Hard News: Unwarranted risk
255 Responses
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James Butler, in reply to
“it means giving away a little piece of the ownership of NZ every time”
What a strange concept. If I sell my business, NZ has no ‘ownership’ of it. Only I do. How is that giving away the ‘ownership of NZ’ if I happen to sell it to a foreigner?
A question for you: how do you define "New Zealand" in such a way as to exclude yourself?
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BenWilson, in reply to
comfortably ahead of demand over the same period of 20%.
I'd like to see you prove that was the "demand" increase. I'd also like to hear how you explain power prices steadily increasing, if supply has increased faster than demand.
What would you prefer: we build power stations for the hell of it just in case?
Yes. I would prefer that. Power is a major part of the cost of life for most NZers and a great many NZ businesses. We have a responsibility to grow our economy by growing the infrastructure that enables it.
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Russell Brown, in reply to
Yes. I have mixed feelings about that. Investment in NZ isn’t always all good. Practically, it means giving away a little piece of the ownership of NZ every time.
In which case, the only solution is that we raise our savings to the level that more investment can come from within New Zealand.
If only a past government had established a compulsory superannuation scheme in, say, the 1970s ...
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It might also have the effect of deterring investment in New Zealand altogether. And it would certainly paint a big political target on Labour's back
A classic argument, best expressed as "safeguard your hovel and pittance - don't lose them by voting [for a previous, more leftwing] Labour"
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BenWilson, in reply to
What a strange concept. If I sell my business, NZ has no 'ownership' of it. Only I do. How is that giving away the 'ownership of NZ' if I happen to sell it to a foreigner?
What a strange question. If you are a NZer and you sell your business to someone outside of NZ, who is not a NZer, then the ownership has moved outside of NZ. What is actually hard about that to understand?
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BenWilson, in reply to
If only a past government had established a compulsory superannuation scheme in, say, the 1970s ...
It's never too late. The Ozzie scheme didn't start until the early 90s. The payback was super fast, and nowadays they're only voting to up the contribution rate. It's such an obviously good policy.
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Russell Brown, in reply to
What would you prefer: we build power stations for the hell of it just in case?
Yes. I would prefer that. Power is a major part of the cost of life for most NZers and a great many NZ businesses. We have a responsibility to grow our economy by growing the infrastructure that enables it.
But building new generation capacity almost always has an environmental impact, and funding it has an opportunity cost. It cannot be done trivially.
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insider, in reply to
You need to go to the MED data file 2011 for both, but the respective numbers are 32.6GWh and 39GWh if you want to check my maths.
POwer prices increase because the cost of power generation can change. No-one is going to build a power station if they won't get a return so effectively prices need to rise to cover that cost and the next power station is usually more expensive than the last, the cost of fuel can change, 40% of your bill is lines charges and we are in the middle of a $3b or so upgrade of the national grid. It all adds up. Your way would be even more expensive because you would have a bunch of power stations sitting idle not earning money just in case. So to encourage economic growth you would effectively overcharge for energy. Not sure that works.
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Chris Bowden, in reply to
Only a wikipedia source but nevertheless, demand increase may have been less than 20%:
"Electricity demand is growing by an average of 2.1% per year since 1974 and 0.9% from 2005 to 2010."
Electricity price rises will not just be a function of supply v demand over that time frame. I suspect price prices would be explained at least in part by increases in the underlying cost of supplying power, although I don't have the time or inclination to comprehensively source this assertion.
I am not a big fan of building extra power stations just for the hell of it. On the assumption that you are advocating a public rather than a private work, the capital that would be required to create power we don't need could be put to much better uses. A better argument might be to invest in more efficient and cleaner energy.
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insider, in reply to
Well it's not giving it away for a start. If I own it but move permanently to Australia have I given it away to Australia? If it's my property, 'NZ' has no ownership of it - I do irrespective of my passport or where I live.
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BenWilson, in reply to
But building new generation capacity almost always has an environmental impact, and funding it has an opportunity cost. It cannot be done trivially.
It can't, but the returns in this case have been fantastic, so opportunity cost is very low. This is hardly surprising, considering how incredibly useful electricity is, and how power from fossil fuels has to continually rise as the stuff runs out, driving up the value of electrical power constantly.
That's why National has such a horn to sell this asset. Because it really is a golden egg laying goose for whomever gets control over it.
Environmental impact is perhaps a concern, but is that really what's been holding up reinvestment? That just draws out the time it takes, but shouldn't impact on how highly prioritized reinvestment should be.
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Sacha, in reply to
They know this is bad for New Zealand, but they want to do it for other reasons, so they will.
Quite probably, and I'm sure your current experience is providing a sharpened perspective.
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Sacha, in reply to
A better argument might be to invest in more efficient and cleaner energy.
There are untapped savings in demand-reduction too. Long-term energy policy is complex, but I'd say Max Bradford's market fantasy has shown its colours enough by now. That Labour kept it going does not reflect well on them either.
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BenWilson, in reply to
You need to go to the MED data file 2011 for both, but the respective numbers are 32.6GWh and 39GWh if you want to check my maths.
I expect we have a very different idea of what demand actually means. Yours is based on a free market model, in which price is set by demand - you maximize how much you can get by how much people are prepared to pay for it. I have a very different concept of it - if power was cheaper, more of it would be purchased, and used for industry, or things like heating people's homes. It's a cop out to say that people do not demand power because they can't afford to pay for it. It's buying into the language that normalizes that power generating organization should squeeze as much as it can out in profits. I simply disagree with this altogether.
