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Image: Tina Tiller
Image: Tina Tiller

BusinessFebruary 16, 2023

How three torrential weeks will impact a whole year – and beyond

Image: Tina Tiller
Image: Tina Tiller

The heartbreaking human toll of Gabrielle is still being assessed. Yet it’s already becoming clear the economic impact of 2023’s extreme weather will run and run.

It feels premature to even address it, with houses still underwater, hundreds of thousands without power and Wairoa essentially cut off. But estimates of the cost of the floods and Gabrielle start at 10 figures and go well up from there, which does not begin to count its broader impact. Which is why it’s important to start to grapple with what its economic echo might be even before its immediate bounds are known.

Because Auckland’s floods and Cyclone Gabrielle did not land on a country which was running smoothly. They dropped into one which was suffering through that debilitating modern phenomenon known as the polycrisis: interlinked crises covering inflation, housing, infrastructure, health and more, all operating against and influenced by the climate crisis.

While economists say it’s far too soon to ballpark the financial cost of the recovery, it’s relatively easy to forecast some of the short-to-medium term impacts of the double-whammy of the floods and cyclone. Bank economists, whose job it is to process enormous volumes of data and attempt to imagine how events might impact them, have already begun working through how the two weather bombs that have scarred Aotearoa this year will impact three of the biggest immediate challenges confronting this country. This is a synthesising of those research notes and first-cut assessments of what we’re now all staring down across three of our most pressing areas of national need.

Note: sharp-eyed readers will see that climate change is not among this trio. That’s manifestly the bedrock challenge, but one far too large and complex  for a 1000 word column.

Flooding in Wynyard Quarter, Auckland. (Photo: Lynn Grieveson/Getty Images)

Inflation will be stranger and longer

Earlier this year, The Spinoff noted that in the swift transition from Covid-19 to inflation as the preoccupying challenge of the moment, we switched from being transfixed by former director general of health Ashley Bloomfield to current Reserve Bank governor Adrian Orr. The latter already had a very difficult challenge in front of him, and these weather events will not have helped him one bit. That’s because the recovery will have a paradoxical split impact on inflation.

In the immediate term, it might prove deflationary. Lost days of work, and a complete inability to shop for many – particularly during a big retail day like Valentines – will mean spending in February could well be down on 2022. Yet further out, it will likely swing the other way. Economists suggest that the demand for construction to rebuild will bid up the price and slow down the pace of work across the entire construction sector – one already suffering, with large firms recently plunged into liquidation and major projects stalled.

In addition to the impact on construction, the location of the flooding – Northland, southern Auckland and Hawke’s Bay – also coincides with some of our biggest food-growing regions. Images of onions strewn across Pukekohe streets are a harbinger of shrunk and spoiled crops all over the country, leading inevitably to even more eye-watering food price spikes than those we have already dealt with in recent years.

It leaves Orr in a bind: does he continue raising interest rates against a very fragile economy, or hold off and risk further increasing what will already be rampant sector-specific inflation? Neither choice is very appealing, yet one must be made.

Flood and slip damage in Piha caused by Cyclone Gabrielle. (Photos: Valentina Rocca)

Housing must be repaired as well as built

In Auckland, the combined result of the floods and the cyclone has seen almost 300 homes red-stickered as of Wednesday, meaning no one is able to enter them. That number will surely rise, before getting into the less visceral impacts – the repairs, the sleepouts rendered uninhabitable, the half-built projects suffering damage and delays.

House prices are now 16% below the level of their November 2021 peak. While there are some positive effects in terms of housing affordability, those are largely wiped away by the much higher cost of borrowing. Kiwibank’s Jarrod Kerr summed up the deeply challenged state of the market on Tuesday. “Sales are still down over 30% on last year, and raw sales data was the lowest recorded by REINZ outside a Covid lockdown,” he wrote in a research note. “We need to see a sustained increase in activity. And we’re in the middle of a cyclone.”

Above all else, New Zealand remains a country in which far too many of our most vulnerable live in repurposed motels, many in the worst-hit areas of the upper North Island. Construction resources, which are desperately needed to build new fit-for-purpose housing across the public, community and government sectors, will now face a long-tail of competing demand to repair the damage of the biggest weather event of the century so far.

Napier
Near Napier, the Waiohiki bridge and surrounds are inundated by the Tutaekuri River. (Photo: Getty Images)

Our infrastructure deficit just got longer

Finally, consider infrastructure. We’re loath to do it in this country, preferring to wait until we see sewage in hospital walls, a road sliding down a hillside or deaths from drinking tap water before grudgingly acknowledging that we need to… start arguing about the governance arrangements of our new utilities.

The infrastructure deficit is one of our most pernicious political problems because replacing infrastructure is so expensive, and invariably the politician who bears the cost of its failure is not the one who let it go to ruin, and the leader who commissions a new tunnel is unlikely to be the one who cuts the ribbon when it’s open. Yet the combined force of the floods and the cyclone in shockingly quick succession should bring about some kind of non-partisan consensus that something must be urgently done across many different stripes of our infrastructure.

Unfortunately, the volume of work is now that much higher again, and remedying that which was wrecked by the weather must be the immediate priority. The water pipe into Gisborne, communication into Wairoa, along with blocked and broken roads everywhere – all that will take engineers and earth-moving equipment and steel and concrete which might otherwise have been tasked with building out our future needs. And despite the screaming need, somehow our major infrastructure companies are not thriving, with Fletcher Building announcing just yesterday that its half-yearly profit shrank by over 40%.

