Turning the draft energy strategy upside down, to shake some ‘step change’ out of it

Dear Gerry. I keep writing to you. You keep ignoring me.

Your draft New Zealand Energy Strategy (NZES) gestures at New Zealand’s two big problems: the economy, and the environment. But it is not a strategy for the current climate.

Its priorities are wrong, fundamentally. It needs to be turned on its head, to shake the ‘step change’ out of its pockets. In the language of the submission guide, it doesn’t “promote and support the appropriate development and use of energy resources”.

I understand your drive for energy-fuelled economic growth. But growth, at any cost, will not enhance “the benefit and well being of all [or any] New Zealanders”. Who knew we were living in a climate change-challenged world? There’s not one mention of “climate change” in the draft. That is the deal breaker, that all else must be built around.

It says there are “challenges and opportunities” for New Zealand’s continued economic growth, in moving to a lower carbon economy. That is, with respect, trite public service talk. It sounds fine, and tells nothing. Whatever we gain on oil, we risk losing on export markets; whatever we have in the bank would soon be spent, on climate disaster mop-ups.

The NZES says it is about realising our potential for energy development in all areas. And we can see, already, this government pushing forward on all of them, with some pretence at even-handedness: oil, minerals, biofuels, renewables.

For example, under "new energy technologies" and "oil security and transport", biomass and coal-to-liquid fuel options are both noted. Carbon capture and storage is discussed in a few places as a “potential” emissions reduction option. But before Solid Energy invests many billions of dollars in lignite conversion, CCS technology has to be found, and its effectiveness guaranteed. That is a necessary precondition, not a desirable possibility.

I appreciate the government’s reluctance to pick winners. I don’t believe it is smart not to acknowledge what we already know: carbon is going to end up a loser, if not one way, then another.

You have asked for comments on your proposed goal, priorities, and 12 areas of focus. The goal implies growth first, plus some token recognition that the environment is important. The government’s goal ought to be for New Zealand to make the most of its abundant energy potential, subject always to the paramount goal of environmentally responsible development — development that is environmentally responsible globally, as well as locally. If we don't demand this of ourselves, one of these days, the world will.

The draft gives some priority to renewable energy, and energy efficiency. But logically, energy efficiency should be first. How much we can cost-effectively save tells us how much more we need to generate; it affects energy security, and affordability, some of your other aspirations.

The draft New Zealand Energy Efficiency and Conservation Strategy (NZEECS) acknowledges all of this, so I know that you agree. But it is not given effect in the wider NZES structure. The NZEECS should be presented at the front, not the back.

Even within the "environmental responsibility" priority, the strategy’s wider priorities are evident: first “best practice in environmental management for energy projects”, then emissions reduction. Best practice in environmental management for energy projects seems, perhaps, a different thing from assessing whether a project should proceed at all. There seems a built-in assumption here that more of them will proceed.

For example, in the context of developing renewables, the government expects greater investment, to a target of 90 percent of generation capacity, “providing this does not affect security of supply”. It will support this by resource management reforms, and removal of other unnecessary regulatory barriers.

But there is no equivalent caveat about threats to conservation and the sustainable management of scarce environmental resources. There needs to be; security of supply is not the only imminent threat. We’ve seen a number of examples of Meridian Energy’s predilection for places of conservation importance; and under the Resource Management Act, it is already a nail-biting ride.

This could be the government’s opportunity to signal a preference for small scale and local renewables. The more local the better: more likely to be optimally efficient; less likely to be damaging.

The sectors and targets in the draft NZEECS are okay. We might quibble about whether the targets are truly "ambitious". And there’s an odd dissonance between what the draft NZEECS says and what the government has demonstrated it’s prepared to actually do.

It says, for example, minimum energy performance standards will only be used on selected products with relatively large energy savings potential. And yet, we all know about the light bulbs, which did have such potential. It talks up transport and vehicle efficiency, and green government procurement. Yet your party voted down a Green government vehicle procurement Bill, and scrapped work on vehicle fuel efficiency standards.

Of course, cost-effectiveness should be a factor. I'm just less sure that this is the factor, than ignorance and ideology.

And finally, both draft strategies need more about what the government will do, medium-term, to deliver them. You’ve pre-empted the criticism. “In many cases the draft suggests the Government will ‘support’ or ‘encourage’ other parties to make changes. How do you consider this support or encouragement is best provided?” you’ve asked.

Writing your strategy isn’t my job. I’m sure you’re as glad about that as I am. But there needs to be more than vague talk about “support” and “encouragement”; more specifics about the mix of information and incentives, and work programmes to develop them.

