Power shortages consigned to dark ages

New Zealand now has enough reserve capacity to ensure the lights won't go out this winter, says electricity commissioner Roy Hemmingway.

It's been nearly two years since New Zealanders were last asked to switch off the heated towel rails and display lighting, as hydro lake levels in the South Island plunged to perilously low levels.

Since that winter, electricity generators have been busy installing new capacity to help save us from a repeat of 2003.

A new body set up by the Government to monitor the power sector - the Electricity Commission now keeps an eye on lake levels and power demand, ready to step in if there are problems.

It says that 2005 is not looking too bad - news that will no doubt please the Government in an election year.

"There has been substantial improvement in the supply situation, making it very likely that there would be sufficient generation to meet demand in 2005, even in a 1 in 60 dry year event," Hemmingway said.

Additional base load generation, the Whirinaki reserve generation plant in Hawkes Bay, and assurances about fuel supply at Huntly and other thermal plants have all contributed to this increased security.

Concern over the lack of an adequate coal stockpile at Huntly was one of the leading reasons behind industry fears of blackouts during the winter of 2003. Genesis and coal producer Solid Energy were locked in a contract dispute over coal supplies and Government pressure was needed to bring it to a speedy resolution.

Hemmingway said four factors lay behind his decision to give the one-in-60 year reassurance.

First were the electricity demand forecasts, which "seems pretty steady at around 2 per cent a year, we haven't seen any extraordinary growth spurt or anything like that".

Second was the availability of new generation - new windfarm capacity in Manawatu and the gas-fired turbine installed last year alongside the Huntly power station.

Third was the availability of fuel - "which looks pretty good for coal at Huntly and at the gas plants - they have secure sources of fuel".

Last was the availability of the Whirinaki reserve plant - built and owned by the Government, which can run in the event of poor hydro conditions and certain "market conditions".

The biggest generation addition to the New Zealand system is at Huntly, where Genesis is building a new gas-fired power station, sitting alongside the existing coal-fired station.

Known as E3P, the 400 megawatt station is expected to cost at least $520 million. The Government is helping the state-owned company build the station with an underwriting agreement. This backing, which will come into force if gas supplies run out, helped convince banks to lend money to build the station.

"E3P will soak up about three years of demand growth," said Hemmingway. "There's no incentive for a generation company to build generation very much in advance of need, and if it's built too late, there'll be shortages and no one wants that."

Asked what changes he had seen in the nearly one year in the job, Hemmingway said he thought things "are much more secure".

While he is confident about security of power supply this winter, he warns there are no guarantees.

"No system is 100 per cent reliable - events can cause temporary problems. But within reasonable expectations, the country should get through winter with no problems."

"These things are always talked about - there is a very explicit understanding of risk in the electricity industry and there is a question of how much security electricity customers should be asked to pay for."

He said while we might be able to cope with that one in 60 dry year, there is no guarantee that we don't have a one in 150-year dry year.

So while things are looking fairly good for this winter, an energy crunch is still coming - maybe next winter a 1-in-60 year drought could mean compulsory savings.

More wind farms are also being built, though local objectors to turbines have stymied attempts to build a 19-megawatt farm on the Awhitu Peninsula south of Auckland.

But with the days of big hydro schemes apparently over, and the much-hoped-for vast new gas reserves yet to be discovered, the country's growing demand for electricity will constantly be putting energy planners under pressure.

Those heated towel rails should perhaps be left off for a while yet.