Coal-fired ban would push up power prices

By FIONA ROTHERHAM

Electricity prices will rise significantly if the Government bans coal-fired electricity generation to reduce greenhouse gas emissions.

A Ministry of Economic Development report suggests that by 2020 a ban on all coal-fired generation would reduce New Zealand's carbon dioxide emissions by up to 13 per cent.

But analysis by the department shows this would, in turn, raise electricity prices by up to 25 per cent as more costly plants would have to be run.

The Huntly power station is both coal and gas-fired but can switch to coal alone if gas supplies diminish.

With moderate gas availability, it would become economic to build another small gas-combined-cycle plant around 2010, says the report.

Other scenarios in the report include a ban on new-fired coal generation or a carbon-pricing mechanism such as a carbon tax or freely tradeable emission permits.

The analysis suggests carbon pricing would reduce the impact on electricity prices, although it would result in gas price rises and, in particular, coal price rises of up to 34 per cent.

The transport sector and use of oil products account for a significant proportion of New Zealand's carbon dioxide emissions.

The department says a carbon tax would achieve only low emission savings.

The Government is considering policy options to reduce greenhouse gas emissions to meet obligations of the Kyoto Protocol.

Under the protocol, still to be ratified, New Zealand is required to stabilise its emissions at 1990 levels by 2008 to 2012. Latest forecasts suggest emissions would be almost 40 per cent higher than 1990 levels by 2010.

Environment Minister Marian Hobbs has said that climate change is a crucial issue in carbon dioxide emissions having risen since 1990.

"Of course, our emissions are not only carbon dioxide but also methane and some other gases. We need to tackle them all," she said.

Voluntary agreements signed in 1995 with 23 industrial corporates and three industry sectors had largely met the targets, although some were not particularly onerous.

These agreements are due to run out this year.

The Government is looking at the impact of climate change, increased public education programmes, greater investment in public transport and a drive for energy efficiency.