Energy efficiency being left in the cold?

Forest and Bird, Volume 22, Issue 4, 1 November 1991, Page 34

Energy efficiency being left in the cold?

Barry Weeber

D R BLAKELEY'S ARTICLE suggests some fundamental requirements in the electricity industry reforms in relation to energy efficiency. The obvious question is will the reforms deliver? While the Minister of Energy, John Luxton, stated at a recent Power Industry Conference in Wellington that electricity industry reforms were consistent with energy efficiency, Forest and Bird and other commentators have a different view. John Collinge, Chairman of the Auckland Electric Power Board pointed out that the reforms have only looked at the generation side of the industry, not the demand side. This is a fundamental flaw, as the efficient market solution Treasury and the Ministry of Commerce are so dearly attached to depends on efficiency existing on both the demand and supply sides of the industry. For example, investigations by Electricorp and the NZ Planning Council indicate cost effective energy efficiency could supply over 50 percent of New Zealand's electricity demand. This means the country could be wealthier, have higher employment and have less rivers dammed with the same level of energy services because investing in power stations is much more expensive than energy efficiency improvements. Efficiency measures can be installed for less than 3 cents a kilowatt hour. Building power stations would cost at least 15 cents a kilowatt hour. Why consumers are neither being supplied with or demanding cost effective energy efficiency has to date not been considered in the electricity reform process. If it had been, perhaps we would all know how better to cope with looming electricity price rises! Electricity price increases are not such a hard thing to cope with if consumers can reduce the amount they use for the same level of comfort and at less cost. Consumers are presently being sent the wrong messages. There is much more information available on energy consumption than on energy efficiency and conservation. This situation needs to be reversed if New Zealand is to become an energy efficient, and thus economically efficient, country.

Fixed charges

At the Power Industry Conference serious doubt was expressed by a number of people, both on and of the floor, about the application of fixed

charges for electricity distribution lines as opposed to variable charges for generation. The Ministry of Commerce’s reply seemed removed from common sense, business reality and economic theory and augurs ill for energy efficiency. Documents put out by the Ministry of Commerce in September increase concerns that fixed charges will be applied in a way that unfairly discriminates against energy efficiency and cogeneration fuels, such as gas. They have suggested that fixed charges could make up 50 to 75 percent of power bills, substantially reducing the incentive to apply energy efficiency techniques.

Efficiency from competition

Energy Minister John Luxton claims there will be efficiency gains from the electricity reforms, especially the proposed share giveaway from electricity supply authorities. Yet energy trading by the ESAs only accounts for 3 percent of the costs of electricity. Not much room for cost cutting there. Forest and Bird believes the Minister has jumped the gun and is freeing up the energy sector before the proper guidelines have been set to ensure energy efficiency and conservation. These guidelines should be the subject of an energy policy statement under the Resource Management Act.

Information disclosure

The Ministry of Commerce and Treasury are proposing mandatory information disclosure as part of the reforms, but are not specifying what form the disclosure will take. How can households make rational decisions about minimising the cost of energy services if the information disclosure regime does not result in standardised, easily read and widely available information on the comparative costs of different sources of energy services? (Be the sources other electricity supply companies, energy efficiency or other fuels?) Ideally every household should have the type of meter supplied by Southpower in Christchurch, plus detailed information on how to save energy arriving with every power bill. Amongst other things, this would encourage electricity suppliers to stock energy efficient products, such as water cylinder wraps.