Transpower CE drives a wedge into the narrative.

The dominant paradigm is failing and cracks are starting to appear. The time is right for some hard truths and heretical thinking.

Humans have an inherent ability to deceive ourselves. We can easily create narratives in our minds and repeat them over and over again until the self -deception is complete and the lie becomes “our truth”.

I am not sure what the biological roots of this phenomenon are. Perhaps it is that deceiving ourselves enhances our ability to manipulate others to achieve an objective. It could also be a mechanism for maintaining confidence and motivation. Possibly it could be a psychological defense mechanism to counter uncomfortable realities. It may even be a simple mechanism to enhance group cohesion and cooperation. It could also be all of these things at once.

The New Zealand energy discussion is not immune to this self-deception.

I often find myself wondering if our industry leaders actually believe that we will electrify everything, that wind, solar and hydrogen are the future, that we can decouple energy and economy, or that there will be a transition?

Because all of these ideas are so divergent from our biophysical reality, I can only conclude that the self-deception must be complete.

However, I could be wrong and possibly there are some cracks appearing in the narrative.

Candid comments, harsh realities.

Last week New Zealand’s energy industry folks descended upon Christchurch for the annual Downstream conference run by the ENA (Electricity Networks Aotearoa).

During the event some interesting comments were made by Transpower chief executive James Kilty.

Transpower is the system operator. They are responsible for the operation of the distribution network of HV transmission lines, that connect the generators to the regional electricity distribution networks. As such they play a critical role in the grids overall operation and have some unique insights.

It struck me that Kilty’s comments were particularly candid and possibly signal a shift away from some of the fantasies that have been plaguing the industry.

Let take a look at what he had to say.

Kilty said that the energy industry is currently failing to deliver the electrification transition affordably.

This is an empirical fact, and the same applies the world over. Intermittency is expensive. New Zealand is suffering a fuel shortage in the absence of rain and gas. This will not be resolved by rain alone. We are increasingly dependent on aging dispatchable thermal sources such as Huntly to fill the gaps.

However, the “transition” term persists and prevents our industry leaders from seeing the big picture that we are in an addition, not a transition.

"Right now, we are in structural energy shortage, in a country surrounded by resources."

The idea that we are surrounded by resources needs to have a great big asterisk beside it. Outside of geothermal, hydro and gas the resources are highly disperse, low energy density and intermittent. These low EROI sources are not compatible with maintaining the productivity of our electrical grid or lowering power prices.

“the sector needs to remember that its purpose is to serve consumers.”

"There are very few markets in the world that manage to get people to use more of their stuff by putting up prices,"

"We must serve our economy."

This is a good point and I agree. As I have noted before I see energy no differently that roads, schools, or hospitals. It is part of the infrastructure of a functional society. Energy does not serve the economy, it is the economy. To quote energy aware economist Steve Keen “labor without energy is a corpse and capital without energy is a statue”.

“last winter's energy crunch - and the loss of some industrial businesses - demonstrates the lack of investment in infrastructure and also the risks of not delivering affordable electrification.”

I agree, but I would highlight that our immediate predicament requires investment in high EROI (energy return on energy invested), dispatchable generation. Small and incremental increases in wind and solar will not deliver the reliability and lower cost that we so desperately need.

Kilty also says he is also tired of hearing that solar, or wind, or offshore wind, or hydrogen is "the future".

"Let's start acknowledging that the whole fuel system is an important part of the future."

All developers "need to step up" and deliver projects, while also realising that their fuel "can't do the job on its own".

Very well said. New Zealand’s electricity mix is hampered by a lack of dispatchable baseload generation as noted above and this worsens each day with the our declining natural gas production.

We are increasingly dependent on Huntly’s coal fired units as a back up, not less.

Offshore wind and hydrogen in particular are not going to deliver a prosperous future for New Zealand.

I don’t see hydrogen having a future anywhere outside of subsidised science experiments. This is simply because of physics. It is a tiny molecule that is hard to keep in a pipe and is very energy intensive to produce.

Kilty says having Genesis Energy's Huntly assets operating as a multi-fuel site going forward - and even expanding it - is a "strategic must" if the low-gas environment continues.

The low gas environment will continue and will worsen. I expect Huntly to be firing on coal for a long time into the future and will not be surprised if additional coal units are required. Biofuels will simply be too expensive and have an energy density that is too low to replace coal.

Huntly is also strategically in the North Island and critical to the energy security of golden triangle of Auckland, Hamilton and Tauranga.

The only prospect for a phase out of Huntly would be a major expansion of the Central North Island geothermal. However this is an expensive and reasonably long lead solution that would require adding about 750MW of geothermal generation. Noting that the last 50MW added cost around $300 million.

He says that the sovereign risk issues around attracting future gas investment into the country may not be solved - which makes the Genesis site increasingly important.

Yes again I agree, this is the Ardern Government’s gift to New Zealand that keeps on giving.

While he hopes there will be investment in discovering new gas, "hope is not a strategy", Kilty says.

The Rankine units are a remarkable asset, he noted, which can run on coal and gas and then "transition with the transition" onto biomass and biogas.

Hope is the only strategy we have if we are to think that biomas and biogas will provide New Zealand with economic growth. Both systems are hard to scale and have very low EROI when compared to the coal that they would be replacing. This is unfortunately not a recipe for success or long term sustainable growth.

Kilty says the "extraordinary people" of the energy sector has delivered "outstanding results for New Zealand" for generations - but this is at risk.

He says that the people in the industry today have been "lucky enough to free-ride on the investments of our forebears" and have great education and healthcare.

"All of those things are starting to fall away - our infrastructure is starting to fail."

I agree the energy industry has been and remains the home of some extraordinary people. The front line operators, maintainers, and engineers out there each day battling the elements and entropy over several generations deserve our gratitude.

However, the baton of the think big era has been passed to this generation and it is time to once again think big and be aspirational.

Kilty went on to describe a vision of New Zealand in 2050 where we are prosperous and have world leading education, heath systems and public services.

I would also like to see these things eventuate, but to realise this vision we have to align our perceptions with biophysical realities. We need a high productivity energy system that can underpin these things.

I hope that Kilty’s comments resonate and light the way out of plato’s cave.

We were once a can do nation of hard grafting pioneers. I sense some of that DNA still exists in this great little nation and that we can build our way out of this mess, but we have to build the right things.

Physics is ruthless referee and the time of imagining that we will do more with less is over.

Larry