The Dim-Post

April 21, 2013

‘de facto nationalisation’ and why the new power policy is a Big Deal

Filed under: economics,Politics — danylmc @ 8:45 am

DPF gets it:

I don’t think people realise the precedent that will be created if you allow a Government to nationalise the entire power generating industry, on the grounds that they are not competitive enough and charge too much.

First let’s address this question of whether the Greens-Labour proposal is a form of ‘nationalisation’, a term that’s been thrown out by National’s comms team and repeated by uncritical journalists.

A lot of left-wing critics of the Mixed Ownership Model have argued that it’s ‘looting’, or ‘theft’ of ‘the people’s assets’, and the problem with that is that National are selling shares in the power companies. The people are getting something back, probably several billion dollars. Likewise, nationalisation is when ownership of assets are transferred to the state, cf Air New Zealand, TranzRail etc. In this case it makes no sense to argue that the state is transferring ownership of the power companies, when it will still already have majority ownership of most of those power companies anyway. Regulation is not nationalisation, not even heavy-handed regulation. If you are, say, an arms company there is extensive government oversight into who you can sell your products to: does that mean that this industry is ‘nationalised’? Are tobacco companies ‘nationalised’? Bah.

But DPF is correct when he says that this is a significant development in New Zealand politics. Prior to the mid-1980s there was a general political consensus that the New Zealand economy should be dominated by state-owned industries, trade-unions and centralised bureaucracies over-seeing any private industry. This system was horribly flawed and in 1984 the Lange-Douglas government broke with the consensus, and for the last thirty years the pendulum has swung a long, long way the other way, far further than almost any other developed country in the entire world, and there’s been a broad consensus between Labour and National that our economy should be dominated by unregulated oligopolies.

Now one of the main political parties has broken with that. This is a Big Deal, and is blowing the minds of people like DPF, Fran O’Sullivan and, most amusingly, Colin Espiner.

The level of disconnect around this debate has been pretty funny, with various Ministers putting out press releases about the loss of share value in various energy companies, apparently oblivious to the fact that most of the country despise the  power companies and see them as loathsome profiteers, and now DPF is warning that Labour and the Greens might introduce legislation to prevent price-gouging by the supermarket duopoly, an idea that is anathema to adherents of the cult of unregulated oligopolies, but probably sounds pretty good to about 90% of the population that have had to live with the spectacular failures of that ideology for the last three decades.

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135 Comments »

  1. Chris Trotter put it well. It is a break from the neoliberalism hegemony that has occurred for the past 30 years. That system is flawed and why shouldn’t our Government take steps to temper its results?

    Comment by Greg Presland — April 21, 2013 @ 8:51 am

  2. Hmm. I found that Farrar post quote amusing. It’s a similar line Joyce was running about a “single food buyer” which he clearly thought was a lot more end of times than you’re average citizen does.

    I’ve been surprised at how disconnected from electorate views the tory response on this has been. I suspect they think that they can be narrative leaders on this, but in this too they’re out of touch.

    As for Espiner? He’s an odd one – he was effectively arguing for an awards system a few columns ago which would be an even greater break from consensus. I’m not sure he has the most integrated political philosophy in the world. Nice bloke though.

    Comment by IrishBill — April 21, 2013 @ 8:56 am

  3. *your

    Comment by IrishBill — April 21, 2013 @ 8:56 am

  4. “Now one of the main political parties has broken with that. This is a Big Deal, and is blowing the minds of people like DPF, Fran O’Sullivan and, most amusingly, Colin Espiner.”

    And on The Nation in which Rachel Smalley (who I normally think is a good interviewer) went hell for leather against David Parker and Gareth Hughes, and then gave Max Bradford a nice snuggly interview

    Comment by max — April 21, 2013 @ 9:04 am

  5. I wonder why the share prices dropped.
    Was the initial announcement or the hysterical reaction by the nats?

    Mcarten makes some good points today.
    He points to three example of single buyer example – California power company, pharmac, fontera.

    Comment by DR — April 21, 2013 @ 9:07 am

  6. And on The Nation in which Rachel Smalley (who I normally think is a good interviewer) went hell for leather against David Parker

    That interview was a bit awkward. Parker kept explaining that some of the foregone dividend would remain in the economy and be collected as tax revenue, and Smalley kept demanding to know ‘what about the foregone dividend?’ as if he was dodging the answer.

    Comment by danylmc — April 21, 2013 @ 9:12 am

  7. And I’m sure she did the hair flick thing at Winston.

    Comment by Northshoreguynz — April 21, 2013 @ 9:16 am

  8. “Prior to the mid-1980s there was a general political consensus that the New Zealand economy should be dominated by state-owned industries, trade-unions and centralised bureaucracies over-seeing any private industry. This system was horribly flawed and in 1984 the Lange-Douglas government broke with the consensus, and for the last thirty years the pendulum has swung a long, long way the other way, far further than almost any other developed country in the entire world, and there’s been a broad consensus between Labour and National that our economy should be dominated by unregulated oligopolies.”

    Hmmm, this is where I have an issue. The deregulation consensus broke down at the end of the 1990s – but the focus changed from ownership to actual regulation … through bodies such as the commerce commission. Why buy the company when you can keep private money on the line, but use the law to limit their ability to extract “supernormal profits”.

    Of course, society should be allowed to discuss any way they want to do policies – as long as the trade-offs they are been told exist actually exist. Which is why my issue with the announcement was that all the numbers provided where total and utter horseshiz. As an economist, I see a lot of figures exaggerated and get annoyed – but to see them virtually made up (inappropriately copied from a point in a report that has show to have exaggerated the figure in the first place about 4 years ago) tells me this is an awful place to start the debate. I’d note a find the National call to socialism also completely unbearable.

    We have a commerce commission who regulates transmission, and the electricity authority specifically working on regulating the energy market as a whole, why aren’t we paying attention to the research coming out of them? If that was the LG intention (as the Wolak report was through this) I’ll give them credit for sure – but they should have looked at more than one report, as a lot happened following that. I’d also note here that the confusion between SR marginal cost and LR marginal cost in the electricity industry is huge – saying things like “free hydro plants” is idiotic. When I hear LG talking like this, they sound just as bad as people that refuse to believe the scientific consensus around global warming because it is cold today … I am not exaggerating with this it is that plain dumb.

    And talking about journalists, why are none of them contacting all the f’ing real analysts who study electricity markets. There are frikken big sections of competition law and regulation conferences solely about electricity markets in NZ, it is the largest area of ACTIVE regulation and research about regulation. The truth is there are heaps of people that have thought about the problem, and we have a lot of active regulation NOW. There IS scope to improve it, but walking out and saying “I’m gonna get people to give you guys $230-$330 a year at no cost if you vote for me” is a incredible load of crap – it isn’t even a bribe because they can’t deliver, it is a lie.

    Comment by nolan83 — April 21, 2013 @ 9:21 am

  9. “unregulated oligopolies” is an oxymoron.

    Business regulation is how various monopolies are created.

    A lot of business regulation is written by large corporations to keep competition from entering the market. The large of cost of regulation ring fence their business to stop new comers and the costs are passed onto the consumer. The Food bill going through now is in part written by the 2 supermarkets.

    The Green Labour energy buying policy is certainly interesting politically but like all central planning doomed to failure. The price signals in the market will lead to over consumption of energy and under investment in energy producing infrastructure. Ultimately leading to power shortages.

    Comment by Simon — April 21, 2013 @ 10:07 am

  10. Matt I hear your pain, unfortunately economics of electricity markets have nothing to do with this issue. Public choice theory and rent seeking are better frameworks for analysis. Let’s be clear this issue has nothing to do with developing the economy or creating new sources of wealth ( at the least a subsidy to the IT sector might generate gains).

    Comment by WH — April 21, 2013 @ 10:07 am

  11. >The level of disconnect around this debate has been pretty funny

    Yup, I realized something odd was going on when opinions were even divided on the Herald online poll. The same number thought this idea sucked as thought it was the bomb. A smaller number couldn’t decide. Usually I’m way in a minority there, but what the right isn’t getting is that this IS back pocket politics in a very clear and simple way. Labour/Greens are suggesting something that will put *real actual money* into our pockets. Not trickle down money. Or dividend money if we’re rich enough to buy shares. Not bullshit imaginary growth money. It’s money we all know we are spending every year just to keep the profits on those power businesses high. Even greedy right wingers can actually get hip to that. In fact, especially them.

    Comment by Ben Wilson — April 21, 2013 @ 10:45 am

  12. I don’t have a real problem with the policy. I have a much bigger problem believing that Labour would actually do it.

    Comment by sammy 2.0 — April 21, 2013 @ 10:50 am

  13. >There IS scope to improve it, but walking out and saying “I’m gonna get people to give you guys $230-$330 a year at no cost if you vote for me” is a incredible load of crap – it isn’t even a bribe because they can’t deliver, it is a lie.

    Oh, well then there’s nothing to be afraid of, is there? Which one is it – outrageous socialism, or ineffective nothingness?

    Comment by Ben Wilson — April 21, 2013 @ 10:51 am

  14. >I have a much bigger problem believing that Labour would actually do it.

    We, the people, have a duty to deliver them a big poll bounce so that they know where their mandate lies.

