Former Labour energy minister slams Labour/Green power policy

March 6th, 2014 at 11:00 am by David Farrar

Stuff reports:

A former energy minister has slammed the party’s proposed power policy, saying it would mostly benefit the rich while damaging the renewable energy sector.

David Butcher, who now runs a consulting firm, was one of four speakers debating the merits of NZ Power at the Downstream energy forum in Auckland. …

Butcher said the proposal would overturn 25 years of collaborative market development for an “untested and very flawed model”.

“I think it would largely destroy the renewables industry, or at least set it back five or six years,” he said.

Butcher said that before deregulation in 1990, were rising by about 20 per cent a year.

Today, 72 per cent of new generation was renewable, there was private investment in renewables and there were no blackouts, he said.

Butcher said the benefits of the policy would largely go to rich people with high power usage and companies like Rio Tinto, which runs the Tiwai Point aluminium smelter.

Of their many bad policies, I rate this one the worse.

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44 Responses to “Former Labour energy minister slams Labour/Green power policy”

  1. Cunningham (836 comments) says:

    “Of their many bad policies, I rate this one the worse.”

    I agree. I don’t think people realise the damage this would cause. It sends a really bad signal to potential investors. Who will want to invest in the power industry? In fact some investors may shun this country completely not knowing what other industry they will come in and fuck with next.

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  2. ross69 (3,652 comments) says:

    So, other speakers thought the policy was great. Good to see some balance. :)

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  3. mjw (377 comments) says:

    I’m amazed to see you supporting this point of view DPF. The underlying argument seems to be that renewables are not economic unless power prices are kept artificially high! That is state intervention at its worst.

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  4. greenjacket (449 comments) says:

    “Of their many bad policies, I rate this one the worse.”

    Nah. Sure, it is an incredibly amateurishly conceived policy.
    But I’d have to rank Labour’s committment to a return to 1970s style industrial national awards as the most damaging.

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  5. Psycho Milt (2,401 comments) says:

    Er, saying “Former Labour minister David Butcher opposes current Labour policy” is like saying “Former Labour Minister Richard Prebble opposes current Labour policy” – file under “well, duh.”

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  6. flipper (3,908 comments) says:

    mjw….
    It would be helpful if you differentiated between the type of “renewables.
    Some are crap.
    Hydro is not. Geothermal is not.
    Wind is hit and miss, but costly and far from “:green”.
    Solar is distant future… and awaits the development of storage to be anything other than a hole in the atmosphere into which we would pour money. :-)

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  7. Bill Ted (91 comments) says:

    @ross69 – Parker and Norman would think it’s great, given they dreamed it up. If you’ve ever spent some time understanding the complexities of our energy system, it’s not too hard to understand that making the taxpayer financially responsible for the associated risks inherent in the system is a bad idea. Throw in the message it sends to international investors, and the impact of this policy is disastrous. But then, I guess we can always print more money…

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  8. anonymouse (709 comments) says:

    The real concern about this is the “we wont tell you any more details until we are in government” line now being spouted by the Greens

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11214563

    “We don’t plan to release much further detail before the election,” said Norman after a panel discussion at the Downstream conference in Auckland.” So we intend to conservatively destroy 5-10 billion dollars in asset values, but we can’t give you any more details…. great

    In government the parties would be in a much better position to develop policy using the bureaucracy at their disposal, Norman said” This to me is code for we are flying this by the seat of our pants and really have no idea how it will (or even if it will) work.

    “We’ve released a lot more detail than the National Party did before the Bradford reforms.”

    But I thought the greens held themselves as being a party of principles and ethics, to bat away criticisms with “well we are better that those guys” simply reinforces that they are just another drity grubby political party wanting to get their hands on the levers or power, – which is fine, just don’t claim to be something you are not…

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  9. unaha-closp (1,155 comments) says:

    So, other speakers thought the policy was great. Good to see some balance. :)

    The other speakers being Russell Norman who wrote the policy and David Parker who copied the policy.

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  10. ross69 (3,652 comments) says:

    @ross69 – Parker and Norman would think it’s great, given they dreamed it up.

    I suggest you chat to consumers who have faced recent power price hikes of 5 times the rate of inflation. When you have done that, you could talk to the Commerce Commission and Geoff Bertram.

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  11. Cunningham (836 comments) says:

    ross69 this policy is a piece of shit. Even Frank Wolak (I think that’s his name) who was the inspiration for it said so. Almost everyone apart from Labour and the communists think it is an ass of a policy. If you think you can convince people it is good, then you are seriously deluded.

