Hodgson won't buy glum power report

By CHRIS DANIELS

When will the lights go out? Depends who you ask.

Contrasting predictions of impending electricity shortages are to be released today, with Energy Minister Pete Hodgson labelling research commissioned by the energy industry as "erring on the side of pessimism".

Hodgson has commissioned his own expert to rebut a study showing a looming energy shortage, as demand outstrips new generation and gas from the Maui field runs out.

Written by energy specialist Bryan Leyland, the research is published by the Centre for Advanced Engineering and paid for by such energy industry heavyweights as state-owned enterprises Transpower, Mighty River Power and Genesis.

"Mr Leyland's findings come as no surprise," Hodgson said on Friday. "He has been releasing his forecasts every two years for nearly a decade now and they invariably predict an imminent power crisis."

Generation obviously needed to keep pace with demand growth, said Hodgson. "It is always true that if we do not build new capacity in a timely manner we will run into supply problems. The key issue is whether new capacity will be built in time and the risk of shortage in a dry year is adequately covered."

The combination of publicly known information about plans for new generation and confidential details supplied by the power companies were enough to convince him that "more than enough capacity is likely to be available for the next 10 years or so".

Leyland's research describes only two new major generating projects as being in the pipeline, Genesis' 400 MW combined cycle unit at Huntly, expected to be in service in 2006 and project Aqua, a South Island hydro scheme being developed by fellow SOE Meridian.

"These projects will barely meet load growth," it says. "The study concludes that New Zealand does not have enough reserve generating capacity to cope with a one-in-20-year drought from now on and existing and proposed stations will not be able to supply the normal year energy requirements beyond 2010."

Leyland's report says there are several factors "underlying the failure of the market and the reforms to provide an adequate supply of power".

They include the inability of Transpower to provide an adequate transmission system and the fact that the market structure does not reward a generator who holds plant in reserve for a dry year.

The present market structure also does not "provide consistent long-term price signals to flag the need for new capacity".

Hodgson said that his expert, energy analyst Tom Halliburton, "concludes that the models used for these forecasts are quite crude" and are unable to accurately model events measured in weeks or months, as it is being studied in yearly blocks.

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