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9:40 am, October 25th, 2025 - 23 comments
Categories: climate change, Economy, Environment, global warming, national, Politics, same old national, science, transport, uncategorized -
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It is clear that the National Party clearly has not met a road idea that it did not want to build.
No matter what the cost.
Following on from Mountain Tui’s post about National’s orgy of roads of national significance announcements there is one aspect that needs to be commented on.
Historically some discipline has been installed in road building hysteria by the requirement that the benefit cost ratio of proposed roads had to be measured. This involves a rather complicated formula that applies a number of factors to see if over time building a road would pay for itself primarily by anticipating a reduction in congestion and trip times and accidents.
But the problem with the formula is that when applied to really expensive projects, like any road of national significance, it often showed that the benefit cost ratio was below 1. That is the road cost more to build than the benefits it accrued.
So what does a Government with a road fetish do?
It puts its thumb on the scale and changes the way that a BCR is calculated.
From Matt L at Greater Auckland:
A striking thing about the RoNS investment cases is that all six of the projects now have Benefit Cost Ratios greater than one. In other words, the assertion is that (at least in theory) every dollar they cost will generate slightly more than that in benefits.
But this is only due to a significant change in the way NZTA calculates the BCR. Most notably:
- these projects are now being assessed over a far longer period of time (up to 60 years instead of 30), and
- using a much lower discount rate (2% dropping down to 1.5% after 30 years, whereas it used to be 6%).
This means projects that previously barely qualified as economical now suddenly generate more benefits than costs – and all now magically clear the (very low) hurdle of a BCR of 1.0.
There was a time when a BCR of 3.0 was the minimum for spending public funds on this scale.
Which raises the question: what should the bar be for funding these mega-projects, given that even with some creative accounting, so many examples are still only just scraping over it?
That is pretty tricky. Avoiding the conclusion that projects are huge wastes of money by measuring benefits over a much longer period and reducing the required rate of return to below the rate of inflation would make the Springfield Monorail project viable.
The total anticipated cost is now between $44 billion and $54 billion, three times the cost of light rail, even the much more expensive tunnelled version.
And it belies how inaccurate its costings were for the last election.
As I noted a year ago the overall cost, originally put by National at $17.3 billion was at best $22.3 billion and at worst $32 billion. The latest estimate is much bigger although it does include four further roads.
National was that embarrassed with its costings it took its transport policy off its website.
Labour was hammered about costs increases in projects and the “wastage” of $228 million on planning and design work for light rail.
National has set aside five times that sum, $1.2 billion fpr preparatory work for the RONS.
In a world facing climate change building more and more roads is the definition of insanity. National’s road fetish is going to cost all of us big time.
How much unfunded spend have they announced just recently with defence etc all rolled up.
Economic vandals stitching up NZ on behalf of others. Remember Pay equity folks, they didn’t bat an eye crushing that.
All this seems to make the $16 billion cost of Lake Onslow a bargain.
I'd love to see a BCR for Onslow, but not one calculated by Shane Jones.
BCR at a 2% discount rate was 1.12 but this is a case where the benefits should have been measured over a longer period because this sort of asset lasts for a century or more.
This Onslow rebirth is really interesting, especially when you reads Simion Brown's release on it's axing
Funny how this hugely wasteful project was quickly taken up by the group including David Parker. Timing here could be interesting to some. My pick is the landowners include Pioneer Generation who own the existing hydro scheme at Lake Onslow. Pioneer are owned by Central Lakes Trust which was set up in the divestment of the old Otago Central Power Board in the Bradford reforms.
This could be a very exciting and audacious development for Central Otago and Lakes if it can be kept in local control. We've got a long history of community development of energy, and irrigation, infrastructure, and although the area votes blue there's a very strong co-operative community ethos that understands the power and value of community.
https://www.thepost.co.nz/business/360865684/group-lodge-fast-track-consent-bid-axed-lake-onslow-hydro-project
Yeah, it's advancing rapidly. Will be very interesting how the Government reacts, do they let it through, or try and politicise it / kill it? Or have the proponents of Onslow hoist National on their own petard?
