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Wednesday, April 6, 2011

Government’s Energy Strategy -- Grade F for Fail

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The government has mistakenly released its Draft Energy Strategy, which is still to be signed off by Cabinet. Despite hundreds of public submissions it remains almost word for word identical with the version published in July 2010.

Of the 12 specific goals "developing petroleum and mineral fuel resources" is first and "reduce energy-related greenhouse gas emissions" is last. The Strategy contains this cute graphic which puts these totally contradictory goals side-by-side!

The strategy has been universally caned by commentators.

Bob Lloyd, director of energy studies at the University of Otago says

"the government is trying to increase growth and increase energy consumption. It's just not going to happen. The priorities are completely round the wrong way"

WWF climate change campaigner Peter Hardstaff says
"this is not a strategy, it is a series of vague intentions"

Green Party energy spokesman Kennedy Graham said “the leaked paper offered no protection against the rising price of oil, despite acknowledging the problems in its first pages.”

Even the International Energy Agency is critical saying "the draft proposals lacked a firm commitment to actions that will contribute to achieving the energy saving goals" and that "detailed action plan is targeted specifically on the transport, commercial buildings and industry sectors must form part of the final strategy”

Green party leader Russell Norman and Prof Bob Lloyd were both scathing in this TV1 interview

Hope to Drill

Making the development of oil and gas the first priority is an incredibly risky strategy. It’s akin to buying tickets in Powerball, and for the Titanic.

  • Attracting oil companies to invest in New Zealand has already proven to be difficult. Exxon has drilled in the Deep South Basin but cited New Zealand’s isolation and rough waters as reasons for pulling out.
  • Volatile oil prices hinder investment. Billions of oil discovery investment was withdrawn following the rapid drop in prices in 2008. Price volatility looks set to continue.
  • The global financial crisis means fewer funds are available for investment. To offset this, the government is proposing one of the lowest royalty regimes in the developed world.

What if the drillers don’t come? Where is Plan B?

Drill and Hope

  • Even if a major discovery is made quickly it still does not save us from the next global oil shock -- which we are entering now. It takes at least 5 years, more likely 10 to get any oil flowing, but the oil crisis is unfolding now.
  • Most NZ oil is exported because we cannot refine it here. So even if new oil is discovered we still remain at the mercy of oil exporters. Global exports are declining at a faster rate than oil production per se.
  • What if no or little oil is found? In spite of more wells being drilled recently domestic production is declining rapidly. All of the wells drilled in the last 12 months were dry. Where is Plan B?
  • No matter how much new oil might be discovered we still pay the world price. And when prices rise over US$85 a barrel, New Zealand heads back into recession.
  • By the time any new New Zealand oil might start to flow, the price will be at a level we cannot afford to burn anyway.
  • The Deep Horizon oil spill disaster has highlighted the extreme environmental risks. A recent report from the Environmental Defence Society reveals the total lack of environmental regulation in New Zealand's Exclusive Economic Zone.

When asked about how government's strategy to prioritise fossil fuels, Lord Stern, former chief economist of the World Bank and economic adviser to the British government said

"fossil fuel investment is risky and getting riskier, clean tech investments are risky and getting less risky" and

"global changes mean that these investments are going to become more risky. The very expensive methods of extraction are likely to become more and more unprofitable. To talk of hydrocarbon growth as a growth scenario is to fly in the face of what would happen in the long term.”

At a time when enlightened nations are desperately trying to leave the fossil fuel age, our strategy is a great leap backwards right into it.


Martin Hanson said...

Trenchant and spot-on critique. This government is energy-illiterate. They have the effrontery to ask for my vote!

Martin Hanson

Jenkins said...

Money over all else seems to be the motto, includng the enviroment and human wellbeing. I wish everyone saw that too, but thats life in a democrazy I guess.

Some hope here>

but then I guess China will have to exploit the precious metals..

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