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Gavin Riley reports on the Power Conference held in Auckland where the message was, ‘our natural resources are under-valued and under-used’.
They give the country a huge opportunity as well as a responsibility to help the 5.5 billion of the world’s population who aspire to reach the standard of living of the one billion well-off people, he told the Power Conference held in Auckland earlier this year. But the 5.5 billion will become six, seven, or eight billion and their aspirations will not be met unless unprecedented breakthroughs are achieved in supply and commodities, energy and food comparable to the scale the IT industry has achieved in speed of processing. Elder says New Zealand has 15 billion tonnes of coal underground, at least two billion of which is good quality but may not economically minable using conventional techniques. However, it is amenable to new technology of underground coal gasification whereby underground gas coal can be extracted by pipes and not by people going underground. “That is the kind of technology breakthrough needed.” The 10 billion tonnes of lignite in Southland is a major global resource that has the potential to make us the richest country per capita in the world, he adds. “Monetising” the lignite by turning it into briquettes for export, transport fuel or fertiliser would be worth about $5 billion a year. With rising fuel prices, by 2015 the figure would be $10 billion and by 2020-25 the lignites could be generating $20 billion a year. “The opportunity is immense,” he iterates. However, there are issues to be addressed that have caused major problems for the energy industry in recent times. Climate-change ‘deniers’ need to apologise for denying everyone else the right to have proper information to determine whether climate change is the biggest threat facing mankind in the 21st century. “I am talking about the people who, it is now clear, to the detriment of sensible rational discussion, have denied scientific process, have denied transparency, have denied free speech around this critical international issue without denigration or ridicule, have denied the rights of good scientists to have their work included in the international body of work while at the same time being happy to use unpublished student dissertations, and to quote in IPCC reports and use as documented evidence press releases from environmental lobby groups.” Elder considers the climate-change argument has suppressed an urgently needed discussion about energy in light of the imminent oil crunch. “We are now on notice from the world’s industry leaders that one of the biggest threats facing New Zealand is our dependence on oil.” He also appealed for a sensible discussion about future mining operations in this country. The value of one hectare for a dairy farm is $3000-$4000, but $200,000-$1 million for a mine, making a national discussion critically important for the country’s future prosperity and social well-being. “If we go into mining and use our natural resources in a rational and responsible way, we can afford to do things we can’t do now because we will be one of the wealthiest countries in the world. We need to grab the opportunity.” Disincentive to investment
“And are we doing enough from the investment in infrastructure to ensure our part in closing the gap is being delivered? At the end of the day energy supply will be crucial to underwriting that infrastructure growth.” Selwood says there has been a considerable decline in the proportion of national income invested in infrastructure and it is seen globally as a constraint on the country’s future growth. Of particular concern to investors is the perceived poor quality of our energy supply in terms of interruptions and voltage fluctuations. He believes the challenge to government and industry is to demonstrate the capacity to meet energy demand at competitive prices while meeting sustainability goals. Without regulatory policy that provides a level of certainty and consistency, that drives confidence, “we simply won’t get the investment”.
The host of regulations and acts that must be complied with before projects get the go-ahead has created a very complex environment in which to do business. “If you’re a New Zealander and you’re familiar with this environment you can probably live with it, but if you’re an external investor you won’t accept it.” Selwood believes there is a lack of national context about what we are trying to achieve in the infrastructure area and he welcomes the setting up of a national infrastructure unit to bring some focus to the issue and provide independent decision-making. In his view, the investment test is about the need to minimise costs and make the investment stand up. Whether the electricity bill is low or high is not really the issue; it is whether the overall pricing regime is sufficient in the longer term to support and encourage long-term investment. That’s where the regulatory focus needs to be, says Selwood. The country needs long-term asset-management to support and encourage long-term investment, we must consider projects in the national interest, we must enable a fair return to be made to sustain investment, and we must benchmark ourselves against other countries to see how we stack up in the global market on rates of return. “There’s a danger we get so bogged down in the detail of the regulation that we forget to answer the fundamental question: is this, when we add it all up together, delivering confidence in New Zealand’s economy and growth? I’ve got to say right now, we’re improving but the answer is no.” RelativityA reminder that our problems are relatively small in a global context came when an audience member queried with World Energy Council chair C P Jain the definition of the term “energy poverty”. In this country it applies to any household which needs to spend more than 10 percent of its income to achieve satisfactory heating and light. But, as Jain pointed out, in India (his home country) only 50 percent of households even have access to electricity. Jain says that to meet the energy needs of all the world’s population, the global energy supply will have to double before 2050. The world has sufficient energy resources, knowledge, skills and capital to meet the need. But private sector engagement is essential. “The future is in our hands.”
Energy NZ Vol.4 No.3 May-June 2010 |
New Zealand’s water, climate, knowledge, resources, people and energy make us the “lucky country”, says Solid Energy chief executive Don Elder (pictured right).
“We have the argument, should we be trying to catch up with Australia? I like to think there is aspiration in on catching up with our OECD peers. The gap is, unfortunately, getting bigger,” says Council for Infrastructure Development chief executive Stephen Selwood (pictured right).