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  12. Lance (2,613 comments) says:

    @ross69
    Yes, power infrastructure has no cost, it doesn’t cost 100’s of millions of dollars to upgrade cook strait cables. Generation never needs maintenance or replacement. There never needs to be new cables/ power lines run.

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  13. NoCash (257 comments) says:

    @Bill Ted – I don’t think ross69 has the brain power to understand the electricity market. After all, he keeps on comparing the NZPower model with Pharmac when they’re apple and orange.

    NZPower is a single buyer of a 100% locally produced product (electricity) that cannot be exported directly, nor sold to other buyers in NZ (except for a few large companies connected directly to the grid).

    Pharmac is a single buyer of products (drugs) that are largely imported from overseas, made by MNCs with many other clients all over the world, who have the choice to not sell anything to Pharmac, or even NZ.

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  14. Ed Snack (1,827 comments) says:

    Don’t worry, to Ross69 power IS free…someone ELSE is paying for it, that’s free innit ?

    Recall also, for the Greens especially, the price isn’t the issue, it’s getting control of the energy market so they can dictate to you how much power you will be allowed and when. The plan is to make power “cheaper” as longs as you use almost none of it, and steeply progressively expensive if you use “too much”. And who will determine how much is too much ? Why, that super-intelligent, empathetic (I’d lose the “em” myself), and genuinely concerned group of people who are members of the Green party, who else.

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  15. ross69 (3,652 comments) says:

    NoCash gets it. Both Pharmac and NZ Power are single buyers of products. I assume NoCash hates Pharmac too…

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  16. OneTrack (2,959 comments) says:

    “In fact some investors may shun this country completely not knowing what other industry they will come in and fuck with next”

    Supermarkets?

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  17. ross69 (3,652 comments) says:

    Have you ever thought, NoCash, why Pharmac is good for consumers?

    http://www.bmj.com/content/340/bmj.c2441

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  18. Ross12 (1,364 comments) says:

    I don’t think NoCash is agreeing with you ross69

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  19. ross69 (3,652 comments) says:

    A year ago, appearing before the select committee considering the Mixed Ownership Bill that opened the way for the partial sale of Mighty River Power, I warned that the regulatory risk overhanging the electricity industry had become severe, and that it would be unwise to proceed with any partial share floats without first ensuring that investors could be confident of a stable policy and regulatory environment.

    Specifically, I pointed out that: “New Zealand’s regulatory regime to date has been spectacularly lax by the normal standards of regulation in other countries, and any investor taking up shares in the pending floats of electricity SOEs will have to bear in mind the likelihood of a future policy shift that will more effectively remedy the obvious failings of the industry to date.”

    http://www.stuff.co.nz/dominion-post/comment/8607601/Tighter-rein-urged-on-asset-revaluations

    Wise advice but this government chose to ignore it. They can’t now complain.

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  20. NoCash (257 comments) says:

    @ross69 – Ok I bite…

    NZPower – electricity producers have no choice but to sell the product to NZPower. A closed market that’s controlled by a govt agency. That’s not good for the sellers, nor the end users.

    Pharmac – drug producers have many choices to whom they sell their products to. A good and open market for both buyer and sellers.

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  21. ross69 (3,652 comments) says:

    I don’t think NoCash is agreeing with you ross69

    That’s why I assume NoCash hates Pharmac. :) Consumers probably love Pharmac.

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  22. ross69 (3,652 comments) says:

    Pharmac – drug producers have many choices to whom they sell their products to

    Who drug producers can sell to is irrelevant. There is a single buyer and that clearly benefits consumers. Even John Key says Pharmac is great and he recognises that the single buyer model works well.

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  23. ross69 (3,652 comments) says:

    Pharmac is a state agency that bulk-buys medicines cheaply, often pricing competing medicines off the market.

    “We think Pharmac has been hugely successful. We think it makes money for New Zealand. It is the most cost efficient way of purchasing pharmaceuticals for New Zealanders and we’d take a fair bit of convincing that that wasn’t the right model.” ~ John Key

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10727575

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  24. OneTrack (2,959 comments) says:

    ross69 – Are you saying that everything should be handled by a single buyer. If not, why not. If yes, hello comrade.

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  25. unaha-closp (1,155 comments) says:

    Who drug producers can sell to is irrelevant. There is a single buyer and that clearly benefits consumers.

    Only a moron (or someone incredibly well connected*) sets up a company to sell to a single buyer.

    * Think Northrop Grumman well connected.

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  26. Bill Ted (91 comments) says:

    @NoCash – I think Ross69 has provided enough evidence to confirm your point on his lack of understanding of the electricity market.

