NZ Faces Power Shortages - 17 May 2004 Print

Lack of investment in new power generation by the major players in the industry will create power shortages and price hikes in the next few years, according to Warren Kyd, Chairman of Auckland Energy Consumer Trust.


Mr Kyd said speakers at the recent Electricity Trusts of New Zealand (ETNZ) conference in Wellington highlighted the major failures of the so-called "reforms".

"Generators have enjoyed significant profits but have failed to invest in further generation, and there is no centralized or long term planning within the industry to meet New Zealand's increasing energy consumption." Mr Kyd said.

"In particular, the State Owned generators who are responsible for over 70% of electricity generation have a dismal investment record - at least in New Zealand."

From 2006 onwards, a reduction in base load generation through the reduction in gas generation from Maui means electricity cuts will be inevitable, unless two things happen- a reduction in demand, and the discovery of new forms of fuel supply which can be brought into generation quickly, he said.

Former Transpower chief executive Mr Bob Thomson - now an adviser to ETNZ - said recently issued Government figures on new generation and dry year reserve which appeared to show that the situation was not as bad as predicted, were flawed.

A number of power stations currently on Maui gas are not able to run on coal - so existing capacity will be reduced. The only option is to import liquefied natural gas which will require significant investment in on-shore facilities and will be much more expensive than the Maui gas it will replace.

According to Dr George Hooper of the Centre for Advanced Engineering, Canterbury University who spoke to an Energy forum in Timaru earlier in the week, the cost of LNG will be twice the cost of power produced by the now defunct Project Aqua.

"The issue with the present market is that thermal generation sets the price for the market-and this can only mean a significant increase in electricity prices." Dr Hooper said.

With a current average price of 4c per unit, this will go to at least 8c and probably 12 to 15c in the long term, he predicted.

Mr Thomson told ETNZ the other failure in the Government predictions was the lead-time for new projects to come on stream.

"The problems New Zealand now faces is that it takes considerable time to get Resource Consents, then construct and commission new generation and transmission line capacity."

Dry Year Reserve Problem

While the Government was in the process of commissioning its first dry year reserve generation at Whirinaki, Mr Thomson said it would not solve a dry year generation shortage.

"It is essentially located in the wrong place- there are transmission line constraints which mean it can not deliver fully into Wellington and thus into the DC link."

"The Government was warned of this by Transpower," he added.

Mr Thomson said hydro storage used to cover New Zealand's power consumption for about 13 weeks but now, because of increased demand, the period was only 10 weeks.

"We will be all right this year with hydro storage at 118% full, but in future a 'normal year' will be a difficult year," he warned.

Transmission Upgrades

The new CEO of Transpower Dr Ralph Craven outlined plans for future upgrading of the transmission network to the conference.

Some immediate work was required and this included a new line upgrade in South Canterbury from near the Livingstone substation (west of Duntroon) through to Islington (Christchurch).

Dr Craven said he had major concerns with the Resource Management Act and having to deal with a number of District Councils and District Plan provisions in getting an upgrade done.

"Under the present system, getting consents could go on for years - we need some provisions which recognize the National interest," he said.

Dr Craven said he had just returned to Wellington after walking over areas of the Mackenzie Basin with Federated Farmers national president Tom Lambie.

He said Transpower was also aiming to upgrade components of the DC link at Benmore and Haywards (Wellington) to increase its capacity.

Electrical and Mechanical Engineer Bryan Leyland told the conference upgrading the Transmission system as proposed by Transpower was not the only solution and he is advocating a DC line from one end of the country to the other to transmit power with reduced losses from major fuel sources (eg Southland lignite coal) to major energy consumption points.

"It is far more efficient to transport an electron over a wire than to ship coal from one end of the country to the other simply to fuel a power station in Auckland."

Generating by Lines Companies

For some time the New Zealand's lines companies have been advocating being able to invest in generation.

Mr Kyd said the present system restrained lines companies to a low level of investment in new generation, but Opposition Spokesman on Energy Roger Sowry said National would allow lines companies back into generation.

This might encourage lines companies to invest in small plants where it would solve local demand problems.

Separation of Energy and Line Charges

An outstanding issue between lines companies and retail companies is likely to be resolved soon, with new powers the Minister of Energy is proposing.

Mr Kyd said lines companies had been campaigning for years to force retailers to separate out the lines charge component from the energy component so that consumers could clearly see where increases were coming from.

"Lines charges have reduced but energy costs have increased - yet in some cases the retailers have tried to blame the lines companies."

Energy Minister the Hon Pete Hodgson told the conference that he currently did not have the power to force retailers to do this - but he was giving himself the power to make such regulations in the Electricity and Gas Industries Bill.

He hoped to have the powers by July this year to put regulations in place- but there was a process which he had to follow to do this so it could be some time yet before transparency in billing is mandatory.

Mr Kyd said ETNZ intended meeting with Grey Power and the Consumers Institute to gain their support for move and it was possible some retailers might start to separate out the charges on bills now, rather than wait for regulation to force their hand.

Efficiency

The Auckland Energy Consumer Trust will be looking forward to the next ETNZ conference in September where a major focus will be on energy efficiency and demand reduction.

While the industry has already picked out many of the "easy" energy efficiency paths, domestic consumers only tended to look at energy saving when a crisis was in the offing, Mr Kyd said.

A number of Trusts in New Zealand had embarked on domestic energy efficient programmes and it would be useful for our Trust to consider the various schemes and opportunities that are available. Obviously, any wise use and conservation savings will defer the day when increased generation is needed, he said.

Ms Karen Sherry, Auckland Energy Consumer Trustee was re-elected to the executive of the Electricity Trusts of New Zealand for a further 12-month term.