It is of course “the actions of all New Zealanders” that will realise the strategy. But it’s also the government’s role to offer leadership and support. Implicit in the fact that this is a strategy — not an election manifesto — and one that has taken a year to write, it should set out how.

You’ve small armies of officials whose job it is to develop specific strategies to give effect to government policy. I imagine the quandary they’re in is that the government doesn’t have much of a policy, beyond the talk of support and encouragement.

Much weight is placed in your draft on the flimsy shoulders of the ETS, to price carbon, and reduce emissions. Apparently, the ETS “will be the primary means to reduce emissions”. But as your colleague Nick Smith has recognised, it won’t — won’t reduce them much, that is. We need complementary measures: that’s why they’re called "complementary".

Comments (16)

by stuart munro on August 19, 2010
stuart munro

I'm afraid Gerry is a compleat failure: gesturing at the economy is not likely to be any more effective than gesturing at the environment.

His is what might be described as a 'lose lose' game plan. He's right up there with Winston Peters as a case for finite parliamentary terms.

by Claire Browning on August 19, 2010
Claire Browning

You had better be more specific, Stuart. I don't know that personal abuse makes you look like that much more of a winner. At the risk of slipping into the gutter myself.

I think that the two draft Strategies are a more honest try, with more positives, than some of Mr Brownlee's other efforts. Things could have been a great deal worse. There are good arguments for oil drilling, along with some really bad ones. None of this is to say that I find them very good. But you could at least do him the courtesy of trying to tackle the substance.

by stuart munro on August 19, 2010
stuart munro

It is of course difficult to be specific when there is so much left undone, and you might consider that Gerry is essentially employed (and staffed and resourced) to address these matters, whereas I am not.

I have not seen any plan on behalf of government that looks to me like a credible long term energy strategy. The exploitation of offshore oil is substantially not attracting large oil companies at present, and the proposed royalties seem to be set so low that they would return little to New Zealand even were they to be taken up.

We cannot repose any confidence in the resource management skills of a bureaucracy that destroyed the (relatively productive and benign) NZ inshore fisheries to establish a resource rental based scheme that could not be maintained, due to the rate at which it collapsed. The parallel with petroleum royalties seems tenable.

Yet we can find statements from current MPs pointing to the quota system as a possible model for protecting NZ interests when making foreign investment decisions. This when it efficiency destroyed the NZ component of the industry, and Mitsui broke foreign quota accumulation rules so graphically that the companies involved had to be broken up. So craven were our erstwhile representatives when it came to protecting NZ interests that instead of enforcing some kind of sanction against the culprits, they cobbled together the Sealord deal to reimburse them, and to cover it up.

Yes, there are good arguments about drilling for oil - in the short to medium term NZ could benefit greatly in balance of payments terms if it could get some flowing. But why settle for a 5% royalty when a state-run drilling program could return the entirety of the value to the country? It is not as if we as a nation do not need more employment and could not use more cash flow. And if the resources the minister proposes to exploit do not exist or could not be profitably exploited, then the whole exercise is simply hot air, foreign investors or no.

It seems to me that Mr Brownlee's efforts are founded upon a principle of government inaction. When we consider the development of successful modern economies, we tend to find that the opposite is true, that active and progressive governments take the lead (or are at least significant partners) in researching and establishing new industries and technologies.

In the energy field this might include some of the efficiency or sustainability technologies. Some years ago, in China, I noticed a prolific use of solar water heating systems. They were readily available for an installed cost well below $1000 NZ. The NZ government's answer was not to support something along the lines of a cheap standardized rooftop collector, but to make a $5000 loan available, with which citizens could buy and install Australian made products. It was neither especially cheap nor efficient, and it did not support local industry at all. I took this up with Pete Hodgson, who, as usual had nothing intelligent to offer. Jeanette Fitzsimons at least understood the wrongness of it.

And Brownlee's offering looks to be no better.

What credit then does he deserve - that he put a good front on it?

by Claire Browning on August 19, 2010
Claire Browning

you might consider that Gerry is essentially employed (and staffed and resourced) to address these matters, whereas I am not ...

As I said myself. However, if you're going to accuse somebody of being a "compleat [sic] failure" and having "a 'lose lose' game plan", one would presumably have some reasons. Thank you for outlining them.

