Well done, Larry, this discussion makes for very interesting and informative reading. Your brief observations concerning the various aspects to be considered, are well-reasoned.
For me, there is one major glitch, and that concerns your notion of a "unidirectional grid". I think that in claiming that this term is representative of a synchronous base load electricity system, is a gross misrepresentation of the truth. What you describe as being a unidirectional system can really only be applied to something like a model train set, or a miner's helmet lamp powered by a pocket battery.
A typical grid system comprises of multiple generators, each sited at strategic points around the distributed grid system, close to the main consumer or load centres. In this multi-directional system, each generator runs in sync with the master generator/s (ie, a master-slave arrangement), and every connected consumer is supplied with synchronous energy. Most importantly, the synchronous state is created and sustained by large synchronous generators, and these machines maintain tight control through the inherent benefit of the physical inertia that they impart.
Most importantly, the synchronous state includes a tightly controlled frequency, together with synchronised waveforms for all other essential elements of the system (including voltage, current, and reactive power, and aspects such as phase angle, phase rotation and so on. This system is designed to accommodate residential, commercial and large industrial loads (the latter featuring large three-phase motors and other heavy machinery), everything that is needed to sustain a prosperous nation.
Conversely, your so-called bi-directional renewables grid is a completely unsynchronised system which is utterly incapable of providing the same services. It is an asynchronous system. Yes there are pieces of technology which need to be added to help asynchronous generators to connect to a system of their own, including invertors and other devices, but none of these devices are ever going to be capable of creating and sustaining inertia, and therefore can never exert the essential control which is necessary to assure grid stability.
The characteristics of various and disparate asynchronous inputs to a system are each unique. They are not in sync with any other device and, therefore, the resultant input to the system is at best disruptive of all other inputs and outputs.
If there is insufficient synchronous inertia to enforce their compliance with the pre-existing grid conditions, grid instability ensues. The consequence is that one protective metering device after another will detect the faults, and then initiate a cascading sequence of trips, ultimately shutting down the entire system (especially the generators).
It is not synchronous generators that cause system failures, it is the faults injected into the transmission system by asynchronous machines, at various points in that system, that ultimately cause the system to shut down.
Oh but technology will fix the problem, some proponents will have us believe. Well, I'm sorry, that grid-scale technology does not yet exist. Some issues can be solved by technology, but not grid scale inertia (for one).
The bottom line: How many people can afford to pay for the impossible dream of free energy?
I used the "unidirectional grid" grid as a direct quote from the EA paper. I agree it's overly simplistic and not an accurate representation of a balanced grid with multiple generators.
The use of the term complexity to describe what the EA term as a "bi-directional grid" is appropriate as you point out. It's pilling complexity on top of complexity and the cascading and phantom faults will be a major challenge. I was recently reading about inverters issues in the ERCOT grid that would knock out inverters hundreds of miles from the source of the fault but not those nearby.
My bottom line is that "keep it simple stupid" is a line to live by and that adding complexity has diminishing returns.
Thanks again for the great and far more technically accute comment. Much appreciated.
Thanks, Larry, now you’ve got us laughing. We have recently received a rude reminder that the ‘KISS’ principle has clear limits: When we first set out on this mission to provide public education for the masses, we believed that keeping things simple was a primary target.
Well, imagine our great surprise to receive some very strong criticisms from many readers - ranging from ordinary non-technical folk to professional electrical engineers - complaining bitterly that we hadn’t explained all of the facts.
So, we have had to back-track, and are presently attempting to add more detail without killing all interest in the subject. It’s very challenging, and there is no clear line in the sand.
All I can say is that we just need to do our best, and then manage the responses in a positive and constructive way, as you seem to be doing. Keep up the great work.
It sounds like the NZ authorities are just as bonkers as ours in the UK. They have just published a mind-blowingly stupid “UK Modern Industrial Strategy” which is certain to lead the country to ruination. For an excellent debunking of this, see https://cliscep.com/2025/06/26/the-cats-out-of-the-bag/.
Recent encounters with people who, like the vast majority of our Uniparty politicians here in the UK, fret about alleged but practically non-existent dangerous man-made global warming and believe in the practically non-existent so-called transition from fossil fuels to weather-dependent renewables has left me wondering. Maybe they are not bad, just mad. Maybe such madness is a congenital human condition. As the Queen in “Alice in Wonderland” said over 150 ago years ago “Why, sometimes I've believed as many as six impossible things before breakfast”.
Thanks for the link Doug it looks like a good challenge to the narrative I'll add to my reading list.
The UK energy policy and associated chaos that is ensuing is really something to behold and yes you are correct NZ has actively collaborated and adopted much of this. Our Net Zero legislation was almost a copy paste.
There is a lot of hoping in NZ and unfortunately hope is not a strategy.
