Published in the National Business Review of 4 July 2008

Genesis Energy's departing Chief Executive Murray Jackson has taken a few more whacks at the government's energy policy particularly the cost of the government's emissions trading scheme to customers.

He claims the scheme will cost Genesis $100 million a year to purchase carbon credits, a move he said would only add to the profits of rival generators.

As Genesis raised its prices to pass on the cost of carbon credits other generators less reliant on thermal fuels would be able to raise their prices as well and thereby gain windfall profits at the customers' expense.

The price of electricity goes up and "my competitors get the benefit," he said.

He estimated the cost of the ETS at $20MWh per customer which on the average household usage of about 9000 kWh per year came to $1800 per household per year.

Mr Jackson acknowledged "we won't understand the full impact until January 2010, when the ETS was to be fully operational.

Mr Jackson said the electricity industry was operating an unstable model characterised recently by severe price fluctuations.

The current power price or around $280 MWh reflected the current drought conditions.

"We need to stabilise the industry with a better mix of plants and to avoid industry being exposed to large fluctuations. Currently we are operating an unstable model with extreme variations in price. New Zealand should be investing in secure generation and transmission capacity.

"We are also three years behind in our transmission upgrade. The industry is still waiting for approval of the 400KV upgrade from Whakamaru to Auckland."

There was also concern that the 500MW cable from the South to the North Island could not carry the extra capacity that would be generated from Meridian's wind farm on the Lammamour Range in Central Otago, until at least 2013/14.

"The power can't be got physically to market because the transmission isn't there."

Mr Jackson is also sceptical about wind power. It is a risky and potentially unreliable source of generation and the government's goal of 95% of electricity coming from renewable sources is too ambitious.

"Wind power is banned in Ireland because it's considered too unreliable".