I agree with you that his efforts are founded on a principle of government inaction. They're also a bit patchy: more readiness for the government to engage in promoting the hunt for oil, than some other measures (eg, vehicle fuel efficiency). Which might well be about relative costs and benefits. But I don't hear Mr Brownlee bothering to articulate this, or discuss it with the rest of us  -- because it's all arguable -- which makes me think it's more to do with myopia and lazy ideology. [Edit: because although, obviously, he's issued the draft NZES, it doesn't lay it out in those terms.] 

by Claire Browning on August 19, 2010
Claire Browning

Hm. Is there a narrative emerging?

Labour Finance spokesperson David Cunliffe has welcomed The New Zealand Institute’s discussion paper A Goal Is Not A Strategy. ...

David Cunliffe said the Institute’s paper confirms that while goals like [closing the income gap with Australia by 2025] can help focus attention on what’s important, they need well-directed and strong actions, grounded in solid diagnosis of what is holding New Zealand back and a coherent plan to address those constraints. ...

“Building a successful economy requires goals, but it also requires milestones that demonstrate an understanding of what needs to be done. It requires a strategy. It requires a plan. National hasn’t even begun to think about what’s needed. ... It has a 2025 goal without a single milestone or yardstick by which to judge progress.”

by stuart munro on August 19, 2010
stuart munro

It is perhaps a start that Labour and National are no longer singing from exactly the same songbook. But they have a long long way to go.

A 30% lift in GDP will require significant effort right across New Zealand society - not just in the export and technology sectors. And it would be a 30% gap if they began implementing perfect policy now. It takes a while for a ship of fools to change course.

This would leave little room for self-aggrandising politicians, or those whose commitment is to their propery values, race and gender politics, or railway shares held in trust on their behalf.

The economic catastrophe that has beset New Zealand (aside from inadequate leadership) is industrialisation. This process however, enriched Japan and Korea just as it has impoverished New Zealand.

Industrialisation moves production away from the household. The consumer society makes the household instead the centre of consumption. In a global economy, a consumer society is not indefinately tenable.

Small economies, like New Zealand's, are vulnerable to monopolism and market rigging. Such practices must be ruthlessly rooted out.

I have a feeling that Mr Brownlee, appearances notwithstanding, does not have the stomach for it.

by stuart munro on August 20, 2010
stuart munro

The Petrobras exploration off East Cape may of course make part of Gerry's plan look credible, if it is fruitful.

The Goal is not a Strategy paper, though interesting, I would characterise as being deeply flawed - but it is after all a discussion document.

Consider its main conclusion - that NZ's strategy should be: supporting internationalisation success for differentiated exports - I think this could be fairly characterised as the prevailing economic advice over the last 20-30 years. ie over the period during which our comparative wealth and productivity has declined so dramatically against Australia. By all means include this goal in a larger strategy - but we already know that on its own, it is inadequate.

Many of the ruling assumptions of the report are profoundly questionable:  retaining the best features of economic liberalisation - I think they mean asset theft.

Their characterisation of NZ as "prior to the global financial crisis, NZ had shortages of skilled and unskilled labour" skilled, certainly, but unskilled? With unemployment steady at around 5%? If an employer cannot fill an unskilled position it doesn't automatically mean that there is a labour shortage - it might be that local cost of living or prospects makes the position a net cost to workers.

Doug Kidd's five point focus on labour productivity seems to rely too heavily on subjective factors. Entrepreneurship. Skills and talents. In Asian economies, both of these matters are considered to be part of the role of education. Asia is on the whole skeptical of the 'genius' talent model, they believe that hard work and study is more reliable. Why the focus on labour productivity anyway? Any competent manager concerns themselves first and foremost with capital productivity, or ROI. Shouldn't that be considered?

Other assumptions:

 multinational corporations on average have higher quality management - corporate cringe.

FDI ... May allow opportunities to proceed when otherwise they would not.  - but it tends to crowd out local investment, reptriate profits, and overall be less socially responsible - not being part of the local society.

New Zealand's whole economy needs a thorough going over - not just the export sector. And the export sector needs to go beyond niche frenzy to at least occasionally competing on price, just like other countries do.

Notice also that the Goal is not a Strategy document had nothing to say about property - still some of the least affordable in the world - and not driven there by the success of the local economy, it was instead an artifact of the internationalisation the authors considered so favourable.

Cunliffe's reliance on material that substanially accords with the enthusiasms of the old National party illustrates how very far Labour has travelled from their traditional support base and from the interests of the constituents they are sworn to represent. He looks set to be another Obama figure - a conservative trojan horse on the leftwing ticket. That we can do without.

by Claire Browning on August 20, 2010
Claire Browning

Oh, Stuart ... Well, I suppose I asked for it.