To expand a bit on my logic I see our key challenge as a global society as being how to avoid a thermodynamic collapse, or the Seneca cliff as Ugo Bardi describes it. To do this we need to generate more surplus energy over time and this is contingent on higher EROI energy systems.
I have major concerns that we are trying to move to lower EROI systems and adding complexity to overcome the characteristics of these systems. From a thermodynamic perspective this is a recipe for collapse.
I agree that there is scope for many of these systems to improve. I would prefer to see them adopted on the basis of them being a superior product. The car only replaced the horse once its benefits mad it an obvious choice. Currently we are forcing square pegs into round holes.
Some adoption makes a lot of sense. Off grid solar and battery applications are great. Behind the meter solar for farm irrigation applications and things like that are also great applications. However too greater deployment into the grid without concern for the physics is not going to end well.
You hit a good point regarding the draing gas reserves as being impetus enough for change and on this I fully agree. The impetus needs to be towards an equivalent or better energy source though. In this respect we are now under duress and have no time.
Thanks for the great comment Stephen these are great challenges and well thought out I like these type of comments as I want to be wrong about much of what I see.
Trump has redefined American political policy; anti woke, anti humanities (ivy league universities), anti immigration, anti Net Zero, pro energy, pro industrialization, pro Israeli, pro the Working Man, pro the American internal supply chain; reference Victor Davis Hanson podcasts.
Trump's policies supported by the polls, will continue for at least 12 years because of the team who supports his constitutionary; JD Vance, Marco Rubio, RFKjr etc; they speak eloquently with logic.
A comparative theme is the economic bankruptcy occurring in Europe and the UK, due to their de industrialization using renewables; eg Spains black out and the UK electricity tariffs about 4 or 5 times the US.
Larry says he can't square the circle; I support his contention for the following reason. It's deliberate by the Gentailers who support the Government narrative, which is a copy of the Global narrative. The Gentailers want us to pay twice, the cost of electricity and our taxpayer subsidies to fund the renewables.
Of course the Gentailers won't support the Natural Gas terminal at New Plymouth; why would they do that? If Shane Jones can't get approval, it's because Woke Luxon won't allow it.
When physics and green ideology collide, physics will win for the reasons stated by Larry and many other podcasters including Mark P Mills, Kathryn Porter, and Richard Lyons. Richard's podcast is called the Iron Law of Energy; it's great.
Cognitive dissonance (ability to hold 2 contradictory ideas in the head) is a deliberate technique used by the Gentailers and the Government narrative to con us, to exploit us, to obfuscate us.
If you want a change, you need someone like Trump in the NZ political leadership.
Hi Don, physics is a ruthless referee and will be the ultimate arbiter.
Lower EROI means less surplus energy with which to apply to our environment, which means a lower standard of living in our modern terms.
I would hazard a guess that the maximum power principle of biology and the associated loss aversion will make all plans of transition increasingly politically unsustainable.
Larry, this is a great post, thanks very much, I think this covers much of the necessary territory for 'practical strategy'. One thing that engineers seem not to factor in often is what an economist like me calls 'the demand side'. Economies in energy use are being made all the time: the population has increased 16% since 2014, and residential electricity demand is up half that. Newly efficient everything electrical in houses, better insulation, etc etc, and I think for the latter especially there is a long way to go.
I don't think we should be talking about 'cheaper electricity', but electricity at the cheapest price we can achieve given the constraints we have set ourselves (no more dams for example). Major components of demand for stuff in an economy cost relatively less or more over time as technology changes. I saw an interesting example last month: in 1950, in the UK, clothing was 10% of British households' CPI weight - and now it is 3%. We may find that electricity's weight, now a bit less than petrol, will rise relatively for the CPI (I'll get to the rest of the economy) while other components will fall. The best thing we can say is we will try to use a (managed) market to deliver the cheapest possible electricity. If its price rises a bit too much, the younger generation might have to go back to wearing jerseys inside (as an illustration of a demand-side response).
One thing is for sure, we can't go on adding population via immigration as we did for a decade until Covid - for lots of reasons unrelated to electricity prices. But that will have a demand-side impact.
It seems the biggest jump in demand will be transport and the conversion from other heat sources like coal etc to electricity - you mentioned Fonterra. We know from decades of experience that 'commercial' uses for electricity (or any input) respond to pricing, and the commercial sector has had flat demand (about 9.4TwH, less than a quarter of total demand) for the last ten years. They have economised - the issue I suppose is what removal of gas will do in practice. But there is always room to get cleverer there.