There’s more where Gabrielle came from

It’s tempting to hope that the truly bizarre confluence of factors which created these two storms won’t happen again, and that we can get back to worrying about inflation, housing and infrastructure. But yesterday’s edition of Ellen Rykers’ superb environment newsletter Future Proof pointed out that the raw energy which created them remains in our looming work programme too.

“We are embarking on a crazy experiment, fundamentally terraforming the planet into a different kind of place,” Niwa’s Sam Dean told Rykers. “And there are massive risks associated with that. We don’t necessarily have a good understanding of how some of these most extreme events are going to behave when you give them that much more energy to work with.”

Which all suggests that while we work on our big rebuild and try and tame inflation, we should do so in the knowledge that this won’t be the last time we pick ourselves up, dry out and rebuild.

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Powerlines in West Auckland. Photo: Toby Manhire
Powerlines in West Auckland. Photo: Toby Manhire

BusinessFebruary 15, 2023

How microgrids can help keep the power on during extreme weather events

Powerlines in West Auckland. Photo: Toby Manhire
Powerlines in West Auckland. Photo: Toby Manhire

With traditional electricity networks, just one fallen tree can cut power to thousands of homes. That’s where microgrids come in, explain two energy researchers.

Tens of thousands of homes and businesses have been left without power after Cyclone Gabrielle battered New Zealand’s North Island, causing widespread damage to the power network.

The grid operator Transpower has declared a grid emergency following the loss of power in some regions, advising people “should be prepared to be without power for days to weeks, rather than hours”.

This once again emphasises the vulnerability of centralised power systems to increasingly severe weather events. It is crucial for communities to adopt more resilient energy solutions that can withstand such challenges in the face of a changing climate.

The cyclone is the second significant weather event to hit Auckland and the upper North Island in just a few weeks, following record rainfall and flooding last month.

Our research explores how renewables-based microgrids and peer-to-peer (P2P) energy trading can help mitigate these impacts and increase energy independence and security.

Power lines brought down in an Auckland street, 2021. (Photo: RNZ)

Vulnerability of centralised power systems

Centralised power systems rely on large power plants and transmission grids. They are susceptible to single points of failure, making them vulnerable to extreme weather events.

Cyclone Gabrielle and the recent flooding in Auckland, which both resulted in widespread power outages, are prime examples of this.

Microgrids (small collections of power-generating assets, often run by communities) and P2P energy systems hold promise for sustainable and resilient energy. Microgrids are self-sufficient and can operate independently or in conjunction with the larger grid. They can run on different types of renewable energy sources, including solar, wind and hydro power.

This illustration shows a typical grid-connected microgrid.
This illustration shows a typical grid-connected microgrid.
Author provided, CC BY-SA

Microgrids are ideal for communities far from the main grid or in areas prone to extreme weather.

P2P energy systems allow individuals and communities to generate, share and trade energy among themselves. This creates a decentralised energy market and allows for more efficient energy use and distribution.

Case studies

Many microgrid and P2P energy projects across the world show the potential of these solutions. In rural India and sub-Saharan Africa, microgrids powered by solar energy provide electricity to remote communities not connected to the main power grid.

The Brooklyn Microgrid in New York City is also a shining example of a successful project. It allows residents to generate energy, share it and trade it with others in their community. This creates a more efficient and sustainable energy market.

Another successful microgrid and P2P energy project can be found in the town of Rock Port, Missouri. There, a community microgrid was established after a tornado destroyed the town’s electricity infrastructure. It is powered by wind and solar and provides stable and reliable energy for the community, even during times of extreme weather.

Hurricane Maria, which devastated Puerto Rico in 2017, serves as a stark reminder of the importance of energy independence and resilience. It caused widespread destruction to the island’s energy infrastructure and left residents without power for months. In the aftermath of the storm, many communities on the island have turned to microgrids as a solution to their energy needs.

As part of its recovery following Hurricane Maria, the Puerto Rican town of Adjuntas is installing solar-based microgrids.

Cost effectiveness and social acceptability

Our research shows that microgrids, both grid-connected and off-grid, can be cost effective when optimised. In Aotearoa New Zealand, they can be on par or even more cost effective than traditional power.

Our case studies from Aotea Great Barrier Island, Rakiura Stewart Island and the town of Ohakune demonstrate this.

The implementation of microgrids and P2P energy systems in these areas has the potential to improve energy resilience and save communities money in their electricity bills.

The social desirability and acceptability of these technologies are crucial factors and will determine their success and widespread adoption. Public perception can sometimes be a barrier to their implementation.

For example, microgrids often require significant amounts of land for the installation of renewable energy sources, such as solar panels or wind turbines. However, some communities may resist the development of these projects due to concerns over land use.

The visual impact on the surrounding area or the potential disruption to wildlife habitats can also be reasons for resistance.

In these cases, it is important for project developers and local authorities to engage with communities. They need to address their concerns and promote a greater understanding of these technologies and their benefits to build support for these projects.

Demonstration projects can also showcase the capabilities and benefits of microgrids and P2P energy solutions. Involving the local community in the development and ownership can increase their social acceptability.

Soheil Mohseni is a postdoctoral research fellow in sustainable energy systems at Te Herenga Waka — Victoria University of Wellington. Alan Brent is professor and chair in sustainable energy systems at Te Herenga Waka — Victoria University of Wellington.

This article is republished from The Conversation under a Creative Commons licence. Read the original article.

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