Bryan Leland: Power planners play with chilling future

COMMENT

Before we can make definitive statements on how much generating capacity New Zealand requires, we need to know how much electricity we are using now and how demand will increase.

Most of our power stations feed directly into the grid but there is an increasing number of "off-grid" generators that feed into the local distribution system. When our supply was centrally co-ordinated, all the off-grid stations had to report their generation every morning.

Thus, we had reliable statistics on the amount of electricity generated and used. Since the restructuring, however, the generation from many of the off-grid stations is not recorded. As a result, we do not know what the total load is or how fast it is growing.

I have completed a study on electricity supplied from the grid and the electricity fed into distribution systems by off-grid generators. In 2003-2004, the total generation was 42,000 GWh, and the peak demand was more than 7000MW.

Over the past four years, load growth has averaged 2.34 per cent. There is 660MW of off-grid generation that supplies 8.4 per cent of total demand and is growing at 5 per cent a year.

The actual demand is about 7 per cent higher than the figures in the Ministry of Economic Development's 2003 Energy Outlook. The study also shows that electricity demand since 1975 has been growing at an average of 840GWh a year; Energy Outlook predicts an annual growth of 430GWh in 2005-2006.

Demand growth since 1999 is highest in agricultural areas: Waitaki, at 22 per cent, is the highest. The highest urban area is the North Shore, at 15.2 per cent.

Over the next 20 years, Energy Outlook predicts we will need 10,000GWh (1600MW) of new generation. But if demand increases by 840GWh a year, as has been the case on average since 1975, we will need 17,000GWh (3000MW). Under a high economic growth scenario, that could reach 23,000GWh (4000MW).

To meet this demand, Energy Outlook seems to take the view that a 1000MW station is all that is needed to meet a 1000MW increase in demand. This is not true.

History has shown that a margin of anything less than about 25 per cent puts us at risk in a dry year. So to meet a load growth of 1000MW, we need to build at least 1250MW of new capacity.

In addition, we need new generating plants to replace our ageing thermal stations. More than 2000MW of existing thermal stations may need to be replaced. They could be replaced by new generating plant on the same site or by new stations. Either way, substantial capital spending and a supply of fuel will be required.

Adding this up, we need to build 5800MW of new generating plant over the next 20 years capable of generating 30,000GWh a year in a dry year. We can eliminate some of this demand by accelerating the rate of improvements in efficiency.

This could save as much 300MW to 600MW over the next 20 years. But where will the rest of this power come from?

The options are: renewables (hydropower, geothermal and wind), fossil fuels (gas and coal - we have vast quantities of low-cost coal in the South Island) and nuclear power.

Hydropower provides 65 per cent of our electricity. More than 2000MW of large hydro could be developed with environmental impacts that most New Zealanders would regard as quite acceptable. But the demise of Project Aqua has sent a clear signal that large hydropower is a risky proposition and does not have the support of the Government. So we cannot bet on that.

Small hydropower - less than 100MW or so - could probably provide 200 or 300MW over the next 20 years but that, too, is a risky business.

Geothermal potential is largely untapped and we have proven fields that could provide more than 1000MW. But the approvals process can result in agonising delays, high costs and no certainty of outcome.

This is a great pity because, with a more rational approach to geothermal development, it would provide backup for dry years and for the fluctuating output of wind farms, at a relatively low cost.

It has been claimed that wind could supply all the electricity needs of the country and the Minister of Energy has suggested that more than 20 per cent of our electricity (2700MW) could come from wind. Based on the results of overseas studies (none have been done for New Zealand), a practical limit for wind power is between 500MW and 700MW.

If we go beyond this, the spill from hydro power stations will increase and we will need to install expensive backup plant to supply the load when the wind is not blowing.

To transmit all this power to where it is needed, we would probably have to build 500km of new 220kV transmission lines.

Therefore, small hydropower, other renewables and efficiency will provide no more than 2400MW. We still need 3400MW from other sources.

The consensus in the gas industry is that there will be sufficient gas to continue to supply the three gas-fired stations and the new station proposed by Genesis, so we can assume between 1000MW and 1500MW of gas-fired generation will be available.

To provide the remaining 2000MW - or more if we manage to expand the economy - we can import LNG (a very expensive option), or burn South Island coal, or adopt nuclear power.

We urgently need to develop a number of scenarios of supply and demand and examine a range of options for generation and transmission to find the best balance between reliability, cost and environmental impact.

Then we need to work out how to make it happen. If we don't, we risk continued shortages, high prices, a shrinking economy and panic building of expensive, inefficient and environmentally unfriendly new stations when shortages hit.

* Bryan Leyland, of Pt Chevalier, is a consultant to the power industry.