And industrial, excluding the smelter (approx 6TwH), has declined about 1.5TwH in the decade to Dec2024, almost all in pulp and paper/wood etc, ie, 'industrial ex-smelter is now less than 7TwH. Agriculture has risen a bit, towards 3TwH. All of these 'TwH' figures can be ratio'd to a total annual 40 TwH, to see roughly what percentage they are of our total demand: residential at 13.5TwH is one third of it all. I've rounded the total up a bit from the last two years' 39+TwH to account for the next year or two. Data centres could use more as they grow, but not materially in this context.
None of this of course illustrates how we get through peak demand periods morning and night in the winter, but it does isolate where the issues are. I wonder if anyone has been writing about that - where the pinch is on a daily and seasonal basis? I know the data are publicly available.
The management of all of this in one way looks exciting, not daunting. The control mechanisms to cope with decentralised solar supply and sun and wind daily variability will be challenging but just require at root better measurement of everything - it can be done.
Your overall intro, saying the hydro becomes the 'back-up' for variability had been coming to me too - all our dams are a distributed Lake Onslow, and a damn sight cheaper!
I've written too much, but want you to know how stimulating your effort has been. Cheers.
Hi Clive, again a great comment and good series of questions.
One of the challenges I see economically is the electrification you mention at Fonterra and other sites. If we look back only a couple of years on a per unit of energy basis comparing gas to electricity the cost of electricity was about six times more than gas.
How our economy can sustain that level of price increase and remain internationally competitive is something I don't understand. It also removes the option to add value to bulk commodity products with domestic industries. If our energy input costs rise does this not materialise as NZ just becoming a low value export commodity economy? Many would suggest that it already is.
The way we are approaching this currently is to add complexity and add cost. We are applying capital to less productive systems that have shorter lifecycles. I don't see how the businesses like solar companies that need to replace their panels and inverters every 15-20 years can be sustainable while providing low long run marginal cost electricity. Batteries systems will face the same issues.
We are heading towards an electrical generation system that needs to be almost entirely re-built every 15-20 years. This is entirely contingent on the price of replacement technology being cheaper and that in large part is related to the price of coal, oil and gas 20 years from now as renewables don't build renewables.
I'm going to find it increasingly interesting how this all pans out, or not.
"Domestic solar and battery systems will be widely taken up
I can’t circle the square on how we are expected to believe that NZ’s electricity prices will reduce if we have lower utilisation of the transmission network, because more people are generating their own power from less efficient systems while receiving a premium for the power they supply?"
Look across the Tasman, there has been a much higher takeup of solar in Australia yet power prices continue to go thru the roof (and they still re-elected a federal Labour govt!).
To add insult to injury some energy retailers in NSW, to force people with solar installations to install batteries, are commencing 1 July 25 imposing what is nicknamed a "sun tax", ie charging a penalty to those solar panel owners who export extra power to the grid at peak times. https://www.canstarblue.com.au/solar/what-is-sun-tax/
Wow I wrote about the NSW solar in one of my earlier articles called the "the missing link" however I did not realise it had gotten to the point of a sun tax! Thanks for that little nugget Alan.
Really appreciated the "what if" approach in this article, and exploring the hypothetical pros/cons in a constructive way.
Are there other theoretical scenarios that are worth looking at in a similar light to discuss viability? Wave power? Fusion? Microwave satellite? Building a long cable to Australia?
One 'takeaway' from this and from your Energy Strategy piece is that business as usual isn't going to work - I don't see any way around that given EROEI trends. Orderly degrowth or chaotic collapse?
Another good piece Larry. Some astute comments too.
Re: "Predicting interest rates" - with economics, like engineering, the old Micky Mouse phrase applies. "Anything can happen and it usually does".
So the most useful approach in my opinion is to work with probabilities and pathways. At the moment I'm predicting interest rates will head up, probably by a lot. This has (for me) the highest probability. Because the expected pathway is being followed (at a very high speed). Of course there's nothing linear, but the OCR probably won't go much lower before heading up (due to inflation - this is the monetarist's only option).
But the key issue is government bonds and what happens to those interest rates. After a significant rise over the last few years, to the point where the yield curve was inverted (https://www.investopedia.com/terms/i/invertedyieldcurve.asp) they have recently been heading down (https://www.investing.com/rates-bonds/new-zealand-government-bonds?maturity_from=10&maturity_to=310). They have (sort of) stabilized over recent months. A few down days, a few up days...that sort of thing. I have suspected the down days (which means the bonds are increasing in value) are due to the RBNZ buying (i.e. acting as the lender of last resort, creating NZDs out of thin air to buy).
Now we have some data from the RBNZ and it is as expected - they are increasing their holdings of bonds (technically called 'bills', 'notes', or 'bonds', depending on duration but I'm just going to refer to them all as bonds), especially the two longest term 30yr bonds. Because I looked a week ago I'll have to dig again to find data if you want to see it (can't remember if it was on the RBNZ or The Treasury site).*
In other words the private sector don't want (trust) NZ govt. long term debt. This is exactly what I would expect to see on the pathway to higher interest rates. The central bank buying the bonds in an attempt to keep rates down.