I wasn't holding out A Goal Is Not A Strategy as the credible alternative plan. I'm not sure David Cunliffe was, either. I would guess he just probably seized on it as the latest handy means of making a point: beyond the government's talk, there's not a lot of specific action.

Apart from anything else, it's addressing a different issue (though related in some ways, and certainly entwined in Gerry Brownlee's mind): economic, not energy strategy.  But the underlying point is identical, and that's why I referred to it.

Here is Phil Goff on The Nation, last week: "Most of all I think New Zealanders are looking for a plan, and with unemployment going up, prices going up faster than wages, New Zealanders are increasingly asking is there a plan that this government has, if so we haven't seen it."

I think that what we're seeing here is next election's narrative. In my view, it's a good one.

by stuart munro on August 20, 2010
stuart munro

Indeed. Last election seemed to be dominated by personality politics, which, I maintain, are electorally improper and ultimately cruel.

AGINAS is a bit odd on Korea too, but I won't bore you.

by Claire Browning on August 20, 2010
Claire Browning

2005, too, was particularly cruel: "cancerous and corrosive", for example.

by Claire Browning on August 21, 2010
Claire Browning

And Stuart: I wasn't bored. Just a bit swamped by one or two ... or several ... other things.

by Simon on August 26, 2010
Simon

Hi Claire,

When reading the energy strategies, I wondered why there were two of them. Then I realised that under the Energy Efficiency and Conservation Act 2000, sections 9 and 13, there has to be a national energy efficiency and conservation strategy. (see http://en.wikipedia.org/wiki/Energy_Efficiency_and_Conservation_Act_2000 Thanks Jeanette!).

Then it struck me "why is there a non-statutory capital 'E' Energy strategy?". The only answer I can come up with is that there's an Energy Strategy, so that it's "in front of", and therefore more important than, the mandatory energy efficiency strategy.

I am sure Jeanette Fitzsimmons would have envisaged there only being one Energy strategy, and that it would be focused on conservation and efficiency.

Any thoughts on this angle?

I think my submission on the energy strategies will just be a covering letter and a Jim Hansen chart of growing fossil fuel emissions. The letter will just make the observation that nothing in the strategy will contribute to reducing emissions trends.

by Claire Browning on August 28, 2010
Claire Browning

I think my submission on the energy strategies will just be a covering letter and a Jim Hansen chart of growing fossil fuel emissions. The letter will just make the observation that nothing in the strategy will contribute to reducing emissions trends.

Well, that'll be succinct! Which will suit (some of) the Minister's tastes.

I am sure Jeanette Fitzsimmons would have envisaged there only being one Energy strategy, and that it would be focused on conservation and efficiency. Any thoughts on this angle?

All I can say is that on her watch, when she was the previous government's spokesperson on energy efficiency, there were also two Strategies -- an NZES and the statutorily-required NZEECS. David Parker, as Energy Minister, was responsible for the NZES.

That may have just been a governance matter, arising from the split Ministerial responsibility (or at least, Fitzsimons wasn't a Minister, but was only spokesperson on the energy efficiency part, I believe).

Both logic and the statutory requirement would seem to lean in the direction of treating the EECS as quite important, arguably the most important, not just an after-thought. But equally, I don't think you can forget about the Energy Strategy part - ie, conserving as much energy as we can doesn't save us from having to think about how to sustainably generate the rest.

I am totally guessing here. But speculating on your possibility of folding the two back into one, I can sort of hear in the distance outraged virtual cries from the Greens, about how the significance accorded to Energy Efficiency and Conservation is being eroded by wrapping it all up again in the broader Energy Strategy. Which is administrative. Which can therefore be developed by a government or not, as it chooses.

On the other hand, section 10 of the Energy Efficiency and Conservation Act -- the Act under which the EECS is required -- is broad enough to envisage a Strategy that addresses the generation part, too. In other words, she (because it was her Act) did leave open the door to wrapping them both up together -- under the statutory umbrella, rather than the non-statutory one.

Mr Brownlee, of course, will not wish to. Nor could he, on the terms of his present Strategy.

by Simon on August 30, 2010
Simon

Claire,

Here's the chart I attached. http://www.columbia.edu/~mhs119/Emissions/

I would have sent Brownlee a cartoon, had I found one.

Yes, David Parker and Labour started 'appendicising' the EECS, but Gerry Brownlee has perfected it!

by Claire Browning on August 31, 2010
Claire Browning

Hm. Think he'll understand it?

by Simon on August 31, 2010
Simon

Nope!

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