One the richest men in Christchurch got a $300,000 grant from a city council trust to make his re-development energy efficient. Is this good public policy? WILL HARVIE reports.

It comes to 0.2 per cent of the cost of Antony Gough's Terrace rebuild project in Cental Christchurch. Well, 0.2 per cent of the published $150 million price tag.

But the $300,000 could have been used by the rate-spenders at city council on something else.



Look at it another way. The median income of full-time workers in June 2014 was about $51,000 ($989 a week), according to Statistics NZ.



So city council handed the annual income of six full-time workers to a guy rich enough to swing a $120m property deal. Gough doesn't have to pay it back. It's a grant. Plus, the savings from energy efficiency stays with him and perhaps his tenants.



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Pauline Cotter, councillor and chair of the Christchurch Agency for Energy: "We want our city to be clean and green."

So is this corporate welfare of the worst sort? Or a justifiable effort to make Christchurch more energy efficient and less reliable on non-renewable energy in an era of climate change and rising sea levels?



Christchurch City Council established the Christchurch Agency for Energy (Cafe) as a trust in 2010. It was funded with $2.9m from selling carbon credits from gas captured at Burwood landfill. Bit of a windfall really, but once it landed in council's bank account, it was ratepayers' in a sense.

The idea was to "encourage the use of renewable energy and advanced energy efficiency measures". The objectives included raising awareness and promoting energy efficiency and renewable energy, reducing the environmental problems caused by fossil fuels and to address fuel poverty — when people cannot afford to keep warm.

This was the sort of thing city council got up to before the earthquakes. "At the time Christchurch was a wealthy council", former mayor Garry Moore once said.

KEVIN STENT/FAIRFAX NZ Jordan Williams of the NZ Taxpayers' Union says the energy grant is just corporate welfare.

After the earthquakes, in July 2013, the focus of Cafe changed. It decided to "focus on large renewable energy projects within the CBD as a way to get more bang for buck", Cafe chair and city councillor Pauline Cotter says. The result was a new fund worth $1.8m called the Christchurch Energy Grants, which is what Gough got (or will get once he supplies invoices and the like). He couldn't be reached for comment this week.



To get a grant of up to $300,000 and for no more than 30 per cent of the capital cost of the energy project, developers have to be building or renovating larger than 1000sqm. The development has to be within the Four Avenues and "go well beyond the building code minimum" for energy efficiency. Acceptable technologies included geothermal or ground-source extraction, solar power or biomass. There must be a sound business case, evidence the applicant can deliver the project and a report must be filed with Cafe about 12 months after commissioning that details the success or otherwise of the energy project.



Hereford Holdings Ltd, of which Gough owns 100 per cent, got the grant and will install a ground source heat pump system at The Terrace. A GSHPS works much like heat pumps installed in many New Zealand homes. But instead of drawing energy from the atmosphere, these system draw energy from below ground, where the temperature is fairly constant. They heat and cool buildings.



"Council believes this is a good thing because we want our city to be clean and green," says Cotter. "Renewable clean energy will contribute greatly to this vision and has great community benefit.



"These are new technologies, and getting big developments on board will encourage more uptake. I think these applicants should be praised for their willingness to be bold, do things right and move forward with new technology," Cotter says.



To Jordan Williams, executive director of the NZ Taxpayers' Union, this is straight out corporate welfare "This seems like an extraordinary use of ratepayer money," says the Right-leaning lobbyist and lawyer. "Why would [council] pick a particular or favourite developer for a $300,000 grant which presumably will increase the value of that development?"



"Where's the money for everyone else?" he asks.



Well, Cafe has so far received 11 applications and approved seven. Fives of those remain confidential because of commercial sensitivity but will be revealed later this year. The sixth is the Arts Centre, a charitable trust, which also got up to $300,000. It's installing a groundwater heating system that draws energy from an aquifer from well underground. That aspect of the Arts Centre rebuild should be commissioned in mid-2016, says chief executive Andre Lovatt.

The other successful applicants can't be anchor projects like the justice or health precincts because central government, Environment Canterbury and city council are not eligible for the grants. They pretty much have to go to the private sector or institutions like the Arts Centre.

So is there a better way to promote green than by subsidy? Interest-free loans perhaps?

Jordan Williams says those still amount to welfare. "If it's such a virtuous cause, council should require all developers to meet minimum standards," he says.

Dr. Eric Crampton, head of research at the market-oriented think tank New Zealand Initiative, doesn't buy that argument. "Different choices work for different buildings and for different purposes, and building code mandates can make buildings just too expensive," he says.

Not that he's a fan of this sort of subsidy: "It seems a bit odd to provide strong subsidy for things like ground-source heat exchangers as a demonstration project. If other businesses take as lesson that the technology is not viable without a subsidy, does that really provide that useful a demonstration?

"The grant could make sense if there are engineering issues that need to be solved to use this technology ..., with the first project then reducing the cost of all subsequent ones. But, otherwise, it is a bit hard to see the case for it."

Williams has another insight: "No-one is criticising Mr Gough for taking this gift. Why is council giving it away in the first place?"