    Comment by Ben Wilson — April 21, 2013 @ 10:53 am

  15. Danyl I assess this post by the two first commentators, presland and irish bill, big LOL’s.

    Comment by Tim — April 21, 2013 @ 10:53 am

  16. I find the idea intriguing, BUT like nolan83, I want to see the analyses from those who have worked with and studied the energy production and distribution industry for a while. Until that happens, we are only getting gut reactions.

    And my gut reaction is that it can’t work. Up until Muldoon, it is how the NZ ‘economy’ operated, and it almost bankrupted the country. It also strongly sends signals to countries overseas that we don’t want their investment, because they won’t be allowed to make any profit. That is not an explicit message, but it is implicit in the proposals put forward by Labour and the Greens.

    I also expect that we will see job losses, not gains, because who is going to want to invest in such an environment? The gap between NZ and Australian wages will widen even further. And let’s please remember that to a large extent, the gap is there because the Aussies have minerals in big volumes that the Chinese want in big volumes. We may or may not have such minerals. I doubt we do, but so far, we don’t really know what we have or how much, if anything, we have.

    As for the mixed ownership models, I suspect if you asked New Zealanders if they liked the Air NZ ownership model, the vast majority would say “Yes”. So it surprises me that the proponents of the “asset sales” are not playing this up more.

    Comment by David in Chch — April 21, 2013 @ 10:58 am

  17. >The price signals in the market will lead to over consumption of energy

    LOL, classic. I’m sure people who are cold and considering using their heater jump straight on the web to check out the spot prices of power. That’s the whole thing about gouging with power pricing – no one knows how much it’s costing when they turn something on. All they know is that it costs, and if they care, they make efforts to keep it down *regardless of the pricing signals*. That’s not going to change. What will change will be more money in their pockets to spend on other things, money that will most likely churn through the economy.

    Comment by Ben Wilson — April 21, 2013 @ 11:01 am

  18. wim,

    I assess this post by your reaction to it, clearly on the money.

    Comment by Flashing Light — April 21, 2013 @ 11:04 am

  19. >Up until Muldoon, it is how the NZ ‘economy’ operated, and it almost bankrupted the country. It also strongly sends signals to countries overseas that we don’t want their investment, because they won’t be allowed to make any profit.

    Eh? That’s wrong on every level. The near bankruptcy came from Muldoon borrowing huge amounts of money. Which sent strong signals that foreign banks had everything to gain by subsidizing our huge investment into energy infrastructure that happened under Muldoon.

    >I also expect that we will see job losses, not gains, because who is going to want to invest in such an environment?

    Um, people who want to USE electricity, perhaps?

    Comment by Ben Wilson — April 21, 2013 @ 11:06 am

  20. oh my dear flushing blight this post is damage control. nobody (outside of some loony activists) wants to see a return to nationalising or heavy government control of the economy because it doesn’t work and will stop foreign funds from funding our massive debt so readily which means you’ll pay more for everything so now that the press are correctly questioning the collective sanity of the green labour collective the pr arm of the labour green collective are spinning furiously hence mine host, presland and billy being all over this like shit on a blanket.

    Comment by Tim — April 21, 2013 @ 11:15 am

  21. Well then, seeing as “nobody (outside of some loony activists) wants to see a return to nationalising or heavy government control of the economy”, I guess Labour and hte Greens have cooked their 2014 election chances. Which makes it odd that the proposal has the rightwing commentators in such a complete tizzy of afeared quaking, rather than jumping about in complete jubulation.

    I mean, it’s even prodded you beyond your usual snarky single line namecalling and made you try to make a substantive argument! Must be serious, then.

    Comment by Flashing Light — April 21, 2013 @ 11:21 am

  22. …this post is damage control…

    Funniest on the thread so far. I can’t wait to see how much “damage” will be inflicted on Labour or the Greens by voters outraged that their shares in power companies might lose value, or that our economy might suffer more of the sort of terrible damage inflicted on it by… er, Pharmac.

    Comment by Psycho Milt — April 21, 2013 @ 11:42 am

  23. “blah blah blah…ing furiously hence mine host, presland and billy being all over this like shit on a blanket.”

    If you’re getting shit on your blankets, Tim, you’re doing it wrong.

    Comment by nommopilot — April 21, 2013 @ 11:43 am

  24. sensitive much boys … seems like it. i mean ffs propogating a bat shit crazy nationlisation policy …. good luck with that one

    Comment by Tim — April 21, 2013 @ 11:46 am

  25. “Parker kept explaining that some of the foregone dividend would remain in the economy and be collected as tax revenue,”

    Basing his assumptions on a dodgy BERL report, that hasn’t been in public long enough to be properly fisked, but that some economists have already seen some big holes in:

    http://offsettingbehaviour.blogspot.co.nz/2013/04/an-open-letter-to-david-shearer-and.html?m=1

    Also at the same link you will find links to a number of papers critiquing the wolak report. Are there really massive super profits due to imperfect competition? I’m far from convinced. Is Parker?

    Comment by Swan — April 21, 2013 @ 11:48 am

  26. A friend described this as an ‘Orewa Moment’ for the Nats, when they are caught unawares and absolutely have to scramble and make outrageous claims. Remains to be seen, but from the crazy talk coming at the moment from them

    Comment by max — April 21, 2013 @ 11:58 am

  27. “LOL, classic. I’m sure people who are cold and considering using their heater jump straight on the web to check out the spot prices of power. That’s the whole thing about gouging with power pricing – no one knows how much it’s costing when they turn something on. ”

    Ben, can a residential customer even get a spot price based supply contract? Sure electricity demand is inelastic in the very short run, but in the longer term, it’s elastic. I wouldn’t have bothered putting a heat pump in a few years ago if power prices were lower

    Comment by Swan — April 21, 2013 @ 12:02 pm

  28. To me it seems like lowering the price of power is a good starting point for trying to stimulate an economic recovery. On the residential side it will allow spending to move from power to other goods and services (&/or increased power consumption which may reduce health costs of cold damp houses). On the business side it will reduce costs and therefore improve bottom lines or allow prices to fall.

    Essentially, if you think of electricity as not just another commodity, but an important facilitator of all other economic activity then it becomes obvious that the effect of extracting profits from the production and supply of it acts like a handbrake on this other economic activity. The government should keep very tight control of energy infrastructure because the invisible hand in the electricity ‘market’ does not have any means of factoring in the positive benefits that low power prices provide to the wider economy.

    This isn’t quite so bad if the government is capturing those profits, thereby offsetting taxation elsewhere, but once privatised offshore (which a lot of shares will be), this money leaves our economy.

    The electricity market should be one where investments yield low, but reliable returns based on fixed contracts designed to pay off large infrastructure over long periods of time. We shouldn’t be trying to use high profits to encourage international (or even domestic) investment in power companies because those profits are extracted from our economy while dampening economic activity across any sector that uses elec (ie. all of them). What’s more, that investment is at the expense of investment in other areas.

    When looked at this way it almost starts to sound like the beginning of an economic strategy to move investment from houses and power companies to industries which can provide much more benefit to the nation than costly power and poor-quality expensive housing.

    Obviously a lot of detail and complexity to be gone through to set the right prices and rules, but this certainly sounds like a more feasible path to a brighter future than “sell them off and cross our fingers that we can spend our little one-off windfall wisely”.

    Comment by nommopilot — April 21, 2013 @ 12:41 pm

  29. “Obviously a lot of detail and complexity to be gone through to set the right prices and rules” no shit. And the small matter of encouraging further capital investment when there is fuck all return due to some bureaucratic price setting mechanism, go ask Texas.

    Comment by Tim — April 21, 2013 @ 1:25 pm

  30. If you are, say, an arms company there is extensive government oversight into who you can sell your products to: does that mean that this industry is ‘nationalised’?

    In the case of companies like Lockheed or BAe Systems, then yes. Because those companies receive most of their income from government (in the latter case, the US and UK governments) produce most of their products to a government issued spec, using government generated procedures and with all R&D input coming from the government. Essentially they’re government controlled but pay a dividend to shareholders.

    Comment by richdrich — April 21, 2013 @ 1:28 pm

  31. i mean ffs propogating a bat shit crazy nationlisation policy …. good luck with that one

    Pretty fortunate the proposition isn’t about nationalisaton then, eh Timbo.

    Comment by Gregor W — April 21, 2013 @ 1:32 pm

  32. “And the small matter of encouraging further capital investment when there is fuck all return ”

    I’m not saying there shoul

    Comment by nommopilot — April 21, 2013 @ 1:34 pm

  33. Greggy, it’s all about dictating wholesale generation rates and this effectively nationalises generating assets to no small degree, Got it?

    Comment by Tim — April 21, 2013 @ 1:41 pm

  34. oops- child-initiated-early-post

    “And the small matter of encouraging further capital investment when there is fuck all return ”

    I’m not saying there shouldn’t be returns, just that they should be low-risk, low-yield long-term dividends because energy supply should be as stable (price and quantity wise) as we can make it.

    The government should be trying to design and build an energy system that supplies sustainable (priority 1), low-emission (priority 2) electricity as efficiently (priority 3) and cheaply (priority 4) as possible. If they can do this then renewable electricity will start to compete in the transport market and the productive economy in general will be more competitive.

    If the only way we can attract capital investment with a private investment model is by allowing large profits, then that’s not the right model to use. But I think the government will be able to find investors looking for this kind of investment to fund new infrastructure.

    Comment by nommopilot — April 21, 2013 @ 1:50 pm

  35. Greggy, it’s all about dictating wholesale generation rates and this effectively nationalises generating assets to no small degree, Got it?