    For the record Ross, a lot of things have increased well above inflation, including lemonade iceblocks. But then I’m not proposing that all ice block manufacturers be forced to sell to one buyer, in order to drop the price. Because their immediate reaction will be to cut costs, reduce supply and scrap any notion of investing in new plant.

    If you’re going to argue NZ Power is like Pharmac, you might as well start arguing Russell Norman is God.

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  27. NoCash (257 comments) says:

    @ross69

    Pharmac operates in a world-wide market of drug buyers and sellers, so it isn’t a single buyer in the sense of the whole drug market.

    NZPower would operate in a closed local market of electricity. With a single buyer, distortion is likely and would lead to mis-investment and development of critical assets in electricity generation.

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  28. Roflcopter (451 comments) says:

    The whole “we’ll release details after the election” is the same bullshit they tried on New Zealanders with their “alternative budget” under Goff… trust us we know what we’re doing… yet refused to give details.

    Just like 2011, NZ’ers will call them on it.

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  29. srylands (404 comments) says:

    “ Even John Key says Pharmac is great and he recognises that the single buyer model works well.”

    This is like dealing with a child.

    What do you mean “even”? I would hazard a guess that nearly ALL economists support the Pharmac model – for obvious reasons. Similarly nearly ALL of those economists would think the NZ Power model is a terrible idea. How many economists have you seen trash Pharmac?

    Now Ross does that even give you pause for thought?

    The differences between the two markets are profound. I don’t have the energy (no pun intended) to list them all so let’s just try a couple.

    Firstly, Pharmac cannot influence the development of new drugs worldwide, or the quantity supplied. We take the drugs that are available. Pharmac strikes the best deal for those accessing subsidised drugs. But if Pharmac doesn’t want to play ball, many New Zealanders pay for drugs themselves. e.g. Pharmac does not subsidise erectile dysfunction meds. But there is not a sildenafil “blackout” as a result. Anyone with the money can buy directly, and of course many do. So Pharmac is simply one buyer among many, albeit a dominant one.

    Secondly, NZPower will be effectively accepting responsibility for planning the SUPPLY side of the market. Because no generator will do so under this model, because if they plan capacity without a guaranteed buyer they will go broke. If NZPower gets its plans wrong there will be blackouts. It is not just a single buyer model – it is effectively moving from a market model to a planned, or at best a “negotiated” model.

    In contrast Pharmac has zero influence over the worldwide supply of drugs because in relation to the global market it is tiny. Pharmac operates in a market as a tiny player.

    I could go on. And on.

    Surely you can see that you are simply comparing two totally different markets and agents with very different public policy objectives.

    I suggest you open your mind, look at the evidence, and the views of experts who understand markets, and quit with the smug responses.

    There are very well understood reasons for the price increases in energy over the last two decades. These price increases were completely necessary and in New Zealand’s interests. Can you think of what might have happened if a magic omnishambles dictataor had been able to limit price increases over the last 20 years to (say) no more than the CPI? Would New Zealand be a happy place with all the power we need, with security of supply, and a diverse mix of generation? OR might something else have happened Ross?

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  30. geoff3012 (66 comments) says:

    If you’re going to argue NZ Power is like Pharmac, you might as well start arguing Russell Norman is God.

    Bill Ted (52 comments) says:
    March 6th, 2014 at 1:12 pm

    Thank you for that. now we know that the big invisible man in the sky is Norman. Better watch what I say.

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  31. Akld Commercial Lawyer (165 comments) says:

    The difficulty with attempting to dissect the Power NZ proposal on a rational, economic, basis is that you need to assume that it is something other than a big fat lie. But that’s all it is.

    In the meantime, it has had the desired political effect of undermining confidence of retail investors in the partial asset sales. And it has wiped $100s of millions from the market cap of both the former SOEs and other energy companies. Job done if you are in political opposition. All this from the same Finance spokesman who laments Mum & Dad investors speculating on (Auckland) residential property.

    If the proposal had included some sort of resource rental on the water going through the turbines of the various hydro schemes, it might have had some sort of credibility – and bolstered one of the latest claims, that the SOE sale process was privatising low-cost generation that uses “public water”. But they don’t mention it – because it is orthodox economics.

    And the Electricity Authority is in the gun because it also used some fairly orthodox economics to try to explain power – and thereby took a knife to a (political) gunfight.

    The Pharmac model is a convenient red herring. As is the sidebar about Tiwai Point. But dealing with those would also give the Power NZ lie the political oxygen that the opposition needs. Too rational, too polite. Better to call it for what it is – and at the same time ask how the business community can give Labour’s finance spokesman even an ounce of credibility.