Hope your trip is going well. You're probably in the right part of the world. Lovely day today (where I am) but has been cold, wet and gloomy.
Hi Craig, yes travelling in Canada and the weather is great here thanks. Last I saw from back home my it would be more appropriate to be farming water buffalo.
I think that investors are astute enough to appreciate that NZ debt is unstable due to our inability to demonstrate GDP growth. Which is a byproduct in large part of our energy constraints.
I appreciate your tracking the bond market and translating what it means for me as this is not something I have given a lot of consideration to or understood. Its an important canary in the coal mine.
You’re in the right place at the moment; cold and wet here. Interesting you mention water buffalo; I was seriously considering them for my permaculture site. I was looking at the milk for making real mozzarella.
I just see these energy constraints as being rooted in finance. My opinion anyway, and obviously that’s an oversimplified sentence, but also a very long conversation.
The bond market is the canary on the gold mine; that’s not my opinion either. Many ‘alternative’ economists/analyst have been saying this for years; I first heard about it c2010 as the ‘bondpocalypse’. And numbers are growing; also there’s' a growing number of mainstream media and market players (finance company directors, CEOs, CFOs etc.) too. Given the root source of all currency is the bond market (i.e. the sale of mainly government bonds=debt) this makes sense imo.
The challenge, as with any area of specialty (which finance shouldn’t be - children should have been learning this stuff from primary school - I suspect this omission, being so obvious, was intentional), is to first learn the ‘language’ then understand what it all means. And finally understand the subject well enough to have confidence in your opinion. Why I appreciate your research on the energy situation in NZ. I’ve felt this was a growing issue for over 20 years. And as you know, it all takes time and energy to gather and credibly analyse the data. So I appreciate you’re doing this. It’s very important.
Good stuff Larry and thanks. Cognitive dissonance (ability to hold 2 contradictory ideas in the head) by the NZ Energy Leaders (includes Fonterra, Federated Farmers, Beef and Lamb, and Meat companies)who wish to support the Globalists via our PM whether the delusional Jacinda or the woke Luxon.
Excellent explanation of the perils of relying on wind and solar. New Zealand is a tiny country with stunning scenery. I worked on a farm in the North Island and then worked at the Smelter in Invercargill for 9 years in the late 70's to mid 80's. We raised 3 girls, and these were among the happiest years of my life. The clueless government will destroy the country for non existent climate change. All I can think of is, invite Alex Epstein from the US, to speak to your parliament about the facts on climate change and fossil fuels.
What does the term grid scale battery storage mean? Does it mean GW or GWh? I'm in the UK and they talk about battery storage as if it will be the main backup for renewables and they quote figures in GW and say things like "this will provide electricity for 50 thousand homes". They don't say "But only for 30 minutes". Isn't gas the main backup for renewables? That and pumped storage hydro.
The "h" is key here. A battery should be specified in MWh or GWh as this is what counts in most applications, how many hours can the battery support a specific load.
In the NZ context gas is the main backup as you suggest but this is changing to hydro as the gas reserves diminish. Batteries still have no where near the capacity to replace what gas has supplied and also have very different physical characteristics which would make direct replacement challenging even if they could scale.
Well done, Larry, this discussion makes for very interesting and informative reading. Your brief observations concerning the various aspects to be considered, are well-reasoned.
For me, there is one major glitch, and that concerns your notion of a "unidirectional grid". I think that in claiming that this term is representative of a synchronous base load electricity system, is a gross misrepresentation of the truth. What you describe as being a unidirectional system can really only be applied to something like a model train set, or a miner's helmet lamp powered by a pocket battery.
A typical grid system comprises of multiple generators, each sited at strategic points around the distributed grid system, close to the main consumer or load centres. In this multi-directional system, each generator runs in sync with the master generator/s (ie, a master-slave arrangement), and every connected consumer is supplied with synchronous energy. Most importantly, the synchronous state is created and sustained by large synchronous generators, and these machines maintain tight control through the inherent benefit of the physical inertia that they impart.
Most importantly, the synchronous state includes a tightly controlled frequency, together with synchronised waveforms for all other essential elements of the system (including voltage, current, and reactive power, and aspects such as phase angle, phase rotation and so on. This system is designed to accommodate residential, commercial and large industrial loads (the latter featuring large three-phase motors and other heavy machinery), everything that is needed to sustain a prosperous nation.
Conversely, your so-called bi-directional renewables grid is a completely unsynchronised system which is utterly incapable of providing the same services. It is an asynchronous system. Yes there are pieces of technology which need to be added to help asynchronous generators to connect to a system of their own, including invertors and other devices, but none of these devices are ever going to be capable of creating and sustaining inertia, and therefore can never exert the essential control which is necessary to assure grid stability.
