In this issue:

• Spot Market Overview
• Carbon Credits
• Big Savings for Energy Challenger Users
• Mighty River Power Investigating Wind Generation
• Energy Policies of Main Political Parties

Spot Market Overview

The winter period is normally characterised by an increase in demand due to the colder temperatures. While June did live up to expectations, the country experienced some of the warmest temperatures on record for July, August and September. The warmer weather led to a widespread decrease in demand during the quarter.

While a decrease in demand normally results in a lowering of prices, lower than expected inflows have left lake storage levels at below historical levels. This led to hydro generators reducing the amount of water flowing through their dams, reducing supply created through hydro generation. As a result more thermal generation has been required to meet demand levels. Thermal generation is normally a more expensive generation method as it requires fuels, such as coal, gas and oil, in order to produce electricity. As a result, prices throughout the quarter remained more expensive than the equivalent period last year.

September saw higher than normal inflows in the South Island which resulted in storage levels finishing the quarter at 80% of the historic average for the South Island and 120% of historic average for the North Island.

Carbon Credits

Carbon credits are the new currency to hit the worldwide trading market.

The PRE programme gives companies, developing generation projects that will reduce New Zealand’s greenhouse gas emissions, the ability to tender for a quantity of New Zealand’s allocated carbon credits.

Carbon credits are an initiative to come out of the Kyoto Protocol, of which New Zealand is a member along with 140 other countries. The aim of the Protocol is to reduce the world’s production of carbon dioxide (CO2).

One carbon credit is the equivalent of the right to emit one tonne of CO2. The amount of carbon credits a country is allocated reflects the greenhouse gas emission cap each country has been given under the Kyoto Protocol.

These carbon credits are not expected to have any direct effect on retail electricity prices, however a carbon tax, if introduced as part of the government’s 2002 Climate Change Policy Package, will cause modest increases to the price of fossil fuels.

A figure from the New Zealand Climate Change Office states that a typical New Zealand household will notice about a $4 per week increase for electricity, petrol and other fuels.

The tax is designed to help New Zealanders move towards using low-carbon energy sources, to reduce the production of greenhouse gas emissions which cause climate change.

Big Savings for Energy Challenger Users

Mercury Energy’s new web-based management tool, Energy Challenger, is helping customers who spend between $50,000 and $500,000 make major savings on their power bills.

By answering the online questionnaire Karl Rendel of Summit Wool Spinners Ltd, a carpet wool manufacturer, says the tool helped reassure both himself and his Executive Management Team that the company was on the right course of action with their energy efficiency programmes.

“It provided us with some additional ideas of where to proceed with energy efficiency in the future,” says Karl.

By identifying their energy management strengths and weaknesses, the report suggested remedies such as modifying maintenance procedures to include energy efficiency checks and assessed opportunities to improve the energy efficiency of their compressed air system.

“The tool also allowed us to benchmark our energy efficiency programmes against other businesses within our industry and the wider business community,” says Karl.

Energy Challenger is an easy-to-use analysis tool that assesses your business’s energy usage and identifies ways to reduce costs. This powerful tool is available on the Mercury Energy website and is a joint initiative between Mercury Energy and the Energy Efficiency and Conservation Authority (EECA).

For more information about Energy Challenger, click here.

Mighty River Power Investigating Wind Generation

Mighty River Power is poised to become a wind energy generator, having recently been selected by the Palmerston North City Council to investigate the development of a wind farm on council-owned land at Turitea Reserve.

The company is confident Turitea, about 10 kilometres south east of Palmerston North, will prove a viable wind site, but says that regulatory processes, including a reserve plan change and resource consent are first needed to enable the project to move forward.

Turitea may be Mighty River Power’s first wind development, but it is unlikely to be the last. The company has been steadily building its expertise in an area it sees as a necessary long-term generation option. Wind is a renewable and environmentally friendly energy source, and New Zealand’s hilly topography and long coastline are suited to wind generation.

Turitea is one of several high quality sites identified by the company – mainly in the North Island – as possible locations for future wind generation, and in some cases discussions with landowners are well advanced. Wind farms won’t be springing up overnight, however – they’ll be built only if they’re supported by strong operational and business cases, while the interests of the local communities which might be affected also have to be taken into account.

Wind is one of several options Mighty River Power is investigating, along with options for geothermal, small hydro and thermal generation as it continues to develop new generation opportunities.

Energy Policies of Main Political Parties

Energy policy is polarised in New Zealand with ACT at one end of the spectrum advocating a highly deregulated energy structure with little or no state involvement. The Greens on the other hand want the Government to control the use of non-sustainable energy sources and improve efficiency.

NZ First opposes the market model, while United Future more or less supports it. As ever, National and Labour sit somewhere in the middle.

Key energy issues and the policies of the main parties are listed below. Please note these are general overviews and are written prior to the election and any post-election coalition negotiations.

Energy uncertainty

National advocates a change to the Resource Management Act (RMA) to allow for more efficient development of generation assets, a view shared by Act. Labour maintains that the Electricity Commission should monitor supply and demand, while encouraging investment in generation assets with a particular focus on renewable energy. The Maori Party and The Greens want some measure of reform to encourage demand-side participation that allows small users to sell power back to the grid. The Greens would also commit to installing solar panels onto 500,000 homes by 2010.

Fuel

Whilst most parties advocate more renewable generation, few have totally ruled out coal as viable source of energy in the short-to-medium term. The obvious exception is the Greens who would gradually reduce fossil fuel use to nil. Most parties would set new vehicle emission and efficiency standards with Labour, the Greens and United Future encouraging the use of biofuels and hybrid vehicles.

Kyoto Protocol & Carbon Tax

New Zealand First, Act and the National Party would reconsider New Zealand’s commitment to the Kyoto Protocol to ensure it is consistent with the policies of our main trading partners. All three parties are opposed to the carbon tax. United Future also proposes a withdrawal in 2012 if our main trading partners have not signed up. Labour, the Greens, the Maori Party and the Progressives all support the Kyoto Protocol and carbon tax.

RMA

The general consensus among all parties is that the Resource Management Act needs remedial work. The difference between the parties is their view on the extent of that work. Labour, the Greens and the Progressive Party are confident the changes already under way are sufficient. National, Act, United Future and New Zealand First want to see the act rewritten to various degrees to reduce costs and delays in the consent process.