Clean green electricity - at a price

Meeting 85 per cent of electricity demand from renewable sources by 2030 is feasible but will raise power prices, the Ministry of Economic Development says.

Its latest energy outlook explores options for energy supply, demand, prices and greenhouse gas emissions over the next 25 years with the aim of stimulating debate as the Government prepares its energy strategy.

The base or business-as-usual case, which assumes no policy changes, has wholesale electricity prices rising about 35 per cent and retail prices by 20 per cent by 2030, reflecting more expensive natural gas and the cost of new generating capacity.

On that scenario there is only a small increase in hydro-electric generation. Wind's contribution increases 10-fold, but from a low base, and gas-fired generation rises by two-thirds.

But the outlook also considers an alternative in which the aim is to increase the proportion of power derived from renewable sources to 85 per cent from about 65 per cent now.

This option assumes the only coal-fired plant, at Huntly, will close in 2014 and that no new gas-fired generating plants, apart from one now being built, also at Huntly, are commissioned.

Instead, the increase in demand would be met by more hydro dams and more wind farms.

This would reduce greenhouse gas emissions but wholesale electricity prices would be about half as high again as they would be under "business as usual".

Residential retail prices would rise by about a third on top of the 20 per cent increase already implicit in the business-as-usual case.

It would be likely to result in the loss of the Tiwai Point aluminium smelter and perhaps some other heavy industry, the outlook's authors say.

"There might also be system security issues with a system so dependent on hydro and wind, which are subject to considerable natural variation."

That scenario includes only wind and hydro schemes that the report consultants were confident could get resource consents. If renewable resources in which they have only "medium" confidence they could get consents are included, the effect on prices is less severe because some schemes are relatively low cost.