The future of power or a large white elephant? 

Wind power used to be considered the environmentally friendly alternative to fossil fuels. Bruce Holloway looks at how the hearing into the Te Uku wind farm has changed that view for many people.

Romantic notions about wind energy have taken a severe buffeting at the Ngaruawahia hearing into Wel Networks’ proposal to build a $200 million wind farm near Te Uku.

Over the next few weeks commissioners Michael Savage, John Hudson, David Hill and Graham Ridley will rule on Wel’s application for resource consent for 28-turbine wind farm on the Wharauroa Plateau.

But regardless of the outcome of their deliberations and perhaps those of the Environment Court further down the track strident opposition to the Te Uku project has already done much to undermine wind power’s image as our favoured squeaky clean alternative to fossil fuels.

The fervour with which residents of the greater Raglan district have zealously agitated against the project, highlighting the large carbon footprint of the plant, spoiled landscape, potential health and noise effects, feared loss of tourism, significant sediment impacts, and marginal benefits, should have concentrated the minds of Wel’s top brass.

Even if they win their case, Wel Networks may find themselves sucked Iraq-style into fighting an ideological war for the hearts and minds of the community against guerrilla-style anti-wind farm opponents for many years to come.

Wel has not fully sold the “big idea” of the project’s potential benefits to the Waikato community.

Indeed, the opponents of the project are convinced there won’t be any financial benefits.

The most viral attack on the Te Uku project came from Aotea Harbour boffin Sean Cox, a man who helped pioneer wind farm technology in the early 1970s.

In his parting shot Cox who called the wind farm “a silly, dishonest, and destructive project” worthy of comparisons with snake oil predicted wind energy would become tragically obsolete within the next decade, in the face of more viable and reliable wood-fired, micro solar and tidal energy plants.

This cast doubt upon the economic case for the wind farm, and he reminded commissioners the project’s financial modelling was purely dependent on underlying assumptions.

“It only shows the level of optimism about the assumptions they are making,” he said, urging the committee to look at what plant output and where it will fit into overall power generation.

Anybody who has bought an LCD television in the past 12 months will appreciate Cox’s subsequent explanation of the technology penetration curve he expects will come into play when energy-producing solar panels hit the retail market.

“With electricity the price will continue to rise up for a while, then in about 10 years’ time there will be this horrendous drop as new technology comes on stream,” he said.

“When you can go down to the hardware shop and buy a 2KW panel for $1000 and take it home, there is going to be little market for wind farm energy to supplement the national grid.”

Cox called the wind farm “a white elephant” and “an economic disaster” and was adamant there was no possibility of any national or public benefit.

Wel’s rebuttal of such economic criticisms has hinged largely on a pledge that the project will only proceed to construction if, at the time of tender, it is good business to do so.

Deloittes partner Paul Callow evaluated Te Uku’s commercial viability and concluded that while the economics were “marginal”, proceeding with the project was justified.

That led to some sharp exchanges in evidence.

Callow on Cox’s evidence: “His assertion that an electricity company would knowingly spend almost $200 million on a project it knew to be `bad’ reflects a fundamental lack of appreciation of the decision-making processes of a large corporate, particularly one ultimately responsible to a community-owned trust, follows before committing to major investment decisions.”

Cox on Callow’s evidence: “Mr Callow has a lot more faith in the ability of corporate organisations to make good decisions than I have. I have sat in on some truly stupid decisions made by this type of organisation. And the bigger, the worse the process, in my opinion.”

Callow said Cox’s “very limited financial analysis” was “flawed in every respect”.

Cox was more insulting.

“If it walks like a duck, and quacks like a duck… then it is probably an accountant.”

He said being independent of “the arcane and ever-changing rules of accountancy” allowed him to take a better view of the fundamental value of a project.

Unlike Callow, Cox said his starting point was to compare the cost of alternative projects and see which offered best value.

“He is assuming, like him (Callow), I have been employed to prove a point. That is not the case. I investigated this project and alternatives in order to find out the truth about it.”

Cox presented figures for six alternatives to wind power, arguing that without such comparisons, financial models were “an empty shell”.

“Does anybody else think that Mr Callow’s numbers are just a little too convenient? Just a small net present value, enough perhaps to justify guarded approval but not enough to get Deloittes into trouble if the project is a turkey.”

Asked by the commissioners if the economic feasibility of the project shouldn’t be left as a concern of the applicant, Cox disagreed.

“This is a thing which affects an awful lot of people. The prudent thing is to take a conservative view on whether it is actually advantageous to the wider community to do it… I am a customer of Wel and they are wasting my money on this rubbish.”

Wel dismissed Cox’s evidence as “unreliable” and lacking credibility.

In summary, Wel counsel Simon Berry said Wel’s experts had demonstrated “Mr Cox is not only wrong about the wind resource, energy output calculations, economic analysis and carbon emissions and footprint, but demonstrated a fundamental lack of understanding about a number of those issues”.

The answer to whether the project makes financial sense or not is blowing in the wind.

But what is certain is that, given the size of the project, Wel Networks will require the input of an as-yet undeclared major partner to get the Te Uku wind farm up and running.

By Bruce Holloway

Waikato Times

6 March 2008