Problems facing New Zealand's electricity system

Canterbury Manufacturers’ Association.
Media Release.
16 June 2006.

The Canterbury Manufacturers’ Association says that the power outages in Auckland and the central South Island on Monday are a further reminder of the problems facing New Zealand’s electricity system and the increasing need to find a solution.

The Association points to the fact that this was only the first winter storm of the year and says that New Zealand must be able to withstand one fault in the electricity system without incurring total failure. The CMA says that the debate has already begun as to where the responsibility lies for the blackout with even the Prime Minister demanding answers. The finger-pointing however must not overshadow the loss of millions of dollars incurred by the manufacturers and business communities in both regions and the potential for ongoing crisis after crisis that in the country’s electricity sector.

“It does not matter who is to blame. This problem has been brewing a long time and involves all shades of politics in New Zealand. It’s time to stop talking and actually implement some action to rebuild our electrical system into the comparative advantage it once was.” said John Walley CEO Canterbury Manufacturers’ Association.

There is general agreement within the industry that the reformed market, although better in some areas than the past, is not perfect. New Zealand’s generating companies are effectively given incentives when our electrical system is operating in marginal shortages, or the assets are worked hardest and stretched. Redundancy within the supply and system leads to less than optimum returns to the electricity system asset holder, resulting in high prices and blackouts for the consumers. Due to the adopted just-in-time mentality and ‘leave-it-to-the-market’ stance, system efficiency for generation, transmission and reticulation is now a myth. The savings achieved through just in time investments are wiped out in seconds when the power goes out by the direct losses and the incalculable damage this does to our international image. At the moment New Zealand can only dream of the low price reliable electricity system that we used to have as a comparative advantage against our overseas trading competitors. This has been sacrificed to the electricity reforms and cannot be rebuilt by the existing structure.

The CMA says that the Government needs to take leadership in the energy debate and set down some bold and decisive policies to supply electricity where and when it is needed and cut through the incremental approach that the reforms have fostered. Focus on how we can yet again achieve a reliable low cost supply of electricity, not on the often esoteric abstractions and economic fixes to economic problems.

Let us learn from our past mistakes and not wait to experience even more blackouts before we finally see the light.

ENDS

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