    No I don’t agree, Tim.
    Given that the bulk of those assets are already owned by the State, this policy announcement doesn’t even remotely represent nationalisation.

    Comment by Gregor W — April 21, 2013 @ 2:06 pm

  36. >Given that the bulk of those assets are already owned by the State, this policy announcement doesn’t even remotely represent nationalisation.

    Since National is selling them, that’s denationalization. This policy could be seen to be undenationalisation, one of the many branches of antidisestablishmentarianism.

    Comment by Ben Wilson — April 21, 2013 @ 2:15 pm

  37. “This policy could be seen to be undenationalisation”

    Watch that turn to Undie Nationalisation in the MSM and the accompanying cries of Nanny-state-gone-mad… The people have a right to own their own undergarments!

    Comment by nommopilot — April 21, 2013 @ 2:23 pm

  38. David from Chch @16 – why the scare quotes around economy? Are you saying we didn’t have one? That an economy with regulation and government ownership isn’t a real economy? Just asking.

    Not sure these people are expert enough for you, but a quick scan of the coverage in the NZ Herald shows some support from people with some expertise in the area:

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10878378

    “But energy analysts Molly Melhuish and Bryan Leyland said the new plan would address power companies “gaming” the wholesale market to ensure they maximised profits.”

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10878516

    “The electricity policy announced by the Labour and Green parties could be made to work and the current debate is overly emotive, says the chief executive of the regulated monopoly electricity and gas network owner, Vector. Simon Mackenzie told BusinessDesk he was encouraged by the fact the proposed central purchaser system would incentivise commercially rational investment in energy efficiency, and that the Opposition parties were not pursuing direct subsidies.”

    Of course you could claim Mackenzie has a conflict of interest here. OTOH, you could argue that he is well-placed to know how well current regulation does and does not work.

    Comment by MeToo — April 21, 2013 @ 2:44 pm

  39. >Sure electricity demand is inelastic in the very short run, but in the longer term, it’s elastic.

    By very short run you mean years, right? You can’t even get an accurate picture of your electricity usage in less time than one year, because the main use of it, heating, changes with the seasons. How many people even know how much their electricity should be costing them in any particular month? The main thing that causes their bills to bounce around is not changes in their usage, it’s changes in the prices. They usually find out about the cost months after they actually purchased and used the power.

    Comment by Ben Wilson — April 21, 2013 @ 2:46 pm

  40. The frantic spin by various Tory mouthpieces certainly shows that Labour and the Greens are onto something here. Let’s just hope that Labour don’t take it as a sign that they’ve become too extreme, and back off. (Fair play to the Greens, even if I do criticise them a lot, they don’t usually make -that- mistake)

    Comment by Hugh — April 21, 2013 @ 3:00 pm

  41. So folks,

    How do you feel about National being in charge of 100% your power supply?

    JC

    Comment by JC — April 21, 2013 @ 3:09 pm

  42. @David in Chch: Air NZ was a unique case – it was recapitalised by the Clark Govt after the airline screwed up with Ansett Oz. It is indeed ‘mixed ownership’, but only because the Govt of the day increased its stake instead of reducing it.

    Furthermore, the same ‘spooked investors’ thing was said about the de-cartelisation of Telecom, in spite of the fact that Telecom had pushed its luck for some years. Rent-seeking is not a property right – even Adam Smith knew that early on.

    The Bradford reforms merely turned an electricity monopoly into an electricity cartel. The Clark Govt gave it the benefit of the doubt, and now its spiritual successors have found it wanting.

    Comment by deepred — April 21, 2013 @ 3:13 pm

  43. Further to the point, I find all the Reductio ad Kimjongilum reactions from the usual suspects rather amusing.

    Comment by deepred — April 21, 2013 @ 3:22 pm

  44. Speaking of Adam Smith the present electricity market would seem to fit this quote:

    People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
    Wealth of Nations Chapter X, Part II, p. 152

    Comment by TerryB — April 21, 2013 @ 3:28 pm

  45. “The frantic spin by various Tory mouthpieces certainly shows that Labour and the Greens are onto something here”

    The frantic spin by various Labour/Green mouthpieces certainly shows that Labour and the Greens are spooked their idiotic plans have been rumbled.

    There fixed it

    Comment by Tim — April 21, 2013 @ 3:37 pm

  46. How have they been rumbled, Tim?

    Comment by Gregor W — April 21, 2013 @ 3:41 pm

  47. “How have they been rumbled, Tim?”

    Why, single-handedly by Tim’s own superior logical arguments of course…

    Comment by nommopilot — April 21, 2013 @ 3:51 pm

  48. “By very short run you mean years, right? You can’t even get an accurate picture of your electricity usage in less time than one year, because the main use of it, heating, changes with the seasons.”

    No, I’m talking about minutes/hours. A lot of industrial users are on spot price contacts and will curtail demand if the spot price increases. Remember that it is the marginal kilowatts that matter most.

    Comment by Swan — April 21, 2013 @ 4:15 pm

  49. Undie Nationalisation – bravo

    Comment by Sacha — April 21, 2013 @ 4:18 pm

  50. The frantic spin by various Labour/Green mouthpieces certainly shows that Labour and the Greens are spooked their idiotic plans have been rumbled.

    There fixed it

    But why would “loony activists” be spooked? And to reiterate comment #21, why are right-leaning commentators arguing against this so strongly, if it’s actually just the undoubted death knell for the Labour/Greens chance of 2014 re-election that you want to portray it as being?

    Comment by steve — April 21, 2013 @ 4:51 pm

  51. How do you feel about National being in charge of 100% your power supply?

    Odd question. But I’d be okay with it if they did a good job of keeping the prices low.

    Comment by steve — April 21, 2013 @ 4:58 pm

  52. “But I’d be okay with it if they did a good job of keeping the prices low.”

    Which they did in the 90s.. even had a small drop.. and in the last four years have halved the percentage rises that occurred under Labour.

    As the Herald editorial spelled out:

    “The most unfortunate aspect of Labour’s new policy is that it has identified the problem. “When markets are not truly competitive, excessive profits are extracted from consumers,” David Parker, the party’s energy spokesman, said yesterday. The most logical response, however, is not to return to a failed approach but to provide the setting for competition to flourish.”.. ie, make the markets “truly competitive” by privatisation.

    JC

    Comment by JC — April 21, 2013 @ 5:40 pm

  53. How do you feel about National being in charge of 100% your power supply?

    Well, they were way more in charge of it 30 years ago than they would be under the L/G’s model, so we have previous experience on which to base our feelings. Reflecting on National’s earlier stewardship of a genuinely-nationalised power supply, my feeling is “meh.”

    Comment by Psycho Milt — April 21, 2013 @ 5:44 pm

  54. I’d rather have a National-led government in charge of my power supply, sure. At least I can vote out a National-led government, I can’t do shit about Meridian.

    Comment by Hugh — April 21, 2013 @ 5:47 pm

  55. >No, I’m talking about minutes/hours. A lot of industrial users are on spot price contacts and will curtail demand if the spot price increases. Remember that it is the marginal kilowatts that matter most.

    OK, so you mean it’s elastic for industrial users. For me or you or any other voter, not so much.

    Comment by Ben Wilson — April 21, 2013 @ 5:48 pm

  56. Ben, are you retarded? It is aggregate dand that determines the price. Furthermore, as I have already pointed out, residential customers are on fixed price contracts, so the intra month spot prices are irrelevant. It is apparent you aren’t in charge of the power bill. Go ask your Mum/flat mates/wife and they should be able to explain this to you.

    Comment by Swan — April 21, 2013 @ 6:11 pm

  57. @JC,

    “The most logical response, however, is not to return to a failed approach but to provide the setting for competition to flourish.”.. ie, make the markets “truly competitive” by privatisation.”

    Equating “privatisation” with “truly competitive” markets is plain dumb. And that is all.

    Actually, no it isn’t. I love how the Herald equates Labour’s proposal with “failed policies of the past”, while claiming that the only problem with present failed policies is that they just aren’t quite pure enough. I mean, why hasn’t anyone thought about creating a properly operating electricity market before? It’s so obvious!!!

    Comment by Flashing Light — April 21, 2013 @ 6:15 pm

  58. Swan,

    People throwing accusations of “retarded” (nice word, btw) at others ought to be very careful they aren’t completely missing the point. And that IS all.

    Comment by Flashing Light — April 21, 2013 @ 6:16 pm

  59. “the only problem with present failed policies is that they just aren’t quite pure enough”

    Yes, if only those pesky kids hadn’t interfered with Saint Bradford’s genius plan..

    Comment by Sacha — April 21, 2013 @ 6:27 pm

  60. “Well, they were way more in charge of it 30 years ago than they would be under the L/G’s model”

    True.. I think. But somewhat unreliable if reasonably cheap.. pity about the maintenance programme, rationing and droughts.

    But we can recall the 1998 costs (Yearbook 2000, page 442) NZ had the third cheapest power for domestic and industrial in the developed world.

    “Reflecting on National’s earlier stewardship of a genuinely-nationalised power supply, my feeling is “meh.””

    A pretty accurate feeling of how we considered State owned power back then. We looked to the heavens, shrugged our shoulders and moved our milk from the dead refrigerator to the big chest freezer in the garage and said “meh”.

    We didn’t have high expectations.

