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Mighty River Power has scrapped plans to convert the mothballed Marsden B power station to run on coal, saying the project was now uneconomic because of new renewable energy projects and increased certainty over domestic gas supplies for thermal generators.
The state-owned power company had previously believed that converting the oil-fired station, which has never been used since it was completed in 1979, could be essential to provide security of supply, especially during dry hydro years.
However since beginning work on the project in 2003 "we have commissioned additional geothermal capacity and successfully consented and begun construction on other projects, including the largest geothermal power plant development in over 20 years at Kawerau", said chief executive Doug Heffernan.
"As a result of this work and other developments within the industry, we no longer see scenarios where Marsden B will be cost effective in the next decade or so."
Heffernan said those other developments included the announcement of significant new generation projects, many of them using renewable sources such as wind, that were more cost effective than Marsden B.
Furthermore, the renegotiation of Maui gas supply contracts and the development of other fields meant thermal generators now had more certainty of fuel supply than was the case in 2003.
"The combination of a lot of renewables coming to meet demand and enough fuel for the existing thermal plants, you just rule a line under Marsden B and say, 'look, it's just not going to beat those plants'."
Heffernan said the prospect of a carbon cost imposed on fossil fuel-burning power plants had been factored into the original Marsden B plan and had not contributed to yesterday's decision.
Neither had opposition to the plan from environmental groups. The company had always been confident of ultimately obtaining necessary consents, a process which had so far cost $4 million.
Heffernan said yesterday's decision marked the end of the road for Marsden B, which was part of former Prime Minister Robert Muldoon's "Think Big" programme of huge energy infrastructure investment.
