Electricity shortages tipped as Maui declines

By CHRIS DANIELS

Threats of electricity shortages and power price rises have been raised by Government energy experts, who say New Zealand needs a replacement for the fading Maui natural gas field.

An added need for new power stations to cope with increasing electricity demand is outlined in official briefing papers released yesterday by Energy Minister Pete Hodgson.

They say demand for electricity is climbing at the rate of around 2 per cent, or 800 gigawatt hours, a year, requiring more than 150 megawatts (MW) of new generation capacity each year. New Zealand's biggest thermal power station, at Huntly, has a capacity of 1000MW.

Transpower, the owner and manager of the national power grid, forecasts that, by 2005, assuming high load growth, existing generation will not be enough to meet demand in a dry year.

In July it said that electricity prices north of Auckland would double in less than a decade unless money was invested in new power stations or improving the national grid.

The impending depletion of the Maui gas field in 2007 is the common factor in many of the most pessimistic predictions of electricity shortages, as its cheap gas is needed to fuel power stations, particularly when dry years force hydro stations to curtail production.

The Pohokura field is likely to start producing natural gas in 2005. It is only one-third the size of Maui and expected to provide more expensive gas.

The only new power station confirmed for construction is a gas-fired station at Huntly, which should provide 400MW in 2005 for the state-owned power company Genesis.

Privately owned Contact Energy has shelved plans for a similar 400MW station, costing up to $450 million, at its Otahuhu site, saying it cannot guarantee supplies of enough natural gas at a cheap enough price.

It is looking at buying power stations in Australia.

State-owned enterprise Meridian Energy will lodge resource consent applications later this year to build a billion-dollar hydro scheme on the South Island's Waitaki River, to generate 570MW within 10 years.

Energy officials have said that it is likely more coal will be needed "to cover supply shortfalls in the period until a more comfortable generation balance is restored".

Mr Hodgson said it was important that economic growth was in some way "de-coupled" from growth in energy demand. New Zealand had to improve its energy efficiency.

He said he expected to have some certainty by the end of this year that new generation was being built, but he would not be leaving it entirely to market forces.

"The theoretical role is that the market will provide. I am not a minister who will accept that the market left to its own devices will always provide in a timely way."

The interests of electricity companies were not always "totally aligned with the needs of the nation".

He said he was confident that unless there was a winter like last year, there would be enough electricity generated to cope with expected growth in demand.

New Zealand had been "spoiled" by the Maui gas field, not only through extremely cheap gas, but also its physical characteristics that allowed it to be "turned up", with more gas sucked out of the field.

Mr Hodgson said the market was structured in the way the power companies wanted and if they failed to deliver there would be Government regulation.

"I say to electricity companies - you want a competitive model, you've got a competitive model. You've got to be sure that model works and generation arrives in a timely manner."

Mr Hodgson said he was not a minister to just sit back waiting for the companies to build new power stations.

Feature: Electricity

Energy Efficiency and Conservation Authority