    JC

    Comment by JC — April 21, 2013 @ 7:20 pm

  61. “I mean, why hasn’t anyone thought about creating a properly operating electricity market before? It’s so obvious!!!”

    We did think about it.. and we haven’t had to tell the elderly to be patriotic and freeze over the last several decades as a result. Why, just a year or two back we increased GST 2% and compensated the old folks and beneficiaries so they wouldn’t freeze!

    Bloody socialism run amok.

    JC

    Comment by JC — April 21, 2013 @ 7:27 pm

  62. The threat of an investment strike is hilarious. Apparently we’ll all be in the dark because no-one will want to build new generation because PowerNZ won’t pay enough. This is the normal reaction when regulation is on the horizon, so its a natural first resort I suppose. But a moments thought should be enough to realise how silly it is. When new plant is needed, PowerNZ will simply call for tenders from competing investors and pay whatever they need to. No problem at all, and in fact it might well be cheaper this way because the generator will have lower risk.

    Comment by jps — April 21, 2013 @ 7:31 pm

  63. If the claim is we are being massively over charged for power then is like to see some evidence of that and not from the party loyalists.

    It’s seems to me that Labour is proposing to lower the price by foregoing tax and dividends – so decreasing the govts ability to pay for other projects. So yes maybe cheaper power but we pay somewhere else.

    The other thing they appear to be arguing I’d that new generation capacity can be built cheaper and hence would require less re-investment.

    Some evidence would be handy.

    Given that the head if one of the companies responsible for major development in geothermal energy is saying this I’d not a heat idea I terms of the future of geothermal development I’m not going to take the word of politicians.

    Comment by NeilM — April 21, 2013 @ 7:37 pm

  64. @JC,

    You miss the point. Even the anonymous Herald editorial writer that you decided was the font of all wisdom said:

    “The most unfortunate aspect of Labour’s new policy is that it has identified the problem. “When markets are not truly competitive, excessive profits are extracted from consumers,” David Parker, the party’s energy spokesman, said yesterday.”

    So, it accepts there is “a problem” at the moment. It then says that the solution is something called “the setting for competition to flourish.” My point was that if this really was so simple, then you’d expect that after near-on 20 years of chasing market-solutions to electricity supply, we might have achieved a bit more than the current situation. Or, could it be that the generation and supply of electricity actually isn’t that amenable to competitive market-based solutions, hence real problem is we’re trying to apply the wrong distribution mechanism in the first place?

    Comment by Flashing Light — April 21, 2013 @ 7:59 pm

  65. “Some evidence would be handy”

    70% above the inflation rate sounds like over-charging to most of us, when the rest of the OECD managed to reduce their electricity costs over the same period: graph via Green party energy policy media release:

    Comment by Sacha — April 21, 2013 @ 8:03 pm

  66. Sacha,

    Thanks but there has been quite a bit of actual academic work on this, and it is not at all clear that the power companies have been charging “super profits”. Parker has been quoting the Wolak report, but that report has been extensively critiqued. I have not seen any rebuttal on the critique. It is fair to say Parker is misrepresenting what the author intended in any case despite the critiques.

    However if we are working on anecdotal evidence, my understanding based on talking to a number of people in the industry is that the government owned retailers were undercharging, presumably based on what was politically popular with the shareholder.

    Comment by Swan — April 21, 2013 @ 8:12 pm

  67. “graph via Green party energy policy media release:”

    I was looking for something less partisan. These bald comparisons don’t prove much at all.

    If we’ve gone through a period of price incease due to a period of increaed natural gas prices then that’s specific to NZ.

    And any price rise will seem unreasonable but the issue is is it avoidable.

    Comment by NeilM — April 21, 2013 @ 8:15 pm

  68. Sacha,

    The Green Facebook pages has some good links, like the one to the MED website

    “Industrial natural gas prices and industrial and residential electricity prices are generally below the OECD average.”

    Comment by Swan — April 21, 2013 @ 8:20 pm

  69. But somewhat unreliable if reasonably cheap.. pity about the maintenance programme, rationing and droughts.

    Funny, I associate unreliability of supply more with the 90s than the 70/80s. In fact 1998 was particularly memorable for it.

    Comment by Psycho Milt — April 21, 2013 @ 8:22 pm

  70. “In fact 1998 was particularly memorable for it.”

    A good thing then Bradford’s reforms later that year made sure we’ve had better security of supply.

    I joke of course, but so much of what’s presented as evidence can be bent either way.

    Comment by NeilM — April 21, 2013 @ 8:35 pm

  71. >It is aggregate dand that determines the price

    Yes, I’ve heard that dandy theory. Pity that there’s so little real world evidence that prices are set in that way.

    >intra month spot prices are irrelevant

    Yup, that’s what I’ve pretty much been saying. Residential demand is not going to fluctuate on prices changing, it’s going to be about the need for power, so this whole idea that we’ll start getting power shortages because people will start going nuts when the prices are low is laughable. Industrial users are a different matter. I’d want to see more detail about how their prices would be controlled in the Lab/Green policy.

    @Flashing Light well put.

    Comment by Ben Wilson — April 21, 2013 @ 8:36 pm

  72. “It’s seems to me that Labour is proposing to lower the price by foregoing tax and dividends – so decreasing the govts ability to pay for other projects. So yes maybe cheaper power but we pay somewhere else.”

    Yes but the Nat’s alternative is giving half the dividend stream to private hands so we get higher prices and government cuts or tax rises. explain why that’s better?

    Comment by nommopilot — April 21, 2013 @ 8:37 pm

  73. “Yes, I’ve heard that dandy theory. Pity that there’s so little real world evidence that prices are set in that way”

    Ha, you really don’t know anything about the mechanics of the NZ electricity market do you? It is one of the most transparent markets in NZ. The spot prices don’t just fall from the sky. It is an auction where by the lowest bids are selected to satisfy demand. Like other markets except for the fact it is actually observable!

    “Residential demand is not going to fluctuate on prices changing”

    The argument around increased consumption is not (for residential customers) about short term”fluctuations”, it is about a response to a sustained reduction in power prices. Elasticity increases over increasing time horizons. You get that right? Just to absolutely clear: No one is suggesting that residential customers are going to not boul the kettle on account of spot prices.

    ” I’d want to see more detail about how their prices would be controlled in the Lab/Green policy.” Oh don’t worry sure they have got all that covered. No doubt prices will be linked to the virtues of the company.

    Wouldn’t we all.

    Comment by Swan — April 21, 2013 @ 8:58 pm

  74. Residential demand is not going to fluctuate on prices changing

    The Greens appear to disagree which is shy their proposal had an element of progressive pricing

    I think the first 300kW is at a “fair” price and above that at the “full” price.

    Fair vs full – a lot fun there for the devil there.

    Yes but the Nat’s alternative is giving half the dividend stream to private hands so we get higher prices and government cuts or tax rises

    National are arguing that the money from the partial sale wil help decrease debt, hospitals and schools will be built without further borrowing.

    Productive State assets of value and an ongoing dividend I’d social betterment, given the argument that the power companies are not only rampant capitalists but very risky investments then there might be done sense there.

    Comment by NeilM — April 21, 2013 @ 9:07 pm

  75. “So, it accepts there is “a problem” at the moment.”

    Yes.

    “Or, could it be that the generation and supply of electricity actually isn’t that amenable to competitive market-based solutions,”

    All thats happened is a Labour Govt stopped further sales and creamed an extra $3 billion in profits as a result. All thats happened now is Labour/Green have proposed a pricing structure that will work for low power uses and re-establish a $3-4-10 billion dividend from users who exceed some minimal level.

    Thats after the MMP negotiations where Winston will demand and receive a 30% reduction for his voters, Mana will receive a 30% reduction for all families with children, CPAG will receive further reduction in power costs for the 25% of families in poverty, preferred industries involved in wind and solar power will get big subsidies.. thats the actual experience in Europe and the US and MMP in NZ makes it a mandatory negotiation.

    You can fiddle around with these figures but the end result is that the middle class, the big users of power and those industries that have no political clout pay the bills. Other factors include the Greens demanding that any renewable energy gets priority over cost and scientific analysis.

    Thats politics 101 under MMP and when National get back in power it may scrap the whole corrupted system or use it to favour its own friends or re-establish fair and free trade between users.

    Its simply ridiculous to allow a Govt to take control of our power in the same way we would not allow Govt to control food and food distribution, access to lawyers, accountants and so on, but having said that I understand that many wage slaves here would wonder “Why ever not?”

    Its tough talking to (wailing) walls.

    JC

    Comment by JC — April 21, 2013 @ 9:13 pm

  76. “I was looking for something less partisan”

    You guys really are hilarious. Check Melhuish and others with a pedigree in the area why don’t you.

    Comment by Sacha — April 21, 2013 @ 9:13 pm

  77. Swan very good comment

    Comment by WH — April 21, 2013 @ 10:18 pm

  78. I take it Labour no longer opposes the partial asset sale.

    The State-owned power companies have been a huge drain on the economy and the need their rapscious wings clipped.

    What better scenario than to have half of they pain shared by private investors.

    And it would be odd if they wanted to devalue 100% of some State assets rather that just 51%

    Comment by NeilM — April 21, 2013 @ 11:24 pm

  79. > It is an auction where by the lowest bids are selected to satisfy demand.

    Yup, but the bids could be anything at all. They’re prices of things for sale, and may not be anywhere near as low as they could be. Generally, as more is being purchased, the cost goes up *whether or not the cost of production goes up*. That’s the thing you really don’t seem to get about the supposed genius of the free market for setting prices. It can gouge like hell. So long as people really need the thing, the real limit is not “what is fair for them to pay”, it’s “what can they afford to pay”. Really strong competition *might* drive that price down, but it’s seldom in the interests of the producers in the long run to compete with each other when they can all just accept a much higher return by not price warring with each other.

    >The argument around increased consumption is not (for residential customers) about short term”fluctuations”, it is about a response to a sustained reduction in power prices

    Do show me some empirical evidence that residential demand for power tracked prices in this country. I understand the argument, since it’s hundreds of years old.

    >Wouldn’t we all.

    No, I’d say most voters won’t really care too much about how it’s regulated for industry. I’m interested, but only in the abstract.

    Comment by Ben Wilson — April 21, 2013 @ 11:29 pm

  80. >Its simply ridiculous to allow a Govt to take control of our power in the same way we would not allow Govt to control food and food distribution, access to lawyers, accountants and so on, but having said that I understand that many wage slaves here would wonder “Why ever not?”

    The Government *does* control ALL of those things. There are standards for food that are set so that it’s not toxic, for instance. You can’t set up a shop anywhere you want, you need permission. Every time you sell food, you must give some of the profit to the government in taxation. You can lose the right to make food commercially altogether. Access to lawyers and accountants is very much controlled by the government, both of whom exist only in the context of a government and its laws, are heavily regulated by that government, have standards set up around their right to practice that are dictated by the government. A great many of them are also employees of the government.

    Which all works just fine. People don’t die of food poisoning, and getting fucked over or ripped off by your lawyer or accountant is just that little bit less likely in a regulated environment. That’s how it’s done in the first world, anyway.

    Comment by Ben Wilson — April 21, 2013 @ 11:39 pm

  81. Which they did in the 90s..

    National were “in charge of 100%” of my power in the 90s? Not market forces then?
    Cool. So either you don’t have a problem with state control of the power market, or the response you gave me was completely disingenuous. Which is it?

    Comment by steve — April 22, 2013 @ 1:14 am

  82. Ben Wilson says “food and food distribution, access to lawyers, accountants: the Government *does* control ALL of those things.”
    whereas Danyl says “and there’s been a broad consensus… that our economy should be dominated by unregulated oligopolies.”

    Err, so which is it guys? (And can someone give me an example of an unregulated ANYTHING?)

    Comment by Clunking Fist — April 22, 2013 @ 8:02 am

  83. Given the looming catastrophe of global climate change, it is highly unlikely we will ever be able extract and use all of our known (or any of our unknown) fossil fuel reserves. To continue along the privatised model is an act of inter-generational genocide. Therefore the state has to take a greater role in informing energy pricing policy. It seems to me then an important component in this policy – and something either missed completely by most of the media or part of the nightmare if you are a right winger – is it restores to the government a mechanism by which it may intervene in the energy industry for policy outcomes that be driven by requirements other than pure price, like saving the planet. For example, the government might use the agency to provide incentives to solar and wind, micro-generation, all that sort of thing.

    Comment by Sanctuary — April 22, 2013 @ 8:17 am

  84. So when you say ” For example, the government might use the agency to provide incentives to solar and wind, micro-generation, all that sort of thing.” you do know this is equivalent to picking winners and subsidising them?

    Comment by TransportationDevice A7-98.1 — April 22, 2013 @ 9:20 am

  85. you do know this is equivalent to picking winners and subsidising them?

    Whats the problem with the government picking winners, other than an ideological one?

    Comment by Gregor W — April 22, 2013 @ 9:28 am

  86. Sanctuary writes “Given the looming catastrophe of global climate change … ” straight after Clunking Fist makes a comment.

    And so dies the comment thread.

    Comment by Grassed Up — April 22, 2013 @ 9:39 am

  87. I don’t really care about whether or not it is picking winners. Personally, I don’t mind if the government picks winners. But I am making the general point that this government in particular appears to resolutely have it’s head in the sand over climate change. It’s economic policy is built on the hope that if they squeeze the environmental lemon until the pips squeak some more juice will come out. It is desperate men buying an economic lotto ticket and hoping they will win big enough to not to worry for the rest of their lives. they seem to have no idea what to do beyond going back to the habits of the 19th century. They certainly do not seem to understand that even if we hit a Saudi sized gusher in downtown Gisborne we could not exploit it if we are serious about saving the planet from massive climate change.

    Now, within the culture of denial about the implications of climate change for such a traditional extractive and exploitative approach to the economy you will not find any requirement for the state to direct energy policy towards a low carbon future. But if you actually think for one minute about what dealing with climate change means then it becomes abundantly clear that carrying on as normal and pretending it isn’t happening is a recipe for a Malthusian catastrophe for humans and extinction for lots and lots of the creatures we share the planet with.

    The government therefore needs more tools to direct the economy in directions that might help mitigate climate change. Pretending we can have a debate about ownership of power generation, with it’s huge carbon footprint from thermal generation, without putting climate change as a central context for the debate, is simply adding to the all-pervading denial.

    Comment by Sanctuary — April 22, 2013 @ 9:52 am

  88. No idealogical issue GW it’s just that Governments are normally pretty shit at picking winners because they tend to pick political winners not commercially sustainable winners.

    Comment by TransportationDevice A7-98.1 — April 22, 2013 @ 9:52 am

  89. But commercial sustainability is essentially a crystal-ball gazing risk assessment exercise, right?

    So in sectors like supporting infrastructure (energy, transport, communications etc.) where large amounts of capital are required and economic returns are long run / hard to quantify accurately, doesn’t it makes sense for the State to take an active role to either direct the investment or provide a risk incentive?

    Comment by Gregor W — April 22, 2013 @ 10:23 am

  90. Forgot to add, why does supporting infrastructure necessarily need to be commercially sustainable at all?
    In fact, isn’t it better for them to be operationally sustaining (enough to maintain function and security of supply), allowing economic surplus to stay sloshing around in the ‘real’ economy?

    Comment by Gregor W — April 22, 2013 @ 10:29 am

  91. @Sanctuary, is this a recent thing for you, to care about climate change and to speak of it being a good thing for the government to push for green energy? My impression has been in the past that you didn’t really care a hoot for such things. Is this really you, or an imposter?

    I pretty much agree with comment 86.

    Comment by Ben Wilson — April 22, 2013 @ 11:44 am

  92. Gregor W “Whats the problem with the government picking winners, other than an ideological one?”

    Sanc “Personally, I don’t mind if the government picks winners.”

    Um, how about if we rephrase that thus:
    ““What’s the problem with the corporate welfare, other than an ideological one?” and;
    “Personally, I don’t mind if the government engages in corporate welfare.”

    (And I’m still waiting for someone to give me an example of an unregulated industry in NZ.)

    Comment by Clunking Fist — April 22, 2013 @ 1:06 pm

  93. Sanc, no doubt personally you “don’t mind” if we cut off avenues of economic growth, in favour of solving global warming? In spite of some of the biggest economies not playing ball and thus our efforts being no more than a fart in the wind.

    Comment by Clunking Fist — April 22, 2013 @ 1:07 pm

  94. People don’t die of food poisoning, and getting fucked over or ripped off by your lawyer or accountant is just that little bit less likely in a regulated environment. That’s how it’s done in the first world, anyway.

    Regulations and the setting of operational standards for Lawyers and Accountants are are predominantly overseen by the Law Society and the Institute of Chartered Accountants who are (shock! horror!) private industry bodies.

    Comment by Phil — April 22, 2013 @ 1:08 pm

  95. @NeilM (#74)
    “National are arguing that the money from the partial sale wil help decrease debt, hospitals and schools will be built without further borrowing.”

    But their argument is completely unconvincing because the debt they reduce is eliminating assets from the other side of the ledger at the same time. If your economic strategy is to sell everything you own so that you have a whole lot of cash to spend, you will eventually run out of cash. What’s more, we give up more than just the dividend stream when we sell those assets because their value to us as a nation is greater than the value they will provide to private shareholders.

    To the private shareholders the value of the shares is just in the dividend stream. That’s it. $. The board is statutorally required to pursue this. There is no incentive to lower prices in order to help stimulate economic activity or to invest in renewable or low-emission options or to provide the lowest price possible (in fact the incentive is to charge the highest price you can get away with).

    But to the government the control of these other aspects allows them to realise far more value across the entire economy: in lowering health costs and mitigating poverty, in increased economic activity if prices are lowered, and in ecological outcomes (especially emissions reduction). Some of these imperatives are contrary to maximising financial profits, in that they may increase costs or reduce revenue, but have a greater value for the people of Aotearoa, because the government’s ledger is much much wider than that of any private investor.

    Comment by nommopilot — April 22, 2013 @ 1:21 pm

  96. @ CF, on rephrasing to “What’s the problem with the corporate welfare, other than an ideological one?”, see my responses #89 & #90.

    Comment by Gregor W — April 22, 2013 @ 1:34 pm

  97. >Regulations and the setting of operational standards for Lawyers and Accountants are are predominantly overseen by the Law Society and the Institute of Chartered Accountants who are (shock! horror!) private industry bodies.

    Any rights they have to make or break their professionals derives from the government, though. Effectively, they’re outsourced standards enforcement. That’s still regulation. In fact, such an organization can easily be more bureaucratic than one directly run by the government, because it does not have the safety valve of public outrage leading to direct intervention by elected officials. I think the worst bureaucracies I’ve ever dealt with have been private ones. Insurance companies are fucking terrible for that kind of thing.

    Comment by Ben Wilson — April 22, 2013 @ 3:15 pm

  98. Hahaha the Law Society is not a private industry body. It’s established and organised by statute (The LCA 2006) and consists entirely of officers of the High Court of New Zealand, and has the power to regulate every lawyer whether member of not.

    Comment by Keir — April 22, 2013 @ 3:33 pm

  99. I meant comment 87 above, not 86. I agree with Sanc here, not that the thread dies on the mention of global warming.

    Comment by Ben Wilson — April 22, 2013 @ 3:34 pm

  100. fact, such an organization can easily be more bureaucratic than one directly run by the government, because it does not have the safety valve of public outrage leading to direct intervention by elected officials.
    [Citation needed] ?

    Maybe you have faith that a combination of public outrage and intervention by elected officials can act as a ‘safety valve’, but I think everything we’ve seen in the last few weeks around electricity generation and the Open Bank Resolution would give reason for sober reconsideration.

    Comment by Phil — April 22, 2013 @ 4:16 pm

  101. >Maybe you have faith that a combination of public outrage and intervention by elected officials can act as a ‘safety valve’, but I think everything we’ve seen in the last few weeks around electricity generation and the Open Bank Resolution would give reason for sober reconsideration.

    Compared to what? Telecom regulating itself just because they’re so public spirited? This is the organization whose head actually admitted that confusing everyone with their prices was policy. With regard to banking, I don’t think the public is outraged enough yet. But again, what’s the alternative? That banking rules are dictated by private enterprise? That’s really going to work in the public interest, I’m sure.

    Comment by Ben Wilson — April 22, 2013 @ 7:35 pm

  102. New Zealand makes me laugh sometimes.

    Socialism at its finest. See if you can find yourself in this video. Which one is Danyl?

    Comment by OECD rank 22 kiwi — April 22, 2013 @ 9:03 pm

  103. Danyl is the red one, under the bed.

    Comment by Ben Wilson — April 22, 2013 @ 10:56 pm

  104. Taking us back to the glorious pre-2008 sport of ‘Helengrad’, etc, etc. Dazzling wit.

    Comment by Sacha — April 22, 2013 @ 11:09 pm

  105. (the clip, that is, not Ben)

    Comment by Sacha — April 22, 2013 @ 11:10 pm

  106. “…don’t mind” if we cut off avenues of economic growth, in favour of solving global warming..?”

    This statement is a logical fallacy that neatly displays the denial of the enormity of the problem that we face as a species. Are you claiming we – that anyone – can have economic growth in the face of a six degree centigrade temperature rise that uncontrolled climate change will produce?
    Where I differ from the Greens (and probably most on the left) is I accept that the political cost of reducing emissions is to high in the short term for anyone to do much meaningful; my view it it has been obvious since at least the collapse of the climate talks in Copenhagen in 2009 that nothing will be done to do reduce emissions if that means standards of living will drop.

    However, that doesn’t mean are doomed. Not exploiting newly discovered or existing fossil fuel reserves won’t lead to a drop in existing standards of living – what we don’t have now we won’t miss. Not exploiting newly discovered or existing fossil fuel reserves will aid the faster transition to energy sources with a lower carbon footprint. Further, while the fact is the planet is heading towards ten billion people, all of whom will want prosperity of middle class consumption and all of whom will aspire to own a car and take passenger jets to overseas holidays, it doesn’t mean we shouldn’t urgently seek to reduce carbon emissions per head, even if they will probably still go up in total. But it does seem to me that our only real hope lies in new technologies for co2 sequestration/scrubbing/storage and geo-engineering solutions on a planetary scale.

    How does this relate to the government having more levers to control energy policy? Well, first of all like I said it can use levers like price signals to transition more rapidly to a low carbon energy production. Secondly, it will help us push for co2 sequestration/scrubbing/storage locally and internationally. Thirdly, any geo-engineering solutions will necessarily be gigantic in scale and require international co-operation. By reducing emissions as much as possible within realistic political limits the cost and scope of these geo-engineering projects will hopefully be much reduced.

    Comment by Sanctuary — April 23, 2013 @ 7:52 am

  107. I actually almost believe that you actually believe that.

    And there’s the nub; why are you lefties so cut up about the price of electricity when increasing prices = lower consumption = lower emissions?

    Comment by Clunking Fist — April 23, 2013 @ 12:22 pm

  108. “increasing prices = lower consumption = lower emissions?”

    that math is not correct. We could close all our hydro and switch to all coal which would both increase prices and lower consumption but would still considerably increase emissions. The important thing to incentivise lower emissions is a differential in the cost of low vs high emission energy. Increased consumption of energy is fine with me (leftish greenish person) as long as it’s within the renewable carrying capacity of our environment and atmosphere.

    There is a lot of scope for increasing consumption in the electricity sector:ie. in order to offset a decrease of fossil fuel consumption in the transport sector, also, and cheaper power prices would help with that. As would a government that could spot the need for this (ie. if we still want to have a use for our nationally significant roads when we can no longer afford to import petrol) and begin developing policies to incentivise this transition.

    With the government regulating the wholesale prices through a tender process, they can incentivise particular generation methods strategically. Which to me is a better approach that letting the generators set the parameters for future development. If allowed to do so it will be in the interests of their shareholders’ profitability rather than the interests of New Zealanders and their economy.

    Comment by nommopilot — April 23, 2013 @ 12:52 pm

  109. Greens energy spokesperson Gareth Hughes was clear on Radio NZ this morning (3 mins, audio options): http://www.radionz.co.nz/national/programmes/morningreport/audio/2552825/greens-say-energy-policy-announcement-timing-not-deliberate

    Comment by Sacha — April 23, 2013 @ 1:54 pm

  110. @Sanctuary, it’s making more sense now why you have apparent antipathy to the Greens. You aren’t against the end goals of reducing/mitigating global warming. You just don’t think doing it by targeting consumers will work, and that guilt tripping people about their carbon consumption is ineffective twaddle. I’d tend to agree. The targeting of emissions has to happen at the highest level in any country that wants to make a lick of difference. Also geoengineering is something that’s only going to be meaningful on a massive scale. I agree, totally. I would say, though, that I think most Greenies would also agree. They just can’t resist the moral highground on an interpersonal level, and yes, that can be frustrating.

    Comment by Ben Wilson — April 23, 2013 @ 3:23 pm

  111. “that math is not correct.” hence the ETS, surelys?

    “Increased consumption of energy is fine with me (leftish greenish person) as long as it’s within the renewable carrying capacity of our environment and atmosphere.”
    So what is the correct amount of co2 for our atmosphere?

    Comment by Clunking Fist — April 23, 2013 @ 7:41 pm

  112. “that math is not correct. We could close all our hydro and switch to all coal which would both increase prices and lower consumption ”

    maybe your maths is incorrect: coal has a high marginal cost, a dam not so. And when consumption falls, it is those sources of electricity with high marginal cost which tend to be “switched off” first.

    Comment by Clunking Fist — April 23, 2013 @ 7:47 pm

  113. coal has a high marginal cost, a dam not so.

    CF – are you including the cost to build a dam versus a thermal station in your cost assessment?

    Comment by Gregor W — April 24, 2013 @ 10:37 am

  114. Gregor, please pick up and economics text book on what marginal cost is and then look back at your comment.

    Comment by WH — April 24, 2013 @ 10:51 am

  115. Actual Gregor is right…. in the economists long term!

    No Gregor, I am not including sunk, capital costs. All the existing power stations are; existing. The owner of a coal fired power station will not burn coal if the electricity produced will not sell for the cost of the coal.
    Whereas a hydro station has no real variable cost: they don’t have to buy the water.

    Comment by Clunking Fist — April 24, 2013 @ 12:30 pm

  116. That what I was getting @ CF – the hypothetical change in marginal cost of having to deploy a new dam vs a new thermal station if production is maxed.
    I get where you are going with the unit variable cost (water vs coal) wrt supply elasticity though.

    Comment by Gregor W — April 24, 2013 @ 1:11 pm

  117. “So what is the correct amount of co2 for our atmosphere?”

    What a singularly stupid question displaying almost no understanding or awareness of climate science or paleoclimatology. I know, let’s try and derail the thread and argue about whether climate change is happening for the millionth time. I’ll start: The “correct” amount of CO2 for our species, and the ecosphere we evolved in is of the order of 290ppm to 350ppm. This level was reached by the biological action of organisms removing carbon from an atmosphere which had much higher temperatures and much higher concentrations of CO2. That is the state to which the climate will return with the release of this CO2. There are uncertainties as to how this transition will proceed, due to inertia and the chaotic nature and the scale of the systems involved, but there are a lot of people expending a lot of resources on understanding it (not just scientists and activists, but military, insurance, NGO and financial minds)…

    Great, now you pick three words from that to rebut and ignore the rest. Post some links to some websites and then I’ll post some more links and we’ll all see that there is real controversy over this issue. Or we could accept that climate change deniers and their tired fallacies are leading in a race with Polar Bears to going extinct. Hang in there, CF.

    Climate change is happening, it’s already costing a lot of money, and how we structure our electricity sector is of prime importance to how we’ll cope.

    “maybe your maths is incorrect: coal has a high marginal cost, a dam not so.”

    I wasn’t arguing this was the economically wise thing for NZ to do, obviously, just that your statement equivocating increased price with decreasing emissions is incorrect because the costs of emissions are not factored correctly into the price of electricity due to extremely poor global policy, and the unknowable (but, I think, currently underestimated) costs of their future impact on society.

    Comment by nommopilot — April 24, 2013 @ 1:20 pm

  118. Good answer, best yet. So you don’t want more CO2 because the dinosaurs might return..?

    I agree climate change is happening. But what do you mean by: it’s already costing a lot of money?

    “There are uncertainties as to how this transition will proceed, due to inertia and the chaotic nature and the scale of the systems involved, but there are a lot of people expending a lot of resources on understanding it”
    Hopefully they will soon be able to explain where the positive feedback mechanism will come from, and why it has not kicked in in the past, when co2 levels were higher (as you admit) and temperatures were higher (which you may not admit, since a lot of effort has gone into trying to dismiss the mediaeval warm period, etc, as global phenomenon).
    “how we structure our electricity sector is of prime importance to how we’ll cope [with GW]”
    Eh? The efforts made to change our energy system are being done in a fruitless attempt to AVOID GW not COPE with GW. I assume you misspoke? Why should be bother, when Germany, that bastion of green in times now past, are building coal fired power stations/ Sure, they are “clean”, but they are not co2 free.

    And since you want a link, here’s one:

    http://www.thespectroscopynet.eu/?Physical_Background:Atomic_Emission_Lines_Shapes:Selfabsorbed_lines

    Comment by Clunking Fist — April 24, 2013 @ 2:55 pm

  119. “116.That what I was getting @ CF – the hypothetical change in marginal cost of having to deploy a new dam vs a new thermal station if production is maxed.”

    Well, ETS creates (arguably) additional cost, the unknowable future price of coal and electricity enough uncertainty as to returns, to make thermal generation risky. Perhaps if we stopped being so hysterical over fracking, we could seriously reduce the chance of coal fired power in the foreseeable (lol) future? After all, there are many real reasons to hate coal i.e. other than their higher-than-gas co2 emissions.

    Comment by Clunking Fist — April 24, 2013 @ 3:04 pm

  120. there are many real reasons to hate coal i.e. other than their higher-than-gas co2 emissions.

    Indeed – I understand Kyle Chapman for one hates coal because it is black.

    Comment by Gregor W — April 24, 2013 @ 3:16 pm

  121. green is the new black

    Comment by Sacha — April 24, 2013 @ 3:22 pm

  122. “So you don’t want more CO2 because the dinosaurs might return..?”

    Yes that’s right. I am very afraid of dinosaurs. Aren’t you? I’m also afraid of trolling, so I’m going to ignore your rubbish denier crap and stick to the topic of energy supply.

    “The efforts made to change our energy system are being done in a fruitless attempt to AVOID GW not COPE with GW. I assume you misspoke? ”

    GW is going to happen. The inertia in the climate system means it will continue to happen. We will in the future, be coping -whether we like it or not – an increasing likelihood of severe storms, severe drought and severe flooding. It won’t be predictable and no single event will be attributable to GW, but the increased probabilities will deliver increased damage and costs. This is what I mean by “It’s already costing…”

    Efforts in our energy system are being made by various parties in various directions for various reasons (avoiding GW being among the lowest). The ones I think will become important are decentralising, divesting of reliance on fossil fuels and incentivising a transition to renewable transport fuels.

    “Why should be bother, when Germany,…”

    Do you go around killing people because there are murderers elsewhere in the world? We should bother because investing in infrastructure locks us and future generations into fuel costs and emission pathways that may be more susceptible to disruption than we think and which our descendants will either praise or curse us for. Whether or not we can prevent climate change, a power system that is reliable, resilient, distributed, and with low-overheads will be of great value in a climate-changed world. Highly paid CEOs and fat-pocketed shareholders will be of no use at all.

    Comment by nommopilot — April 24, 2013 @ 3:33 pm

  123. “This is what I mean by “It’s already costing…” ” – so you have data that supports an actual, already happening, increase in severe storms, drought & flooding events? (I can tell you where CAGW is already costing us and our fellow earthlings: ETS-type schemes, subsidies for windmills (how the feck will they cope with the increase in severe stuff), feedstock for biofuel diverting agricultural land.) I think you are confused. There is generally an increased the cost of damage for an event, due to the way that more and more of the world is fancy… and insured.

    “Efforts in our energy system are being made by various parties in various directions for various reasons (avoiding GW being among the lowest). The ones I think will become important are decentralising, divesting of reliance on fossil fuels and incentivising a transition to renewable transport fuels.” – pretend that I’m ave or below ave intelligence: explain how decarbonising our energy helps us cope with GW? A gas or coal fired power station will cope better than a windmill or a tidal barge in high winds or seas. I think you are wrong on this one.

    “Do you go around killing people because there are murderers elsewhere in the world?” How the fuck is that relevant or analogous? We regulate our local air quality because or air is, basically, local. But co2, other than in respect of suddenly being the major greenhouse gas, is not something we need worry about, since when we close our windows at night, the levels increase markedly over what’s happening outside.

    Comment by Clunking Fist — April 24, 2013 @ 7:19 pm

  124. Enough with the climate denialism. No nation is an island. Our trading partners will kick our arses as their own carbon management obligations strengthen if we try to not play our part. Renewable electricity is a fundamental strategic advantage for our entire economy. If we don’t let wealthy rentiers waste it like short-sighted fools, that is.

    Comment by Sacha — April 24, 2013 @ 7:45 pm

  125. Gouging Ben? Got evidence for that. I’m not going to bother explaining the price being based on the marginal cost etc (as it appears to all be falling on deaf ears – you actually sound like a global warming denier) but let me ask you this: if I have grown some apples and you have grown some apples, and they are of equal quality, and in the same location, should we be paid the same amount for them? If not why not?

    Comment by Swan — April 24, 2013 @ 7:49 pm

  126. “pretend that I’m ave or below ave intelligence”

    I don’t think I can manage to pretend you’re quite that intelligent.

    What Sacha said. They have websites for denier trolls to chat our ears off, so go troll skeptical science or hot topic.

    Comment by nommopilot — April 24, 2013 @ 10:20 pm

  127. “explain how decarbonising our energy helps us cope with GW? A gas or coal fired power station will cope better than a windmill or a tidal barge in high winds or seas.”

    for one, building an energy system that isn’t reliant on expensive fuels (and all fossil fuels will be expensive in the coming decades) shields us from volatility and uncertainty in fuel markets. It shields us from the risk Sacha mentioned of trading partners applying tariffs or sanctions through Carbon management schemes. As long as the people building the infrastructure are of above average intelligence it will be situated appropriately for weather conditions.

    “How the fuck is that relevant or analogous?”

    Yeah, that makes less sense to me, now that I reread it, than I think I thought it did when I wrote it. Apologies.

    So I’ll try again:
    The key reason I perceive for action on climate change is a moral one: Our collective global actions today will have catastrophic consequences for future human beings. Most adults today will likely not see the worst impacts of climate change. Every generation for the past 2 centuries and more have inherited a more polluted world than the last. The rate of our consumption and pollution has grown at exponential rates and it is plain that the planet has a finite capacity to absorb this. So given these facts, should we not be trying to find a way to reverse these trends at whatever scale we can? Whether Germany does or not?

    Every generation inheriting a cleaner world than the last? That would be nice.

    Comment by nommopilot — April 24, 2013 @ 10:52 pm

  128. >Let me ask you this: if I have grown some apples and you have grown some apples, and they are of equal quality, and in the same location, should we be paid the same amount for them? If not why not?

    The question is utterly impossible to answer because it uses the word “should” which is a moral judgment. If apples are the only thing to eat, and there are people starving, there’s a strong case that the apples should not be paid for at all. Left to the free market, the apple vendors could charge anything they like whatsoever.

    What you don’t get is that that is gouging. For you, the concept simply doesn’t exist. A high price is a fair price to you, simply by virtue of being the same as what others are charging, not because of any other considerations. The apples may have required no labour of any kind to grow, simply popped up by virtue of sun, rain and soil, and yet the free market can charge a starving family everything they own, and then some, it can demand they rack up debt, until they are enslaved, just to eat apples that cost the land owner nothing.

    This is where your idea of fair pricing and mine diverge.

    >Gouging Ben? Got evidence for that.

    ALL of the profits generated by the electricity SOEs, which are in the billions, could have been delivered to consumers in the form of lower prices. As I’ve already said, the only reason people haven’t been totally outraged by it is because the money does at least go back to the government.

    Comment by Ben Wilson — April 27, 2013 @ 10:00 am

  129. Ben you are clearly an unreformed socialist. Go read about what happened in the 20th century.

    Comment by Swan — April 27, 2013 @ 2:52 pm

  130. “and all fossil fuels will be expensive in the coming decades” weeeell, except maybe fracked gas, which has been a bit good for the USA and soon the UK. And of course, if environmentalists keep trying to shut down every exploration proposal for the more conventional sources outside of the middle east and africa, then perhaps supply will begin to suffer.

    “that makes less sense to me, now that I reread it,” no sweat!

    “The key reason I perceive for action on climate change is a moral one” Whilst I agree with restricting trade with countries that support slavery, WTF is one supposed to do with a country that doesn’t believe in CO2 as a pollutant? E.g. China, India, USA, Canada: tariffs? How much? Trade bans?

    “The rate of our consumption and pollution has grown at exponential rates” Um, that’s emotive. Unless you’ve got data? And the more we produce, the more we can consume, so where’s the problem?
    And you are still equating CO2 with pollution.
    Environmentalists seem to confuse on the one hand, poolution, and on the other, sustainability. So we can’t burn gas, but we can burn trees/wood pellets which are industrially processed and then transported vast distances. And then burnt, releasing all sorts of things besides simple CO2.
    Environmentalists also seem confused over whether we should be high density or low density. First they tell us high density living is the way to go: it is less energy intensive. Then they tell us we should all be producing our own food, which can only be supported by low density living (and consequently low tech, low productivity farming, just like in the third world).

    I think some of you folk need to make up your mind: are you environmentalists, for the planet, feck the people consequences; or socialist, for the underprivileged, the workers, the poor. Because I see no way that the two are compatible.

    PS ““Efforts in our energy system are being made by various parties in various directions for various reasons… [t]he ones I think will become important are decentralising…” How does state ownership or control fit with “decentralised?” A market approach is decentralised, so Lab-Green policy takes us away from decentralisation.

    Comment by Clunking Fist — April 27, 2013 @ 3:42 pm

  131. Swan, you’re giving up so easily? But come back, tell us more about the “laws” of supply and demand! And marginal utility!! How could we possibly understand the necessity of our disenfranchisement without it?? It’s like being thrown in the briar patch without you!

    Comment by Ben Wilson — April 27, 2013 @ 4:04 pm

  132. “Because I see no way that the two are compatible.”

    OOps, that reads like I support planet-rape for the poor, which is silly. But I think burn wood = GOOD, burn old long buried wood =BAD doesn’t make sense.

    Comment by Clunking Fist — April 27, 2013 @ 4:52 pm

  133. >I think some of you folk need to make up your mind: are you environmentalists, for the planet, feck the people consequences; or socialist, for the underprivileged, the workers, the poor. Because I see no way that the two are compatible.

    Hard to believe one could be both for the planet, and for the people on the planet? Not really. Certainly different environmentalists prioritize the two differently, and there is a class of environmentalist that is simply regressive, but the progressive kind aren’t conflicted when they want both things. Wealth could be better distributed without the redistribution harming the environment.

    Also, it’s easy to confuse opinions about what should be done at a policy level with opinions about what should be done at a personal level. It’s not contradictory to think that we should reduce our reliance on petrol, whilst still loving muscle cars and living out in the bush. Indeed, a reduced reliance on petrol by the population as a whole could make that work out a whole lot better, so it’s not even self-denying. I have a similar take on public transport – I fully support buses, but don’t really rely on them myself. Every bus is a bunch of cars that aren’t on the road and thus impeding me in my car. As a socialist, one is not duty bound to hand over every cent earned to the worker’s collective, either. We have to survive in a capitalist world, so there’s no great contradiction in being a rich socialist. It’s likely to make you a hell of a lot more effective in making any meaningful change. The socialist end-vision is that everyone is rich, not that everyone is poor. Self denial is a gesture that is individually rather meaningless. At a collective level, it’s vital to make society work.

    Comment by Ben Wilson — April 27, 2013 @ 6:05 pm

  134. “Um, that’s emotive. Unless you’ve got data?”

    Look at the data for any human activity over the past 10,000 years. Our population growth and technology are growing exponentially and that has driven exponential increases in pretty much every area. While some of these are tapering off for various reasons (ie wagon wheels, population, CFCs) many others are increasing (tons of plastic in the ocean, soil erosion, deforestation) and I am confident in saying the planet is far less healthy in terms of biodiversity and biomass (which really is the main measure of ecosystem health) than it was when I was born and that the major extinction event our species has presided over since we started spreading out across the globe continues to worsen.

    For pretty much the last ~million years our proto-human ancestors lived within the daily solar budget of the planet and did not dig into ‘solar savings’ at all. we lived within the biological cycle and did not emit toxic, non-biodegradable substances. then a few thousand years ago we started farming, breeding and spreading out on larger scales to a point where there significant impacts on local ecosystems. then cities were an exponential step up. so in the context of human evolution the time period from when we began digging up coal to now represents a massive increase in the energy being extracted, the non-biological material being put into the ocean, land, and animals, the levels of CO2 and other waste gases in the atmosphere, extinction due to habitat loss and pretty much any other metric relating to human activity. At some point these exponential increases will hit the ceiling of environmental carrying capacity, and some already have.

    Yes, that is emotive, and it should be if you have any compassion or love for nature. Why are your emotions not stirred when you think about these issues? Do you pessimistically think that nothing can be done to change it? Or optomistically that some magic technology will rescue us? Or do you just refuse to acknowledge that there are environmental problems at all?

    “But I think burn wood = GOOD, burn old long buried wood =BAD doesn’t make sense.”

    I am sorry it doesn’t make sense for you, but it does make quite good sense, actually. Before life first happened on this planet there was little to no free oxygen in the atmosphere just water, and volcanic gases.

    For hundreds of millions of years simple life forms anaerobically converted tons of that CO2 into Carbon and Oxygen and then died and sequestered that carbon out of the atmosphere. Aerobic turned out to be a more efficient energy pathway than anaerobic, so the organisms that could do both thrived and shifted the balance to a point where anaerobic bacteria were out-competed from the atmosphere at large and the atmospheric balance of oxygen and CO2 began to be modulated by the aerobic and anaerobic processes of life on the planet. They very slowly and gradually changed the climate of the planet, interacting with other natural forcings, and as these changes occurred more and more complex life forms evolved. Over very long periods of time. Until we get to a few hundred years ago when we began digging up and burning carbon that was last above ground when the atmosphere was very poisonous to human beings, as opposed to carbon that a tree pulled out of the air over thirty years.

    The scale of ecosystems required to influence atmospheric concentrations is massive and our species has, in a geological microsecond, made vast changes to both the ecosystems that had stabilised over millions of years and the atmosphere they exist in.

    The fact that you can’t make sense of this is probably why you think fracking will bring long-term price stability of cheap fossil fuels. and maybe it will, just as long as the atmospheric physicists are wrong and nothing happens to bring about strong international action on climate change, making fossil fuels economically and/or politically unviable, eh?

    “A market approach is decentralised, so Lab-Green policy takes us away from decentralisation.”

    In what way is the current market decentralised? How would National’s sales move the market towards decentralisation? Centralisation is about infrastructure policy, not market forces. Where is the incentive for big power generators to encourage their customers to utilise the energy from their own property and stop paying inflated prices? The market incentive is to keep customers on the teat, extract as much profit as possible by charging as much as they can get away with and keeping supply restricted.

    And with that speal I shall leave this bloat’d thread. good talk.

    Comment by nommopilot — April 28, 2013 @ 5:56 pm

  135. “Look at the data for any human activity over the past 10,000 years. Our population growth and technology are growing exponentially”
    Hmm, population growth is declining in rich countries, has been for a while. If it weren’t for immigration, populations would decline as well. So there’s a lesson there: get rich and you want/need less kids (China tried doing it the other way round).

    “For pretty much the last ~million years our proto-human ancestors lived within the daily solar budget of the planet and did not dig into ‘solar savings’ at all. we lived within the biological cycle and did not emit toxic, non-biodegradable substances.”
    And we lived shitty, brutal lives, much like animals. Not something I aspire to, thanks. Cheap energy equals healthy people and healthy environments. Just take a look at the third world where folk resort to burning dung and what wood material they can scavenge, in their houses, lower their lives every time they breathe. A bit like when we burned coal in our houses before the magic of town gas.

    “Yes, that is emotive, and it should be if you have any compassion or love for nature.”
    Just the facts, ma’am. I have compassion for nature, but I don’t think CO2 is a pollutant. In fact, in spite of the rising popluations of, say, NZ and the UK, we are healthier and living in cleaner environments with cleaner air than our ancestors. Evidence is beginning to emerge of the “greening” of the planet. Some say this is due to elevated CO2 levels, but I take that with a pinch of salt, as green requires water, and perhaps there’s more water available in more places due to increased precipitation. Or more irrigation for farming maybe.

    “The fact that you can’t make sense of this is probably why you think fracking will bring long-term price stability of cheap fossil fuels.” I fail to see the relevance of early life on the planet. Coal miners can point to whole fossilised trees in coal seams, indicating that coal doesn’t owe its direct existence to those microbes.

    “In what way is the current market decentralised?” Multiple producers, multiple customers. The fact that many of the producers are owned by the state, well, National was attempting to sort that bit out.

    “Where is the incentive for big power generators to encourage their customers to utilise the energy from their own property and stop paying inflated prices?”
    I’m not sure what this means? If prices are “inflated”, then “customers” would be motivated to produce their own electricity with solar panels or windmills. You’ll notice that (outside of remote areas where solar and wind might help solve practical distribution problems) these solutions rely on subsidies (UK, Germany, etc). There are tales of Spaniards running diesel generators and using floodlights trained on their solar panels due to the inflated feed-in tariffs for domestic solar.

    “The market incentive is to keep customers on the teat” Sure, that’s ONE incentive for the producers and retailers. But you can maximise profits by winning customers and lowering costs. And you forget that customers are incentivised as well: to save power, compare prices, switch to gas/biomass, etc.

    Comment by Clunking Fist — April 28, 2013 @ 9:02 pm


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