The characteristics of various and disparate asynchronous inputs to a system are each unique. They are not in sync with any other device and, therefore, the resultant input to the system is at best disruptive of all other inputs and outputs.
If there is insufficient synchronous inertia to enforce their compliance with the pre-existing grid conditions, grid instability ensues. The consequence is that one protective metering device after another will detect the faults, and then initiate a cascading sequence of trips, ultimately shutting down the entire system (especially the generators).
It is not synchronous generators that cause system failures, it is the faults injected into the transmission system by asynchronous machines, at various points in that system, that ultimately cause the system to shut down.
Oh but technology will fix the problem, some proponents will have us believe. Well, I'm sorry, that grid-scale technology does not yet exist. Some issues can be solved by technology, but not grid scale inertia (for one).
The bottom line: How many people can afford to pay for the impossible dream of free energy?
Hi Graeme, thanks!
I used the "unidirectional grid" grid as a direct quote from the EA paper. I agree it's overly simplistic and not an accurate representation of a balanced grid with multiple generators.
The use of the term complexity to describe what the EA term as a "bi-directional grid" is appropriate as you point out. It's pilling complexity on top of complexity and the cascading and phantom faults will be a major challenge. I was recently reading about inverters issues in the ERCOT grid that would knock out inverters hundreds of miles from the source of the fault but not those nearby.
My bottom line is that "keep it simple stupid" is a line to live by and that adding complexity has diminishing returns.
Thanks again for the great and far more technically accute comment. Much appreciated.
Thanks, Larry, now you’ve got us laughing. We have recently received a rude reminder that the ‘KISS’ principle has clear limits: When we first set out on this mission to provide public education for the masses, we believed that keeping things simple was a primary target.
Well, imagine our great surprise to receive some very strong criticisms from many readers - ranging from ordinary non-technical folk to professional electrical engineers - complaining bitterly that we hadn’t explained all of the facts.
So, we have had to back-track, and are presently attempting to add more detail without killing all interest in the subject. It’s very challenging, and there is no clear line in the sand.
All I can say is that we just need to do our best, and then manage the responses in a positive and constructive way, as you seem to be doing. Keep up the great work.
Ha ha I agree this is the biggest challenge. Balancing accuracy and interest. Thanks Graeme much appreciated!
How long before the engineers have to come to the rescue of the masses by removing the imbeciles by force?
Sadly, I think Robert Bryce nailed it when he said the UK is path to becoming a cultural theme park. Apt for NZ methinks, and Oz.
That crossed my mind when I saw Robert Bryce make that comment too.
There does at face value appear to be a distinct lack of engineering input at a policy level.
It sounds like the NZ authorities are just as bonkers as ours in the UK. They have just published a mind-blowingly stupid “UK Modern Industrial Strategy” which is certain to lead the country to ruination. For an excellent debunking of this, see https://cliscep.com/2025/06/26/the-cats-out-of-the-bag/.
Recent encounters with people who, like the vast majority of our Uniparty politicians here in the UK, fret about alleged but practically non-existent dangerous man-made global warming and believe in the practically non-existent so-called transition from fossil fuels to weather-dependent renewables has left me wondering. Maybe they are not bad, just mad. Maybe such madness is a congenital human condition. As the Queen in “Alice in Wonderland” said over 150 ago years ago “Why, sometimes I've believed as many as six impossible things before breakfast”.
Thanks for the link Doug it looks like a good challenge to the narrative I'll add to my reading list.
The UK energy policy and associated chaos that is ensuing is really something to behold and yes you are correct NZ has actively collaborated and adopted much of this. Our Net Zero legislation was almost a copy paste.
There is a lot of hoping in NZ and unfortunately hope is not a strategy.
Hi Larry,
Great post with plenty of detail which I think you summarise
well in your last paragraph;
“I think one of the key takeaways here is that it is all
contingent on technology getting better and cheaper. There are strong arguments
that it could go either way.”
If I read backwards through the detail I sense an undercurrent
theme of; “rather than go either way, it’s only going one way and that’s the
wrong one.” This is what I take issue with. In two respects. The first because
I’m an optimist and have huge faith in the ingenuity and resourcefulness of
human minds to think our way out of the corners we’ve painted ourselves into. (we do need posts like this to highlight the paint, though)
The second because it paints the transition away from fossil fuels as half baked because
the fully complete all bells and whistles new energy system is not just there
ready to turn on. To me that’s like a new car buyer in 1910 looking for a Ford Ranger
when the only thing on offer is a Ford Model T. It has taken 100years of
automative development to get us to the Ranger with diversions to the Edsell
and Pinto along the way. This transition will likely follow a similar twisted
path.
