiatives like Powershop, the What’s My Number campaign and greater transparency of pricing.

As a result, power prices have risen at a far slower rate than in the 7 years prior to 2008. Whether they can or will fall further on a sustainable basis, depends on the policies being followed by the government of the day, and perhaps more importantly on the cost of each new increment of electricity generation capacity as New Zealand has run out of “cheap” renewable energy such as hydro. . .

He has suggestions for further improvements which would make the market work better, and put pressure on the industry to deliver the lowest possible prices to consumers.

I would include the following:

  • Mandating smart meters into all electricity consumers’ premises
  • Consider removing metering from the generators and putting them in the hands of independent meter operators or lines companies
  • Improve the ability of independent retailers of electricity to provide electricity to household consumers, by removing any barriers to their ability to buy power from generators, independent retailers or the wholesale market
  • Providing a power tariff for household consumers to buy power through the wholesale market (to get the benefit of low prices when the wholesale market is over-supplied)
  • Make it easier for individuals to generate their own power and supply into the grid, with a certain, if necessary mandated, tariff payable by lines or generation companies

He identifies serious shortcomings used by the Labour and Green parties to justify their policy and concludes:

As a country we have clearly reached a fork in the road: do we continue to promote competitive measures to force competitive generators to look for lower cost solutions, together with sensible regulation on monopoly parts of the electricity sector; or do we return to the post-war model of monopoly state ownership and control, where political parties determine prices and profits?

We’ve got a choice.

There’s the LabourGreen policy which puts power in the hands of politicians and bureaucrats or National’s policy which puts the power in the hands of consumers.


Follow

Get every new post delivered to your Inbox.

Join 1,280 other followers

%d bloggers like this: