Solid Energy: Poor government ETS policies and unwise fossil fuel investments require rethink
Solid Energy has done the right thing to abandon plans to dig and process lignite, but suggestions that the coal market will return to normal is unlikely and a re-think is needed, says the Environment and Conservation Organisations of NZ (ECO).
Catherine Wallace, a senior lecturer in environmental and resource economics, and co-chair of ECO said “Assumptions by some commentators that the coal market will return to its normal cyclical price patterns need to be tempered by three fundamental changes in the market.”
“Long term, the coal energy market is changing. Consumer awareness of coal’s damage to the climate, increased supplies of fracked gas, and renewable alternatives are changing the dynamics of the coal price.”
“The slow-down of the world economy and the Chinese economy has dampened the market for metallurgical coal, and that may recover, but the coal for energy market is grappling with the impact of fracked gas elsewhere,” said Wallace.
“Solid Energy management made a lot of very optimistic assumptions, embarked on costly mis-directed fossil fuel investments, but markets have changed too.
Cath Wallace said the lignite plans were amongst the worst of their ideas, so it is good for Solid Energy that they have backed out of the lignite plans, and even better for the climate.
“In the long run there are more jobs from farming that land than from mining it, so it is a win for the Southland community as well.”
Solid Energy’s investments in renewable energy were small compared to the disastrous lignite and Spring Creek investments, and in many ways the investment in renewable were a good strategy.
“The problem is that the government shot itself and the company in the foot by killing off the biofuels market and then refusing to allow the Emissions Trading System to send accurate signals about the climate cost of fossil fuels,” said Wallace.
“By not allowing the carbon price to take effect, the government has killed off many renewable initiatives, and thus removed the opportunities for a gradual transition to low-carbon jobs and energy sources such as wood pellets.”
“As markets world-wide increasingly regard coal as unacceptably damaging to the climate, New Zealand has been left with stranded lignite and other coal assets, and severely damaged prospects for transition to low carbon alternatives due to poor ETS policies.”
“The leadership of Solid Energy misjudged both the market and the government, made some mistakes, but many of the problems were the result of poor government decisions and oversight.”