THE PRESS MONDAY, JUNE 22, 1987. Luggate dam on hold

Press, 22 June 1987, Page 20

THE PRESS MONDAY, JUNE 22, 1987. Luggate dam on hold

Tbe odds against construction of the Luggate dam starting before the turn of the century have increased. A delay to the start of the dam — originally scheduled to follow the completion of the now almost-complete Clyde dam — has seemed likely for the last three years or so. The social impact of leaving hundreds of construction workers without jobs was a complicating factor, however, and as recently as last November the Government caucus declared that work on the Luggate dam should proceed as soon as possible. This was in spite of warnings from the Minister of Energy, Mr Tizard, and the Minister of Works, Mr Colman, that power from the dam would not be needed until the late 1990 s at the earliest. Now the Government has passed the ball tp the new Electricity Corporation, which will be free to make up its own mind on when the dam should proceed. In view of the overriding requirement on Electricorp to be an efficient business, and in view of its own analysis that Luggate is unlikely to be commercially justifiable until some years into the next century, a prompt start on the dam is highly improbable. The work-force at Clyde is angry. Most of the people who worked on the Clyde dam had expected from the start that they would go on to jobs at Luggate and then Queensbury. They might have become resigned to not having these jobs had the caucus not raised hopes at the end of last year. As late as April it seemed the decision would still be political and the Prime Minister, Mr Lange, was reported as saying that the Government might find it cheaper to pay the workers an annuity for life than proceed with a dam for which there was no need. The Government need no longer concern itself except, perhaps, for the almost inevitable reaction at the polls when the Cromwell workers cast their votes in the General Election. However unhappy the workers might be, the Government’s reluctance to order that the dam proceed simply to create jobs has the logic of consistency. If, as the Government has always said, it is wrong to put the unemployed on “make-work” jobs of no lasting value to the community, there is little more justification for making work in the construction of dams which, although they are permanent assets, have no immediate use.

Several factors combined to change the timetable of hydro-electric power demand. The collapse of proposals for a second aluminium smelter was one. The smelter would have justified the great expansion in power generating capacity that Luggate and Queensbury would have provided. Delay to the construction of the Clyde dam — delays to which striking workers contributed — was another factor. These delays forced a commitment to other electricity generation — mainly North Island thermal plants — to meet expected demand. The use of coal-fired plants in the north brought other considerations into play. The availability and

price of coal is very much a consequence of the market. A guaranteed continuing demand for large quantities of coal allows the economic development of coal fields. The surplus of power that would result from Luggate would reduce the need for coal and so affect the economics of providing coal for the thermal stations that still would be needed.

The Luggate dam issue is one of the first tests of the Government’s corporatisation policy and thrust to market-force control of what were State sectors of the economy. In the past, with the responsibility for power production and coal mining under the single umbrella of the Ministry of Energy, often conflicting requirements were balanced within the one department? Now the responsibilities are divided; separate, commercially competing corporations must achieve their sometimes conflicting ends as best they can. A delay to construction of Luggate will also suit the Government’s plans for a deregulated power industry. Any excess of capacity in the electric power generation of Electricorp must necessarily inhibit the development of non-corporation power manufacturers.

A contributing factor to the Electricity Corporation’s reluctance to proceed with the Luggate dam is the need to duplicate the Cook Strait link. Without the extra capacity to send power north, much of the generating ability of Luggate would be unused. The present Cook Strait link will have to be replaced soon anyway. One of the three existing cables is faulty and the other two are considered to be suspect. Without some new — and as yet unlikely — big user of power in the South Island, water would have to be spilled at Luggate because there would be no way of using the power generated. Extending the Cook Strait cable capacity at the same time as the old cables are replaced is the most economic option. A delay in building Luggate will permit the Cook Strait work to be done at a more leisurely pace and also avoid an urgent $750 million capital development for Electricorp in its first years. This is a big part of the economic argument against the early start to Luggate: it is not just a question of a premature expense of $3OO million for a dam, but of a premature expense of $lOOO million for a dam and the Cook Strait link out which the dam would have little purpose. By almost any measure that can be applied, there is no economic justification for the Luggate dam for perhaps 20 years; some experts believe the lead time is longer than that. Hard as it might be for the Clyde dam work-force to accept, they will have to face the same reality of market forces that the Government has applied to other sectors of the economy. Farmers have been told there is no sense producing a commodity for which there is no ready market. Lamb, wheat, or electricity — the logic is the same.