    We need a better opposition. However, I am feeling increasingly confident that we won’t get one anytime soon as the current lot seem destined to stay exactly where they are – in opposition. There is much talk in Auckland about the bright young things waiting in the wings for Labour – after the election. All power to them – there needs to be a clear-out and the next generation of younger, smarter, candidates brought forward to debate the real issues facing this economy, not play games (ones they are clearly not much chop at).

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  32. Bogusnews (475 comments) says:

    I wouldn’t cause this the worst policy of Labour. Have you seen the crazy policy they have for ICT?

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  33. lolitasbrother (617 comments) says:

    I just received a notice from Contact Energy.
    It said :
    ” We are sorry your power price is going up.
    This is because of Orion directors shoving it at us.”

    I might look up the single control model suggested by Labour / Green again.
    I have no trust in these divisions in the electricity market where every body sucks the consumer .

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  34. J Bloggs (193 comments) says:

    I have yet to have one supporter of this NZPOWER scheme adequately explain to me how an organisation using my tax money to buy electricity (so I’ve paid for it once with my taxes), then sells that to a retailer, who then sells it on to me (so I pay for it a second time with my remaining money) saves me money.

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  35. OneTrack (2,959 comments) says:

    The other issue is, once there is only one place to get power, you have no idea if it is good value, or whether you are being reamed to pay for other parts of the economy – just like happened during Helen’s reign. And even if you know you are being reamed, with a single seller, there is nothing you can do about it. Just like the comrades found in Soviet Russia.

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  36. ross69 (3,652 comments) says:

    I have yet to have one supporter of this NZPOWER scheme adequately explain to me how an organisation using my tax money to buy electricity (so I’ve paid for it once with my taxes), then sells that to a retailer, who then sells it on to me (so I pay for it a second time with my remaining money) saves me money.

    I suspect you don’t know how Pharmac saves you money.

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  37. srylands (404 comments) says:

    “I suspect you don’t know how Pharmac saves you money.”

    I obviously wasted my time.

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  38. ross69 (3,652 comments) says:

    I obviously wasted my time.

    Defunct economists have that effect on me. :)

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  39. srylands (404 comments) says:

    “Defunct economists have that effect on me.”

    Ross you are a smarmy prick. You make no considered contributions here whatsoever.

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  40. J Bloggs (193 comments) says:

    Ross: I know quite well how, and for whom, PHARMAC works, which is why I know the comparison with NZPOWER is flawed.

    And then there is the even bigger flaw which lies in one fundamental assumption in the policy. Namely, that the power companies will sell power at an unprofitable level to NZPOWER, rather than mothballing power stations and laying off staff. Even assuming that all the partially govt. owned generators will toe the party line, Contact Energy alone has enough generation capacity under its control that if it shut everything down, the other companies would have insufficient generation capacity to meet the nation’s consumption requirements – and that’s counting the capacity currently used by Tiwai point being put back into the national grid. If Tiwai pt is still operating, preventing Manapouri’s output from being redirected, then Contact has NZPOWER by the short and curly’s….

    Unless of course, Labour and the Greens plan to nationalise Contact Energy…..

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  41. NoCash (257 comments) says:

    You’re right ross69…

    Not to mention KiwiCap, KiwiCloud, KiwiMap, KiwiMart (single buyer and seller in the supermarket business), KiwiAssure, KiwiFilm (we can’t have the Hollywood studios taking advantage of our talented film industry), KiwiIce (single buyer and seller of ice blocks), KiwiTaxi, KiwiBuild, KiwiBlog (to be nationalised to replace The Standard), KiwiCar (after all we’re a car loving nation), KiwiHoliday (we love to travel), etc. will take NZ to great prosperity.

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  42. Than (446 comments) says:

    NoCash and srylands, you are wasting your time arguing with ross69. Myself and several other people have tried to discuss with him how Pharmac and NZ Power are different. He just ignores it and keeps boasting how perfect Pharmac is.

    On this topic he is simply a troll. Ignore him.

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  43. freemark (552 comments) says:

    HueRoss69..increasing the Centre Right Vote for the last couple of years. Good On Ya Mate

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  44. griffith (1,111 comments) says:

    New generation?

    Solar power photovoltics will continue its rapid growth. Solar is cost parity over life with new coal generation now
    Our hydro lakes are huge energy storage systems ideal patners to solar/ wind generation.
    NZ inc needs to be near the lead in the looming distributed smart power network paradigm shift. The future will see led bulbs smart grid responsive appliances and other technology halting the rise in power consumption of domestic consumers.

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