Thursday, November 12, 2009

A policy of no policy

In this post
  • The Project Hayes windfarm has been turned down
  • It is not clear whether this decision is correct or not
  • This lack of clarity is a national energy policy failing
  • The Minister of Energy and the Government are not accepting their accountability for setting energy policy
  • Such a policy will not be popular with everyone as it must determine and make clear the trade offs between energy security and environmental purity
  • It is time to move past the purely aspirational and make the national policy decisions
  • Perfect outcomes with no compromises are for Walt Disney movies - not for real world energy policy
The recent news that the Project Hayes windfarm has been turned down makes quite obvious the energy policy failings in New Zealand. For the avoidance of doubt I am making no comment about whether the Project Hayes decision was correct or not. What I am observing is that the Hayes decision is not clear and how the Commissioners have found themselves in a ridiculous predicament.

New Zealand does not have any meaningful energy policy. Neither does it have any meaningful environmental policy despite a great deal of rhetoric to the contrary. This has been a significant policy failure of the previous government but the current government is doing little more than the purely superficial.

The Project Hayes example highlights this well. In a project such as Hayes the fundamental issue of the project's contribution to the country's energy supply versus the local and global environmental impacts must be a national policy issue. This doesn't mean that such a project should be considered at a national level (as this would merely promote the global above the local) but it should be considered within a very clear and unambiguous national policy and assessment framework.

The Commissioners in the Project Hayes case found themselves making self admitted subjective assessments (guesses in effect). All of the Commissioners found themselves in this predicament even the Commissioner with the dissenting minority report. All of them found that the evidence (the scope and content of which was entirely at the discretion of the proponent of the project) was inadequate for balancing all of the benefits and costs. This is unsurprising as the Commissioners have, unwittingly, found themeselves in the role of national energy policy makers where this is clearly not supposed to be their role.

Fundamentally, the level of contribution of renewable energy to New Zealand's increasing energy demands (and how important that is relative to various benefits of the local and global environment) is a national issue. These energy and environmental objectives of New Zealand need to be clearly presented in a national energy policy. No doubt the previous and current Minister of Energy would claim that we do have such policies. However, making the aspirational statements we want entirely renewable energy without any environmental impacts is as useful to energy policy as the anti-smacking legislation is to the genuine welfare of children. There are critical and unavoidable trade offs between energy supply and the environment and it is time for the Minister of Energy and the Government to accept this accountability. OK, so it will not be universally popular but that is the job and not doing it is unacceptable.

Part and parcel of this policy should be an assessment framework that guides the assessment of projects against the energy policy. This would not only ensure that the Commissioners deciding such projects were doing their jobs (rather than also doing the politicians job) but would also make it very clear to project proponents what standard they are to meet; and how they will meet them.

Some might argue that the call-in process facilitates the national policy objectives but I cannot agree with this proposition. The call-in process allows for political expediency rather than enforcing a clear statement of energy policy and an accountability to that policy. I think it is entirely appropriate that decisions for such project authorisations are made locally provided that there is clear and unavoidable guidance in how to balance the local with the global.

The Project Hayes decision makes these policy problems obvious but every wind project so far has suffered from the same problem (including the ones that have been accepted). One can argue indefinitely whether any decision is correct or wrong because it comes down, fundamentally, to the trade offs that we want to make as a society to have a balance between energy security and environmental purity. It is the Governments job to make this unpopular choice between the national benefit and cost and the local benefit and cost. If we prioritise the local environment then we will have to compromise on our renewable objectives. If we prioritise renewable energy then we will have to compromise some local environments. Perfect outcomes with no compromises are for Walt Disney movies - not for real world energy policy.


  1. The commissioners decided that insufficient evidence had been put before them to show that the windfarm was "an economic use of resources". So what they were saying was that given that I had produced a considerable amount of evidence demonstrating that the cost of power generated by the windfarm was somewhere between 11 and 17 c/kWh and given that Meridian had not seriously challenged this evidence - and their expert witness, Brent Layton, inadvertently supported my capital cost estimate of more than $3000/kW - they concluded that it was, in all probability, more expensive than alternatives.

  2. As mentioned above the Hayes decision may well have been the best decision. I personally think that it probably was but that is not the point.

    The point is that these commissioners should not have been in the effective position of deciding national energy policy. Nor should the outcome have been decided on which party's consultant (with no disrespect intended) did the best job.

    The Commissioners should have been considering the local effects (and costs and benefits) against a national framework for comparing the national costs and benefits consistent with a coherent national energy policy.