Between the lines: Gas for Power dilemma

Talk of new gas-fired power stations raises problems for a Government already grappling with ways to reduce carbon dioxide emissions.

TransAlta and Natural Gas Corporation set the ball rolling by saying they were investigating the feasibility of building up to a 400-megawatt gas-fired plant in the North Island within five years.

They are not alone.

All the major generators are weighing their options.

Market consensus is any new generation will be gas-fired on current economics.

Burning fossil fuels has an environmental impact by releasing additional carbon dioxide into the atmosphere.

Electricity generation already contributes to 15 per cent of the country's total carbon dioxide emissions.

New Zealand is committed under the Kyoto Protocol to stabilising its greenhouse gas emissions at 1990 levels over the period 2008 to 2012.

Latest figures show the emissions in 1998 were 14 per cent higher than in 1990 and forecasts suggest emissions could be 40 per cent higher by 2010.

A spate of new fossil-fuel generation adds to the dilemma unless it replaces older, more inefficient plant.

Energy Minister Pete Hodgson said recently that the policy focus was shifting from energy production to more efficient energy consumption.

New Zealand had lost the plot in recent years, he said, when it came to energy efficiency and the value of renewable energy resources.

This is a worry when the country trades on a clean, green image.

Budget money to the tune of $3 million went to the Energy Efficiency and Conservation Authority to produce a national strategy on sustainable energy use.

A carbon tax is being considered along with tradeable emission rights.

The objective is to increase fossil-fuel generation costs to make renewables, such as new hydro and wind, competitive in the electricity market.

It is speculated that during the past year 3000 GWh of hydro was spilled in favour of gas-fired generation.

Electricity prices would have to rise to about 6c/kWh - about a 50 per cent jump on today's average price - to make the renewable sources competitive. That compares to about 5c/kWh for new gas-fired to be economic.

The upper price would have a severe impact on New Zealand's energy-intensive industry and the economy at large.

Australia has chosen instead to provide tax incentives and the like to generators to supply a percentage of their load from renewable resources.

Energy analyst Molly Melhuish warns that public energy policy is shifting to one which accounts for the full costs of burning fossil fuels.

Simple things can help.

Instead of new plant, demand can be reduced by improving home insulation and draught-stopping.

Energy efficiency will be a political hot potato, whatever the Government decides, when the Greens' influence is considered. The policy dilemma is weighing up how environmental commitments can be traded off against what industry and the country can afford.