We should be viewing many of the currently proposed solutions
to the energy transition through the eyes of a 1910 car buyer because that is
where we are in the process. Somewhat fewer than 5% of NZ homes have solar and
most of those will be 1st time installations. That means 95% of NZ
home owners have no practical experience of the constraints and opportunities
provided by this technology. It is almost exclusively sold on the basis of Return
on Investment. Is that sensible? I’ve never heard of lounge suites,
refrigerators or bathroom tiles sold on the basis of ROI so why suddenly is ROI
the imperative when looking at this transition. I would have thought the imminent
draining of the gas reservoirs would be impetus enough. It was for me.
Many thanks, keep posting.
Stephen great comment and very valid challenges.
To expand a bit on my logic I see our key challenge as a global society as being how to avoid a thermodynamic collapse, or the Seneca cliff as Ugo Bardi describes it. To do this we need to generate more surplus energy over time and this is contingent on higher EROI energy systems.
I have major concerns that we are trying to move to lower EROI systems and adding complexity to overcome the characteristics of these systems. From a thermodynamic perspective this is a recipe for collapse.
I agree that there is scope for many of these systems to improve. I would prefer to see them adopted on the basis of them being a superior product. The car only replaced the horse once its benefits mad it an obvious choice. Currently we are forcing square pegs into round holes.
Some adoption makes a lot of sense. Off grid solar and battery applications are great. Behind the meter solar for farm irrigation applications and things like that are also great applications. However too greater deployment into the grid without concern for the physics is not going to end well.
You hit a good point regarding the draing gas reserves as being impetus enough for change and on this I fully agree. The impetus needs to be towards an equivalent or better energy source though. In this respect we are now under duress and have no time.
Thanks for the great comment Stephen these are great challenges and well thought out I like these type of comments as I want to be wrong about much of what I see.
There is an international aspect here..
Trump has redefined American political policy; anti woke, anti humanities (ivy league universities), anti immigration, anti Net Zero, pro energy, pro industrialization, pro Israeli, pro the Working Man, pro the American internal supply chain; reference Victor Davis Hanson podcasts.
Trump's policies supported by the polls, will continue for at least 12 years because of the team who supports his constitutionary; JD Vance, Marco Rubio, RFKjr etc; they speak eloquently with logic.
A comparative theme is the economic bankruptcy occurring in Europe and the UK, due to their de industrialization using renewables; eg Spains black out and the UK electricity tariffs about 4 or 5 times the US.
Larry says he can't square the circle; I support his contention for the following reason. It's deliberate by the Gentailers who support the Government narrative, which is a copy of the Global narrative. The Gentailers want us to pay twice, the cost of electricity and our taxpayer subsidies to fund the renewables.
Of course the Gentailers won't support the Natural Gas terminal at New Plymouth; why would they do that? If Shane Jones can't get approval, it's because Woke Luxon won't allow it.
When physics and green ideology collide, physics will win for the reasons stated by Larry and many other podcasters including Mark P Mills, Kathryn Porter, and Richard Lyons. Richard's podcast is called the Iron Law of Energy; it's great.
Cognitive dissonance (ability to hold 2 contradictory ideas in the head) is a deliberate technique used by the Gentailers and the Government narrative to con us, to exploit us, to obfuscate us.
If you want a change, you need someone like Trump in the NZ political leadership.
Hi Don, physics is a ruthless referee and will be the ultimate arbiter.
Lower EROI means less surplus energy with which to apply to our environment, which means a lower standard of living in our modern terms.
I would hazard a guess that the maximum power principle of biology and the associated loss aversion will make all plans of transition increasingly politically unsustainable.
Larry, this is a great post, thanks very much, I think this covers much of the necessary territory for 'practical strategy'. One thing that engineers seem not to factor in often is what an economist like me calls 'the demand side'. Economies in energy use are being made all the time: the population has increased 16% since 2014, and residential electricity demand is up half that. Newly efficient everything electrical in houses, better insulation, etc etc, and I think for the latter especially there is a long way to go.
I don't think we should be talking about 'cheaper electricity', but electricity at the cheapest price we can achieve given the constraints we have set ourselves (no more dams for example). Major components of demand for stuff in an economy cost relatively less or more over time as technology changes. I saw an interesting example last month: in 1950, in the UK, clothing was 10% of British households' CPI weight - and now it is 3%. We may find that electricity's weight, now a bit less than petrol, will rise relatively for the CPI (I'll get to the rest of the economy) while other components will fall. The best thing we can say is we will try to use a (managed) market to deliver the cheapest possible electricity. If its price rises a bit too much, the younger generation might have to go back to wearing jerseys inside (as an illustration of a demand-side response).
One thing is for sure, we can't go on adding population via immigration as we did for a decade until Covid - for lots of reasons unrelated to electricity prices. But that will have a demand-side impact.
