Asset selloff not the key to a brighter future for NZ

Opinion – Pat Wall

It is unfortunate that the election has been reduced to sound bites and a beauty contest because there are some very important issues that are never even discussed. One of the most pressing would be that of energy security for the future of our nation …


Asset selloff not the key to a brighter future for NZ…actually it will be quite dim with no lights.

Pat Wall November 10, 2011

It is unfortunate that the election has been reduced to sound bites and a beauty contest because there are some very important issues that are never even discussed. One of the most pressing would be that of energy security for the future of our nation and how the selloff of energy assets has the potential to sabotage the future of NZ. As a student of Energy Management at Otago University, and an individual who is deeply concerned about the future of this nation, I feel compelled to speak out publicly on this issue in order to drive debate.

According to the International Energy Agency, the world hit peak oil in 2006 and we are now on the downhill side of the curve with potentially as little as 30 years left until we are sucking the bottom of the barrel so to speak. We can actually see evidence of this around us if we consider the rise in fuel costs, increased conflict over fuel resources and increased effort to utilise more expensive and hard to get non-conventional hydrocarbons to name a few issues.

If left unchecked, we will see living standards in NZ and worldwide undergoing a dramatic decline. Alarmist? Unfortunately not, it is very real indeed but often glossed over or avoided.

As the resource becomes more depleted, our energy costs will rise and as a consequence, all costs go up and productivity and profitability go down. Keeping this in mind, let us consider our reliance on these resources. According to the NZ Energy Data File 2011, about 62% of NZ energy comes from hydrocarbons, with the bulk of that being oil and gas. The remaining 38% of our energy in this country comes from hydro, geothermal, wood and wind, or in other words, renewables.

Several other nations have begun to come to terms with these issues and no nation is moving forward faster than China. Yes, China has made it a national mandate to transition to renewable energy because the government is well aware that hydrocarbon supplies are in decline. All discussions of an economic nature are moot without energy, for without energy, there is no economy.

It takes energy to make the infrastructure to harness energy and at present, we are squandering that opportunity. It will take at least 15 years to build the infrastructure required and the longer we wait, the more it will cost and the less likely it will happen at all.

Luckily, our existing energy generation infrastructure offers a good basis to build on. As the price of oil gets higher, more of our energy needs will be met by electricity and therefore our electrical generation infrastructure will become more important, more valuable and more profitable. Currently, we have about 3 Tera Watts electrical generation capacity in NZ. As an example, if we were to put 1.5 million electric cars on the roads, we would require 9 TW peak to keep those cars charged. That is just for cars, but we would also require much more electricity to keep our economy running. So, in the future, electrical generation capacity will become ever more important and MUST be increased vastly to meet future needs.

Presently, we should be using the profits from our electrical generation to augment renewable capacity in order to kick our dependence on fossil fuels before it kicks us. If we were to start investing now, we would see our reliance on fossil fuels reduce and as an added benefit, since much of our oil is imported so we would not be sending money offshore to meet our energy needs. Rather, we would be meeting our needs more and more with free, local resources, yes free. Indeed, we must build the infrastructure to capture that energy but the running costs are low, unlike relying on fossil fuels where we continually need to feed the system to get energy out…so high running costs.

Now we must ask ourselves why we would want to risk what will become the backbone of our economy falling into foreign hands and enriching someone else? Our electrical generation assets are currently turning a tidy profit that will actually be growing immensely as we transition from oil because our reliance and utilisation of electricity will go from 38% to 90% of total energy or perhaps even more.

Furthermore, if we do not have complete ownership, we cannot be assured that proper re-investment will take place to augment generation capacity and therefore we will be at risk of having a serious shortfall. This is a matter far too serious to trust to market forces because they may dictate to squeeze all the profit out rather than investing as well as preferring BAU to trying something new. This is not a good model when what is at stake is the future of our economy. We must be prepared ahead of time, rather than racing to catch up.

Thousands of jobs will be created to design, construct and run the required infrastructure and indeed there are likely many areas where Kiwi can-do attitude can create export spin-off. We already have done this actually. Not long ago a NZ company became the first to test a bio-aviation fuel. So, to those who say that we cannot profit from green ideas, please use some imagination and realise that yes, we can.

Currently however, the debate seems far more concerned about beneficiaries than it is about energy security and the future. We must alter our short term vision and consider the next 10, 20, 50 years, and the future of our children, rather than being so self centred and short sighted.

We are becoming polarised like what has happened in the US. Unfortunately, all this does is paralyse a nation and make it impossible to progress. We need cooperation and we do not need to lose everything we have due to blind faith in economic ideologies. We need to look after NZ by keeping jobs and money in NZ, by investing in renewable energy while creating jobs and export potentials. We also need to find ways to transition our agriculture from hydrocarbon dependence so that we do not have a collapse of agricultural production in the future. Hydrocarbons are the basis for the fuel, fertilisers and pesticides that are used in agriculture, so the industry is dependent on fossil fuels and therefore our food security and export market as well.

The job of government is to look after the long term needs of the nation as well as the short term. Furthermore, we must learn to accept that not everything will be comfortable and at times we may have to pay for things. Our politicians often say inaccurate things because they are too scared to tell the truth to a public that does not want to hear bad news because we will vote them out. We should look at the long term consequences versus the short term inconvenience and get on with it and we need to also make our politicians accountable, so that they actually look after the needs of the people, rather than corporate or private interests.

ENDS

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