The Press WEDNESDAY, JUNE 13, 1956. Cost of Roxburgh Power

Press, Volume XCIII, Issue 27993, 13 June 1956, Page 12

The Press WEDNESDAY, JUNE 13, 1956. Cost of Roxburgh Power

The Minister of Works (Mr Goosman) hardly made the economics of the Roxburgh power scheme clear in his address at Little River last week. What Mr Goosman was trying to impress on his hearers was that, although the capital costs of the huge dam have to be met as soon as generation begins, only part of the dam's ultimate output will■ find an immediate market. Each unit sold will have to bear the cost • of three or four other units going; to waste, although the charge to consumers will be spread over all the units sold in New Zealand. The high cost of the first units produced at Roxburgh does not mean, as Mr Goosman seemed to imply, that three smaller stations of an equal total capacity would be more economical in the long run than Roxburgh, because in a few years all Roxburgh’s power will be saleable. It will then produce more economically than smaller schemes.

! The annual capital charges on Roxburgh with four generators ! working (160.000 kilowatts) will be £1,210,000 a year. In the first year perhaps less than a quarter of the ultimate capacity will be sold; and the unit cost of generating electricity in the South Island will rise from .682 d to .931 d in the 1957-58 financial year. At this stage the State Hydro-electric Department’s practice of charging a uniform bulk price over the whole of New Zealand will be a substantial advantage to the South Island. The demand for Roxburgh power may be expected to grow so rapidly that in 10 years or less the production of the entire ultimate capacity of 320,000 kilowatts will be sold and the unit cost reduced heavily. The second 160,000 kilowatts will be produced much more economically than the first instalment, because no further large expenditure on the dam will be necessary. The annual capi- ! tai charges for the first stage will be £7 11s a kilowatt and for the ; second half only £ 1 6s. The gravity |of the recent allegation by the i Leader of the Opposition (Mr Nash) about the inadequacy of the water i supply to Roxburgh lay not in the | possibility of an early power shorti age, but in the economic consequences. If. as Mr Nash suggested, four generators were all that could be operated, the average annual cost a kilowatt would be more than £8 (which would put the cost of generating power in the South Island well over Id a unit) compared with the engineers’ estimate of about £4. This, of course, was an aspect that Mr Nash, as Minister of Finance, presumably considered carefully before his Government gave the original authority for Roxburgh. Fortunately, it seems that Mr Nash was better informed in 1948 than he is now.

No matter how cheaply a big hydro-electric station may be built, its completion adds to the cost of power, unless its whole capacity is absorbed at once, which, in a growing country like New Zealand, would mean an immediate and serious shortage of electricity. In the case of Roxburgh, the addition to the South Island supply is so great that it cannot be absorbed at once. The first four generators will increase the capacity of the South Island by more than 50 per cent.; and, when all eight generators are installed, the South Island supply will be more than twice as great asi it is now. It might seem good business for the State Hydro-electric Department to sell the first productiorf of Roxburgh at a loss to stimulate demand, so that the total capacity would be quickly taken up, thus eventually cheapening the unit cost. But the same process would then have to be begun again, with the earlier building of a new dam, which would have surplus capacity to begin with and therefore dearer unit costs. The sensible plan is to base bulk : charges on production costs and I let demand grow naturally. The ; demand, in fact, is already growing [fast enough, if not too fast, for the physical ability of New Zealand to satisfy.