It seems the biggest jump in demand will be transport and the conversion from other heat sources like coal etc to electricity - you mentioned Fonterra. We know from decades of experience that 'commercial' uses for electricity (or any input) respond to pricing, and the commercial sector has had flat demand (about 9.4TwH, less than a quarter of total demand) for the last ten years. They have economised - the issue I suppose is what removal of gas will do in practice. But there is always room to get cleverer there.
And industrial, excluding the smelter (approx 6TwH), has declined about 1.5TwH in the decade to Dec2024, almost all in pulp and paper/wood etc, ie, 'industrial ex-smelter is now less than 7TwH. Agriculture has risen a bit, towards 3TwH. All of these 'TwH' figures can be ratio'd to a total annual 40 TwH, to see roughly what percentage they are of our total demand: residential at 13.5TwH is one third of it all. I've rounded the total up a bit from the last two years' 39+TwH to account for the next year or two. Data centres could use more as they grow, but not materially in this context.
None of this of course illustrates how we get through peak demand periods morning and night in the winter, but it does isolate where the issues are. I wonder if anyone has been writing about that - where the pinch is on a daily and seasonal basis? I know the data are publicly available.
The management of all of this in one way looks exciting, not daunting. The control mechanisms to cope with decentralised solar supply and sun and wind daily variability will be challenging but just require at root better measurement of everything - it can be done.
Your overall intro, saying the hydro becomes the 'back-up' for variability had been coming to me too - all our dams are a distributed Lake Onslow, and a damn sight cheaper!
I've written too much, but want you to know how stimulating your effort has been. Cheers.
Hi Clive, again a great comment and good series of questions.
One of the challenges I see economically is the electrification you mention at Fonterra and other sites. If we look back only a couple of years on a per unit of energy basis comparing gas to electricity the cost of electricity was about six times more than gas.
How our economy can sustain that level of price increase and remain internationally competitive is something I don't understand. It also removes the option to add value to bulk commodity products with domestic industries. If our energy input costs rise does this not materialise as NZ just becoming a low value export commodity economy? Many would suggest that it already is.
The way we are approaching this currently is to add complexity and add cost. We are applying capital to less productive systems that have shorter lifecycles. I don't see how the businesses like solar companies that need to replace their panels and inverters every 15-20 years can be sustainable while providing low long run marginal cost electricity. Batteries systems will face the same issues.
We are heading towards an electrical generation system that needs to be almost entirely re-built every 15-20 years. This is entirely contingent on the price of replacement technology being cheaper and that in large part is related to the price of coal, oil and gas 20 years from now as renewables don't build renewables.
I'm going to find it increasingly interesting how this all pans out, or not.
Larry, ref your section
"Domestic solar and battery systems will be widely taken up
I can’t circle the square on how we are expected to believe that NZ’s electricity prices will reduce if we have lower utilisation of the transmission network, because more people are generating their own power from less efficient systems while receiving a premium for the power they supply?"
Look across the Tasman, there has been a much higher takeup of solar in Australia yet power prices continue to go thru the roof (and they still re-elected a federal Labour govt!).
To add insult to injury some energy retailers in NSW, to force people with solar installations to install batteries, are commencing 1 July 25 imposing what is nicknamed a "sun tax", ie charging a penalty to those solar panel owners who export extra power to the grid at peak times. https://www.canstarblue.com.au/solar/what-is-sun-tax/
Are these crazy times??
Wow I wrote about the NSW solar in one of my earlier articles called the "the missing link" however I did not realise it had gotten to the point of a sun tax! Thanks for that little nugget Alan.
Really appreciated the "what if" approach in this article, and exploring the hypothetical pros/cons in a constructive way.
Are there other theoretical scenarios that are worth looking at in a similar light to discuss viability? Wave power? Fusion? Microwave satellite? Building a long cable to Australia?
Thanks Eion, much appreciated.
Yes all these topics can, and should be, approached this way.
I have done a piece on the Trans Tasman cable idea previously check out "The missing link".
https://open.substack.com/pub/newzealandenergy/p/the-missing-link?r=ubsbu&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
How do we educate the masses who actually believe 🌞,💨,&🪫 comes at no, or even just less, cost to the environment.
Burning more harmless fuels to make energy deficient Rube Goldberg machines is beyond madness it’s human race destroying
One 'takeaway' from this and from your Energy Strategy piece is that business as usual isn't going to work - I don't see any way around that given EROEI trends. Orderly degrowth or chaotic collapse?
Hi Andrew I agree. I think of it as Mad Max or the Hunger Games.
Another good piece Larry. Some astute comments too.
Re: "Predicting interest rates" - with economics, like engineering, the old Micky Mouse phrase applies. "Anything can happen and it usually does".
