Market structure blasted by greens

New Zealand's wind power industry has a role to play in providing greater security in a more diverse national energy industry. But the economics of the current market approach must change before wind gets a chance. Speaking at last month's New Zealand Wind Energy Association conference, Jeanette Fitzsimons of the Green Party warned that it was time the wind lobby got involved in market politics.

"The rules of the electricity wholesale market have the power to make or break wind energy but there is no one in there with the mandate to argue for the industry. We can expect Trustpower to be batting for wind-friendly rules, but they are a small player compared with the others," she said.

"The operation of the wholesale market ensures that the gas stations run when they want to run, even if it means renewables don't, and there is plenty of anecdotal evidence of unnecessary hydro spill as a result. It's not clear how you will get your new wind stations scheduled if gas bids in at minus zero as they have done."

As in nearly all electricity markets in the world, wind power's "embedded generation" value -- the fact that is generates electricity locally -- is not recognised in the current market structure, she argued. "Market access is a key need and that covers a lot. With Transpower's charges almost wholly fixed at each node there is virtually no financial benefit to be gained by the wind industry from its embedded nature in local networks."

She said that wind had particular problems when it is required to bid into the market in advance and claimed that wind needs to be able to take advantage of sudden increases in the resource. Bidding in every two hours is particularly onerous for the smaller generating companies.

The Greens see the government's newly released energy strategy as a chance to get away from the market-driven forces that have dominated New Zealand's energy supply to date, though they are none too hopeful about its practical implementation. They want more focus on carbon costing, with Fitzsimons noting that the current approach "after many years of inaction" is still looking to be little and late." The Greens seek a stronger commitment reflected in specific setting of targets by next year and a greater role for the country's Energy Efficiency and Conservation Authority (EECA).

"So far [EECA] has not had any influence on proposals for more thermal capacity or market rules. The old style supply side continues on course while EECA has been ring fenced to issues of trying to affect demand," she said.

"The market rules will be largely in place by mid-2003 and unless there is clear government backing for EECA and the threat of regulation I cannot see the current market players taking much notice of these efforts to persuade it to create a level playing field for renewables and efficiency."

The Greens are not part of the coalition group in government, but support many of the policies of the Labour-Alliance grouping in power and have a strong public voice.