Parker defends building of peak-supply plant

20:57, Dec 07 2011

Labour energy spokesman David Parker has defended the building of the Whirinaki peak-supply plant, which was sold this week at a knockdown price.

Contact Energy, which was paid $150 million to commission the plant in 2004, said on Tuesday that it had agreed to buy Whirinaki for $33m, with the option to move it. Contact shares fell 4.3 per cent to $5.34 yesterday.

The plant runs only when electricity prices are high, reducing New Zealand's exposure to dry weather draining hydro lakes. However, it has operated less than 4 per cent of the time since being built and energy experts said Whirinaki was a panicked decision to be seen to be doing something to insure New Zealand against high electricity prices.

Parker, while not "vehement" in his support of Whirinaki, defended its building, saying criticism it should have been built either near Auckland, gas supplies or both, was made with hindsight.

"The reality was that New Zealand's generation margins back then were very thin and there was a need to do something in the short term to get over the problem."

Parker said market-based energy reforms had left New Zealand exposed to dry weather, forcing the need for an "emergency" response.

"The real criticism that should be levelled here is what was wrong with the so-called `market solution' that left New Zealand short of generation capacity."

The situation had been rectified through the consenting of additional wind and geothermal energy since.