So the most useful approach in my opinion is to work with probabilities and pathways. At the moment I'm predicting interest rates will head up, probably by a lot. This has (for me) the highest probability. Because the expected pathway is being followed (at a very high speed). Of course there's nothing linear, but the OCR probably won't go much lower before heading up (due to inflation - this is the monetarist's only option).
But the key issue is government bonds and what happens to those interest rates. After a significant rise over the last few years, to the point where the yield curve was inverted (https://www.investopedia.com/terms/i/invertedyieldcurve.asp) they have recently been heading down (https://www.investing.com/rates-bonds/new-zealand-government-bonds?maturity_from=10&maturity_to=310). They have (sort of) stabilized over recent months. A few down days, a few up days...that sort of thing. I have suspected the down days (which means the bonds are increasing in value) are due to the RBNZ buying (i.e. acting as the lender of last resort, creating NZDs out of thin air to buy).
Now we have some data from the RBNZ and it is as expected - they are increasing their holdings of bonds (technically called 'bills', 'notes', or 'bonds', depending on duration but I'm just going to refer to them all as bonds), especially the two longest term 30yr bonds. Because I looked a week ago I'll have to dig again to find data if you want to see it (can't remember if it was on the RBNZ or The Treasury site).*
In other words the private sector don't want (trust) NZ govt. long term debt. This is exactly what I would expect to see on the pathway to higher interest rates. The central bank buying the bonds in an attempt to keep rates down.
Hope your trip is going well. You're probably in the right part of the world. Lovely day today (where I am) but has been cold, wet and gloomy.
*Probably here https://www.rbnz.govt.nz/statistics/series/reserve-bank/open-market-operations
Hi Craig, yes travelling in Canada and the weather is great here thanks. Last I saw from back home my it would be more appropriate to be farming water buffalo.
I think that investors are astute enough to appreciate that NZ debt is unstable due to our inability to demonstrate GDP growth. Which is a byproduct in large part of our energy constraints.
I appreciate your tracking the bond market and translating what it means for me as this is not something I have given a lot of consideration to or understood. Its an important canary in the coal mine.
You’re in the right place at the moment; cold and wet here. Interesting you mention water buffalo; I was seriously considering them for my permaculture site. I was looking at the milk for making real mozzarella.
I just see these energy constraints as being rooted in finance. My opinion anyway, and obviously that’s an oversimplified sentence, but also a very long conversation.
The bond market is the canary on the gold mine; that’s not my opinion either. Many ‘alternative’ economists/analyst have been saying this for years; I first heard about it c2010 as the ‘bondpocalypse’. And numbers are growing; also there’s' a growing number of mainstream media and market players (finance company directors, CEOs, CFOs etc.) too. Given the root source of all currency is the bond market (i.e. the sale of mainly government bonds=debt) this makes sense imo.
The challenge, as with any area of specialty (which finance shouldn’t be - children should have been learning this stuff from primary school - I suspect this omission, being so obvious, was intentional), is to first learn the ‘language’ then understand what it all means. And finally understand the subject well enough to have confidence in your opinion. Why I appreciate your research on the energy situation in NZ. I’ve felt this was a growing issue for over 20 years. And as you know, it all takes time and energy to gather and credibly analyse the data. So I appreciate you’re doing this. It’s very important.
Some really great assumptions here. If 10%are correct I’ll be shocked.
Another great reason not to buy an electric car. You need to go to aroma therapy and the grid has sucked your car dry.
Good stuff Larry and thanks. Cognitive dissonance (ability to hold 2 contradictory ideas in the head) by the NZ Energy Leaders (includes Fonterra, Federated Farmers, Beef and Lamb, and Meat companies)who wish to support the Globalists via our PM whether the delusional Jacinda or the woke Luxon.
Excellent explanation of the perils of relying on wind and solar. New Zealand is a tiny country with stunning scenery. I worked on a farm in the North Island and then worked at the Smelter in Invercargill for 9 years in the late 70's to mid 80's. We raised 3 girls, and these were among the happiest years of my life. The clueless government will destroy the country for non existent climate change. All I can think of is, invite Alex Epstein from the US, to speak to your parliament about the facts on climate change and fossil fuels.
What does the term grid scale battery storage mean? Does it mean GW or GWh? I'm in the UK and they talk about battery storage as if it will be the main backup for renewables and they quote figures in GW and say things like "this will provide electricity for 50 thousand homes". They don't say "But only for 30 minutes". Isn't gas the main backup for renewables? That and pumped storage hydro.
Hi Steve good questions.
The "h" is key here. A battery should be specified in MWh or GWh as this is what counts in most applications, how many hours can the battery support a specific load.
In the NZ context gas is the main backup as you suggest but this is changing to hydro as the gas reserves diminish. Batteries still have no where near the capacity to replace what gas has supplied and also have very different physical characteristics which would make direct replacement challenging even if they could scale.