The main power companies make billions in windfall profits and their underinvestment in renewable infrastructure means they pay their shareholders even more cash
Opinion: Yesterday, our flat received yet another high power bill, despite keeping our heat pump on minimum, and our hydro dams being full of water. What’s going on? As with many things, it’s all about land. Four power companies – generator-retailers or gentailers – dominate the electricity sector, generating 88 percent of New Zealand’s power, and retailing 84 percent of it. Some of the places best suited for wind power in New Zealand have been locked up by these gentailers – just like the supermarkets have done. Much of this land was originally stolen from Māori, who are now forced to pay high power prices – and often prevented from asserting tino rangatiratanga by producing power on their own whenua.
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The gentailers are doing anything not to build windfarms or solar panels on the land they’ve purchased – instead choosing to sit on fully approved consents, often for over a decade. Genesis, for example, has had consent to build an 858MW Wairarapa windfarm on Castle Hill since 2012, but has refused to invest in building the infrastructure.
They have the money and consents to build the renewable infrastructure our country needs but are choosing to profit from expensive, dirty coal. Gentailers consent and sit on renewable developments at least partly to prevent competitors building clean generation in those spots
In fact, Genesis recently announced a two-thirds reduction of the proposed size of the windfarm. Genesis is not alone –Meridian has sat on a 76MW windfarm consent in Hurunui for a decade, as has Mercury Energy, which has refused to build its fully consented 318MW Puketoi windfarm.
Why are the gentailers doing this? It’s simple economics – there is no profit motive to invest in renewables. The spot-market pricing system means the wholesale energy price is set by the most expensive generation – Huntly’s coal plant. This incentivises the burning of coal, and keeps power prices for households far higher than the actual cost to the power generators. The result? Not only do the gentailers make billions of dollars of windfall profits but also their underinvestment in renewable infrastructure means they pay their shareholders even more cash than they earned in profits.
They have the money and consents to build the renewable infrastructure our country needs but are choosing to profit from expensive, dirty coal. Gentailers consent and sit on renewable developments at least partly to prevent competitors building clean generation in those spots.
From 2014 to 2021, the gentailers paid out $8.7 billion in dividends to shareholders: a whopping $3.7 billion more than they earned in profits over this period. Contact Energy’s results for the last financial year were released this week – it paid even more dividends to shareholders, despite net profits dropping by 30 percent. This is by no means a victimless crime: a recent Government report found that 110,000 households – mostly Māori/Pasifika, low-income, and renters – live in energy poverty. Of course, the climate also loses, as the hundreds of thousands of tonnes of coal burned creates a heat-trapping blanket around the earth.
The Government has failed to act decisively to address these problems, despite making signals in the right direction. Environment Minister David Parker has sought initial feedback on a proposal to shorten consent durations and force gentailers to "use or lose" consented wind and solar farms.
We’ve seen attempts to incentivise private investment in renewables, such as the recent deal with BlackRock, but nothing has amounted to anything near the bold action required to rein in the profiteering of the gentailers, address energy poverty and slash emissions.
In 1997 Chris Hipkins wrote a university essay about the energy reforms of the then-energy minister Max Bradford, arguing that partially privatising the electricity market was the wrong thing to do and that we would all pay more for power in the long run. He was right, and the good news is that it’s not too late to change things.
Through its majority ownership of three of the four gentailers, the Government can instruct them to invest in renewable energy generation and build windfarms on the land they’ve been sitting on. Minister for State Owned Enterprises Duncan Webb could do this tomorrow, if he decided to. This would reduce the revenue for the power companies, and the dividends issued to the Government and shareholders, but would slash power prices for every consumer in the country and benefit the economy, the environment and society as a whole.
More broadly, the Government can restructure the electricity market to set the wholesale price by renewables, and support community energy projects across the country to produce their own power.
Back here in my cold flat, I snuggle under another blanket, warmed only by the heat of the computer on my lap and the cat at my feet. The solutions are obvious – either the Government forces renewables projects through, or I need to get a lot more cats.
