KEY POINTS:
Genesis Energy's gas-fired power station planned for Rodney is unlikely to proceed following the release of the Government's energy strategy today.
Ministers said today they did not want any new fossil fuel burning power generators built for the next 10 years unless they were needed for emergency back-up.
Prime Minister Helen Clark speaking at the launch of the strategy said she wanted the sector to focus on renewable energy unless new coal and gas fired stations were needed to ensure security of supply.
Energy Minister David Parker said the state owned generators - which dominate the sector - had been told not to proceed with any plans to add thermal power generators to their baseload ability.
Finance Minister Michael Cullen said it was hard to see how state owned enterprise (SOE) Genesis' plant would get the go ahead under the strategy "unless there was an absolutely clear offset against higher emitting thermal capacity elsewhere".
"We do not need that amount of additional thermal capacity given what we are told is available in terms of wind, geothermal and hydro," Dr Cullen said.
He said there would not be any compensation for state owned enterprises who were stopped from embarking on prospective projects.
Mr Parker also said the strategy spelt the end of the road for the Rodney plant.
The Government had written to SOEs outlining they did not want more baseload fossil fuel plants.
Genesis issued a short press release welcoming the energy strategy saying it would give the sector certainty.
It did not mention the planned power plant or its consideration of importing liquid natural gas (LNG) into New Zealand.
Mr Parker denied that banning plants such as Rodney would push up power prices.
"The biggest risk of substantial increases in power prices for New Zealand would be if we had an imported LNG future.
"If we had to move to importing LNG to fuel our gas fired power stations the electricity price increases would make increases in recent years look very modest and this makes it far less likely that we will have an LNG future."
Miss Clark said the Government would decide by the end of year whether to regulate for a ban to cover the private energy sector - mainly dominated by Contact Energy.
In other changes the limitations on line companies generating power would be eased, though there would be regulations to ensure the large generators did not get into the lines companies business.
Mr Parker said the Government wanted to encourage lines companies to invest in smaller scale localised renewable energy projects.
He said greater guidance to local councils considering renewable energy planning applications would not mean such projects would be approved at any environmental cost.
McDouall Stuart's energy analyst John Kidd said it appeared Genesis had been given little warning of the move as it had provided an update on progress towards the 480MW plant at a briefing earlier in the week.
"Given that Genesis has been working on the project for over two years... the news may be greeted with some coolness," Mr Kidd said.
The abandonment of the Rodney plant had significant broader implications for the industry.
There would be a more benign investment environment for renewable energy, less so for thermal generators.
The effect would be an increase in wholesale prices to meet the costs of the remaining available generation alternatives.
- NZPA