If Onslow does happen Contact may rep the day they gave up on the dam at Tuapeka Mouth, and divested their property holdings there, that would've got a second bite at water released from Onslow, which would be pretty profitable water.
cheers micky…interesting.
My own, admittedly, back of an envelope, calculation showed a good positive return on Onslow over decades. But it compared well with our past more detailed calculations, for using forest waste for energy.
National/ACT don't believe in long term State investment unless their cronies can make a dollar off it.
So. This could be very 🤔
KJT–How does your Onslow calculation compare with grid-scale solar farms with battery storage attached? This also alleviates the "dry year" scenario.
Solar is now the cheapest energy source on the planet, but it could be that both solar* AND Onslow are needed.
*rooftop solar with attached batteries in residences/buildings is also an important part of the mix, and starting to take off in NZ finally.
To me the comparable EROI, over the projected life of Onslow, against the EROI of replacing batteries many times over in the same period is compelling.
https://entura.com.au/batteries-vs-pumped-storage-hydropower-a-place-for-both/
Just one of many references.
Look at the EROI comparison, which is close to most references I've seen.
Individual house generation and batteries is not very efficient, compared with larger scale plants, especially as the grid is already in place. Simple physical scale effects. It has benefits for individual homeowners who can afford it, but the total cost is much more than larger scale power. To me the main benefit would be scaring power companies to stop price gouging.
I wouldn't discount anything as the technology is evolving fast, but in IMHO for overall national energy welfare, Onslow, large renewable installations, wind and solar including town, factory or mega carpark roofs, and maybe some smoothing battery storage, are going to work in future.
Provided we get away from the current incentives for power companies to minimise generation and maximise spot prices. To them, using a coal reserve, instead of building more renewable generators and options like Onslow, maximises their profits. The longer they keep coal and gas and the accompanying spot price system, the better for their shareholders.
Agree entirely about the power companies-they have been passive (effectively useless) in relation to promoting and developing solar and wind.
They have trumpeted their few renewable developments as progress, but there should have been many more built by now.
Lukewarm encouragement from Labour, and active discouragement from National.
What we need is re-nationalisation, or, at least the threat of it.
https://www.google.com/url?sa=t&source=web&cd=&ved=2ahUKEwiguI_Fq8OQAxUGr6gCHaTfJFEQFnoFCIsBEAE&url=https%3A%2F%2Fwww.interest.co.nz%2Fpublic-policy%2F131671%2Fearl-bardsley-lake-onslow-pumped-storage-scheme-decision-pending&usg=AOvVaw3BBAmosuVnBvF0B11qHhNI&opi=89978449
Hydropower potential and development opportunities
1billion is abt 200$ per person for nz.
Thus the roads will cost 3200$ per person
Changing the method of calculating cost/benefit ratio to ensure the proposed projects score at least 1:1 is basically an admission that they know the projects are unjustified but are determined to carry them out anyway, which in turn suggests that this is more about major donors getting their quid pro quo than the public interest.
Not so sure it's donor's interests or National's re-election interests with their prejudice and focus groups say new roads in congested areas are an easy vote winner
Written as
$200
$3,200
Actually.
ok eoj
And what would be the cost-benefit ratio and social benefits of making our present roading network resilient to extreme weather events, which we are now experiencing with increasing frequency? Not to mention funding Local Water Done Well!
Luxon’s plan to make our economy more like Singapore is… to do the opposite of what Singapore does?
Nobody owns cars over there
New Zealand now has more in common with Fiji than Singapore.
Also very tough that the rail investment discount rate is 2% for the first 30 years and 1.5% for 30-100 years.
So this RONS discount change makes rail investment tougher in future against road.
Sure makes me wonder if even the Golden Triangle rail investment will happen.
Will Peters rise again to this?