Castalia’s blog

Mayors representing Communities 4 Local Democracy at Parliament during a visit to voice concerns about Three Waters back in late 2021

In New Zealand, the “Local Water Done Well,” policy is set to replace the “Three Waters” regime. The Local Water Done Well policy is based on an alternative water reform put forth by “Communities 4 Local Democracy”, whom we advised.  

The New Zealand Herald recently published a column written by Andreas Heuser, Managing Director at Castalia, about the Local Water Done Well policy. 

Mr. Heuser outlines the key components of the Local Water Done Well policy, emphasizing its potential to address financial challenges within the water sector. Mr. Heuser dispels misunderstandings, particularly regarding the separation of balance sheets, and explains the policy’s focus on decentralization and community involvement. 

The proposed framework involves creating separate corporatized water service providers (WSPs) owned by individuals or groups of councils. These WSPs would maintain independent accounts, subject to regulation by the Commerce Commission to ensure efficient expenditure. This approach, globally tested and successful in other utility sectors, aims to make WSPs credit-worthy entities, attracting capital and positively influencing credit ratings. 

Heuser addresses concerns about financing challenges and explains the suggested mix of standard utility financing and targeted government support. The new policy encourages a case-by-case approach, with the government providing technical assistance to WSPs or councils facing financial challenges. Innovative solutions, such as a Ratepayer Assistance Scheme, revenue bonds, conventional LGFA finance with relaxed debt limits, and Crown support with equity finance, could be explored based on local needs and preferences. 

Highlighting the importance of local involvement, Heuser stresses that communities should play a pivotal role in overcoming challenges. The column underscores the flexibility of Local Water Done Well, allowing local communities to shape its design based on specific circumstances. The example of Auckland is presented, where tough choices, like separating Watercare from Auckland Council, are best decided by Aucklanders themselves. 

Mr. Heuser highlights the potential of the Local Water Done Well policy to be a major advance in New Zealand’s water services. Castalia looks forward to supporting this proven and adaptable method.

Supercritical geothermal energy

Supercritical geothermal (SCGT) resources have the potential to meet a significant portion of New Zealand’s future energy needs while helping to meet climate policy commitments.  Based on GNS Science’s research, Castalia’s economic analysis found that SCGT could supply up to 30,000 GWh of electricity per year, at least three times the current output of conventional geothermal. SCGT can also deliver the trifecta of low-cost, zero-emissions, and reliable electricity with minimal land requirements. By reinjecting extracted gases underground, SCGT systems could operate essentially as zero-emission plants.

SCGT also offers efficient green heat for industrial uses like dairy processing and wood pellet production for use as low-carbon solid fuel.

Our analysis suggests that grid-connected SCGT electricity generation could become a reality by 2037. This ambitious timeline requires advancements in research and development (R&D) and strategic policy support in the near term. Castalia’s modeling indicates SCGT could provide either 1365 or 2050 MW of new renewable capacity post-2037, depending on whether thermal generation is permitted. Under a thermal generation permitted scenario, SCGT could make up a substantial portion of new generation capacity even when competing with the lowest-cost wind and solar energy projects.

To achieve the 2037 goal, we recommend policymakers recognize SCGT’s immense potential for affordable decarbonization and consider granting environmental consent for exploratory wells.  Proactive collaboration between research institutions, mana whenua and landowners, private sector energy companies, and government agencies is vital to spurring the timely investments in innovation needed to tap into this next-generation renewable resource.

Access the full report here: Economic-Value-of-Supercritical-Geothermal.pdf

Access our slide deck, presented to GNS Science, mana whenua representatives, private sector investors, and energy experts during the New Zealand Geothermal Workshop: Supercritical-Geothermal-Presentation.pdf

Find more information about the ‘Geothermal: Next Generation‘ project led by GNS Science.

El Salvador LNG plant

Castalia recently finalized a report to analyze the development impact of Energía del Pacífico (EdP), the 380MW liquid natural gas (LNG) regasification facility and gas-fired power plant, in El Salvador. The project has delivered significant value to El Salvador’s energy sector by by displacing generation from dirtier and more expensive thermal plants. Also, introducing LNG in El Salvador’s energy matrix has resulted in reduced generation costs, increased energy security, and flexibility  and reliability of the system.

Overall, using LNG has strengthened the sector’s ability to bear the impacts of the changing climate, building much needed resilience into a previously vulnerable sector. EdP currently meets 30 percent of total demand.  EdP has enabled El Salvador to keep the lights on despite the reduction in rainfalls caused by “El Niño”, which started in June 2023 and has reduced water levels at hydropower facilities by 26 percent compared to the previous year.

Introducing LNG has reduced greenhouse gas emissions (GHGs). On average, EdP emits about half of the GHG emissions per MWh compared to power plants running on HFO. By displacing domestic oil generation, EdP reduces GHG emissions by nearly 400,000tCO2e annually for the next 20 years, significantly contributing to the Government’s pledge to reduce its annual energy sector emissions by 640,000tCO2e by 2030 as part of its National Determined Contributions (NDCs).

Access the report here: Development Impact Study for Energía del Pacífico EdP

D. Marcelo, S. House, C. Mandri-Perrott, J. Schwartz. 2017. “Do Countries Learn from Experience in Infrastructure PPP?” Washington, D.C., World Bank. 
El Salvador. UNDP Climate Promise. (n.d.).