Renewable Energy in New Zealand

Predictable scorn greeted the release of the Greens’ economic policy. Political opponents are keen that the party continues to be perceived as a group of tree-hugging environmentalists with no grasp of fiscal reality. Yet this policy deserves better than that, if only because it demonstrates the Greens’ new-found willingness to advance beyond dogma. And if there is good reason to say the policy’s goal of creating 100,000 "green" jobs is overly optimistic, it still suggests something more substantial than the Government’s 2009 Jobs Summit was able to offer.

The centrepiece of the Greens’ plan is the creation of up to 81,000 jobs through the building of a new $6 to $8 billion export industry in renewable energy technology. Greens co-leader Russel Norman suggested this could be achieved by securing just 1 per cent of the global market for renewable "solutions". The catalyst for this industry would be incentives for state-owned energy companies to work with private-sector partners. The SOEs, said Dr Norman, were big enough to be players in the global market and should remain under complete state ownership, rather than being partly privatised, as planned by National.

The Greens say geothermal energy provides the greatest potential for such partnerships. In that, they are probably correct. The wind power boat has sailed, and New Zealand has a history of technological innovation in tapping its own geothermal energy resources. Equally, geothermal energy generation is increasing rapidly internationally, with 24 countries, led by the United States, the Philippines and Indonesia, now using this source of power. Considerable potential has also been identified in areas previously assumed to have little in the way of an exploitable resource.

However, two questions hover over the Greens’ scenario. The first is that New Zealand is far from the first to recognise the possibilities of supplying the technology to tap geothermal fields. The US, Germany, France and Switzerland are among those already boasting of their prowess through demonstration projects. Secondly, state-owned enterprise Mighty River Power, having diversified into geothermal power to become one of the leaders of its renaissance in this country, is already doing something similar to what the Greens suggest.

The previous Government also wanted SOEs to be more entrepreneurial. Mighty River has taken that on board to the extent of deploying about half of the US$250 million capital committed through an international partner, GeoGlobal Energy, to geothermal projects in Chile, California and Bavaria. It is something of a poster boy for the Greens – albeit with an overseas partner – in its belief that New Zealand expertise provides a genuine competitive advantage globally.

But Mighty River aside, this country does not appear all that well placed.

Contact Energy, the other major force in New Zealand’s geothermal renaissance over the past five years, has shown nothing like the same interest in chasing opportunities overseas. A private company and the owner of the Wairakei field, it has decided that its best prospects lie in New Zealand.

The incentives proposed by the Greens may entice the other state-owned power companies to look more closely at the geothermal option with private-sector partners. Diversification overseas to areas of strong demand is an attractive revenue option. The potential to create jobs is, therefore, real. It is questionable, though, whether this would be on anything like the scale suggested by the Greens.

At the very least, however, they have delivered a scenario that exploits this country’s environmental credentials and technological expertise. For that, they should receive some credit.