Dodgy Socialist Dam = Clyde Dam?

Economist Peter Fraser has written a scathing article comparing the Ruataniwha Water Storage Scheme to the ill fated Clyde Dam. He compares the decisions made to allow the Clyde Dam to proceed, and the similarities with the Ruataniwha scheme.

The RWSS’s promoters would therefore do well to pause and consider the similarities between their proposal and the ill-fated Clyde High Dam – as it is a truism that those who fail to heed the lessons of history end up repeating the same mistakes. While it is now universally accepted that the Clyde project was an unmitigated disaster that should never have been built, it is less well understood that there was sufficient information available at the time that clearly showed the project should be abandoned. Unfortunately, a combination of egos, politics, and sheer pig-headiness meant that these ‘off-ramps’ were ignored – a situation that looks eerily similar today.

Firstly there is no economic benefit in building the dam.

The first off-ramp was that the economic evaluation of the Clyde High Dam and proposed smelter at Aramoana showed that it did not meet the hurdle rate necessary to justify public sector investment – which, in ‘normal speak’, means the project was a dud. Amazingly, the RWSS is in an even worse position: it is a $600 million project that produces net benefits of negative $27 million dollars.

That is a truly jaw-dropping result: it means HBRC would be better off simply putting $600 million on a bonfire and burning it, because as least the result is only nothing. It also implies that claims that the RWSS is some type of economic circuit-breaker are simply illusionary. 

Then outside investors pulled out because the dam was not worthy of outside investment because the numbers didn’t stack up for those in the real world.

The second off-ramp was when investor Alusuisse pulled out of the project – which indicated that private sector investors had also done the numbers and concluded it did not stack up either. The comparison with Trustpower and Ngai Tahu pulling out of the RWSS is therefore telling – especially given the former has considerable hydro expertise.

Lord knows who thought it was a good idea to build a dam when no one actually wanted the water in the first place, but this is what the extremely dodgy Hawke’s Bay Regional Council has attempted to do.

The third off-ramp was building the Clyde dam in the knowledge that there were no customers for the power generated – as the proposed Aramoana Aluminium Smelter had long since been cancelled. The fact that only about 5 per cent of the RWSS’s capacity has been contracted to farmers – despite repeated extensions, exhortations, and discounting – indicates a similar lack of customers.

Will Chairman Fenton “Jong-Un” Wilson and his merry bunch of council sycophants continue with their dodgy socialist dam in spite of reasoned advice not to.


– Hawkes Bay Today


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  • Time For Accountability

    Clyde = dam built over fault line. Also in a gorge with unstable banks where landslides could result in a bow wave. No one in Clyde would survive a dam break whereas further away in Alexandra people may have a chance.

    One good thing was the good fast road required because the old gorge road was flooded.

    • Alright

      Ahhh, Muldoon.

  • Andy

    I don’t really understand how the NZ grid works. If we have too much hydro (i.e Clyde wasn’t needed) then why are we burning coal and gas to generate electricity? Does anyone know how this all ties together?

    • Alright

      Someone does. Probably to do with the economics of getting electricity from the deep South to the Far North.

      • Andy

        There is something very dodgy about it though. When the wind blows in the north, it never seems to displace the coal at Huntly

        Disclosure – I am a bit of an nerd

      • symgardiner

        And capacity to move it.

        • Alright

          That’s about economics. Such as the capacity of the Cook Strait cable to transmit it – efficiently.

          • peterwn

            The original Cook Strait cable scheme was a world class project at the time, one which NZ can be very proud of. Also NZ was a world leader in designing power stations, substations and the grid earthquake resilient. This resilience was a major factor in easing the horrific effects of the Christchurch earthquakes.

    • peterwn

      The problem at the time of Rogernomics was that the proponents needed to ‘knock’ NZ Electricity and the Post Office Telecommunications engineers to justify laying off people deemed ‘unsuitable’ and the changes proposed for these organizations. In the long term Clyde was warranted although in the short term soon after construction, the project could in retrospect have been deferred for several years.

      There are also various ‘economists’ who with the benefit of hindsight claimed that it would have been more economic to have built gas and oil fired stations instead of hydro. Yet at the time of development of generation since WW2, the ‘mix’ of stations built was chosen to provide the most economic solution using conventional assessment methods at the time. In some ways far rather plant is built a bit early, power shortages are political dynamite.

      NZ is not the only country to have capacity surpluses from time to time – in the late 1980’s the Mt Piper power station (similar to and I think a bit larger than Huntly) was a white elephant for a while.

      • jonno1

        Another issue was MoW/union inefficiency – this was the same era as the first new Mangere bridge. Think how quickly the recent duplicate bridge was built in comparison. IIRC the first one took more than a decade to build.

      • david

        I thought Clyde Dam was Muldoon.

        • peterwn

          The Clyed Dam was admitted to the 15 year ‘power plan’ through the usual investigation and evaluation processes, and was the next appropriate project to start. There were some sub options including scale-downs and ones that had less overall impact. NZ Electricity recommended a scaled down option but Rob Muldoon decided to go for the full monty. This was a different attitude to the one he took as Minister of Finance to a proposal in 1968 or so to reinforce the national grid in Taranaki. He wanted it delayed despite the then existing 110kV lines operating near capacity with little margin to deal with fault conditions.

    • MrBarrington

      Coal and gas are mainly used as peaking plant in NZ… with Hydro and Geothermal providing the majority of the base load… both hyrdo and gas can operate profitability at low prices, whereas gas and coal need higher prices to be profitable… there is also water storage management issues as well that need to be taken into account for both hydro and geothermal… Anyway the coal plants at Huntly are on their way out… one has gone, one is in storage and the other two will probably get the heave ho in the next few years…

      • Sir Brucey

        There is also the issue of only one pole of Cook Strait cable working which limits hydro power bring sent North.

        • MrBarrington

          The Cook Strait Cable has been upgraded and now operates with two pole of 500MW each and can send power in both directions… its going to be upgraded to 1,500MW this year some time, if it already hasn’t…

          • peterwn

            The scheme has always (and still AFAIK) included a third cable which can be switched in if one of the two main cables faults. The original scheme had the occasional cable failure due to circumstances such as a cable resting on a pinnacle which caused abrasion. Despite this the original scheme had one of the highest availability rates of the world’s HVDC power schemes. Modern technology especially with submersible devices has enabled the newer cables to be laid in a way as to be far less susceptible to damage.

    • dgrogan

      Also remember, you can’t store the stuff. When it’s generated, it has to be used. There’s also a natural loss of energy during electricity transmission.

  • symgardiner

    I like the imagery of burning $600m in a bonfire. A lot of government spending is like this – actually creating a nett cost to society.

    • PM of NZ

      Another ‘Toll Rail’ extravaganza in the making.

    • david

      Yes but it isn’t quite right. A net benefit of negative 27 million means that there was an estimated benefit of 573 million. So they were burning 27 million, not 600.

  • friardo

    Apparently none of the councils including the dodgy one you mention is going to appeal the Environment Court’s decision. That makes it very difficult to proceed especially with the widespread knowledge that it will cost ratepayers to subsidise a few farmers, and the farmers don’t want it because the water is too expensive. We can now expect to hear a few months of glibspeak and reference to minor unknown reports that the council following good practice has commissioned to conclude the bleeding obvious. Add to that a liberal sprinkling of side issues and smokescreens that should keep the Hawke’s Bay Toady padded out with frothy vacuity for months to come.