I do not deny that these SOEs have managed to squeeze huge profits out of their power supply monopolies, to the point where obviously inefficient ideas like people generating their own power are almost viable. But that does not make it right. That makes it wrong.
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James Butler, in reply to
Well it’s not giving it away for a start. If I own it but move permanently to Australia have I given it away to Australia? If it’s my property, ‘NZ’ has no ownership of it – I do irrespective of my passport or where I live.
You seem to have some concept of "New Zealand" being something other than the set of people living in New Zealand. I'd love to hear what that is.
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Why build new power generation capacity?
Because the old ones are old. Most of our hydroelectric generation is old and dams have a lifetime as do the generators inside them. Old things wear out, for example my knees. If you don't plan to replace them they break.
Also because new technology means that a new power generator is more efficient and more forgiving on the environment than the old one. This allows you to retire old equipment before it breaks.
Also new technology means that new power generation methods are possible that simply didn't exist 50 years ago. So you build new types of power generation. More efficient and better for the environment hopefully.
Also New Zealand has bugger all natural resources. But we do have water and renewable energy. Those resources are increasing in value all the time worldwide. Now I'm not sure about building more concrete dams and I certainly don't want more coal power stations but building wind farms and building tidal power generation could actually create a resource we could sell.
The last is obviously more speculative but it is worth thinking seriously about.
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insider, in reply to
A couple of things. Electricity is not a one way guaranteed bet or without risk (and the risk issue tends t be forgotten). The risk is often low though making it a solid rather than spectacular investment. If the returns were that spectacular you;d see every man and his dog lining up to build power stations, but you don't. ASsets are usually very expensive up front and need big reinvestment at times - Look at the discussion about Huntly. So they are not costless and should not be seen as revenue generators only. This is not a facebook IPO.
As for holding up investment, Genesis announced this week the deferral of a major wind farm because demand was not there.
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Sacha, in reply to
I'd love to hear what that is.
If you've heard any Rand you already know.
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BenWilson, in reply to
If I own it but move permanently to Australia have I given it away to Australia?
Pretty much. You'll be paying tax in Australia, and spending your money there. You've stopped doing anything for the NZ economy with the profits from that business. You will still be employing people in NZ, possibly (depending what your business is). Which is precisely what the situation is with a foreign owned company.
If it's my property, 'NZ' has no ownership of it - I do irrespective of my passport or where I live.
I think you're trying to say that there's no such thing as foreign ownership? That's ridiculous. In fact it's so ridiculous, that I can see why you're struggling to understand - it's because you don't even believe in the idea of a nation or a nationality at all. To you there are only people. So far as you're concerned there is no such thing as NZ, or the NZ economy.
Your position is not nonsensical, except in so far as most people would think it was utter nonsense. But it is possible to take a normative approach like yours. I just don't. To me, the idea of a foreigner is not meaningless, it's just complex, and doesn't really need your normative simplifications added on to twist it into something unrecognizable.
As for holding up investment, Genesis announced this week the deferral of a major wind farm because demand was not there.
Which, if you understood me at all, is synonymous with Genesis saying they deferred development because the profits are not there. Which is not the same thing at all as saying no one would find the extra power generated useful, or that no-one would use it if it was heaps cheaper.
The exact same reasoning has been what's choked broadband in this country. It's not that no-one would use the capacity, it's just that they're not prepared to choke on the prices they would be charged to line Telecom shareholder pockets.
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Chris Bowden, in reply to
I would love a plan to replace my knees, especially a for pair that is more efficient and more forgiving as (I hope) I still have a few things for them to achieve!!
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In 1980, NZ had 90% renewable electricity. Today, it's 74%.
We need to get back to that 90% and move beyond (once we have 100% of current demand met by renewables, there's more work to do replacing transport and static fossil fuel use).
If we do this (and NZ is one of the best placed countries in the world to do so) we'll be in a great position with our economy isolated from rocketing fossil fuel costs and carbon charges. If we don't, then we'll be steadily stuffed by higher and higher energy prices.
This obviously doesn't make short term commercial sense to a company that can make better returns by sucking more gas out of Taranaki and burning it. Which is why we shouldn't let "commercial returns" determine our energy policy.
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James Butler, in reply to
If you’ve heard any Rand you already know.
That's what I suspect; I just really, really want "insider" to come out and say it (:
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If the returns were that spectacular you;d see every man and his dog lining up to build power stations, but you don't.
Your concept of returns is entirely tied to profit. This is not how I see it. The return from the nation generating a lot more cheap power is a massive growth in the nation's industry. This is stifled by the insistence in returning a profit from one kind of asset - it chokes out other industry. This is so obvious in the realm of finance that the world economy has been stalled by it.
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insider, in reply to
@ James
NZ is many things and we can debate what it is but the "set of people living in New Zealand" seems not only limited but gramatically poor. Ben seems to think it's some form of collective that has dibs on my property and is devalued by me selling it, because that's giving it away, whatever 'it' is.
Well the set of people living in New Zealand have no rights to my business. That is unchanged if I sell it to a NZer or non NZer. And no right to reside or vote transfers with the shares. So it's all a bit more complex than the slogans being chucked around IMO.
PS I've never read Rand. Everything the Libz say about her makes her sound bathit crazy.
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the deferral of a major wind farm because demand was not there.
There's demand. There's 40TWh a year of demand.
The reason the wind farm isn't being built is that it's "cheaper" to dig coal out of the ground and burn it, polluting the world with CO2.
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