The report, published by the Centre for Advanced Engineering, was released today and in it engineering consultant Bryan Leyland says there is a high risk of supply problems from next year if the cold, dry winter of 2001 is repeated.
However, Hodgson says Leyland has been making forecasts every two years for nearly a decade and 'they invariably predict an imminent power crisis". Hodgson said he was satisfied that 'more than enough capacity' was likely to be available for the next 10 years or so.
He admitted generation obviously needed to keep pace with demand growth. "It is always true that if we do not build new capacity in a timely manner we will run into supply problems.' The key issue was whether new capacity would be built in time and the risk of shortage in a dry year was adequately covered, Hodgson added.
A review, commissioned by the Ministry of Economic Development, found the report too pessimistic with some assumptions, but also found modelling by Transpower too optimistic. The government-owned Transpower, which is responsible for the national electricity grid, is forecasting generation shortfalls between from mid-2005, or 2007, depending on demand growth and assuming a one-in-20 dry year for hydro lake levels.
Despite all this, Hodgson has asked Ministry of Economic Development officials to report promptly on options for better electricity supply-demand modelling.
The government seems suspicious of the 'independence' of reports funded by such energy industry heavyweights as the State-owned enterprises Transpower, Mighty River Power and Genesis Power regarding 'post-Maui' energy issues
However, EnergyReview.Net has for months been quoting senior energy executives and commentators warning of New Zealand's possible perilous position once the former giant Maui gas field falters.
The latest executive to speak out on this issue was Shell New Zealand chairman Lloyd Taylor, who last month warned this country could no longer count on the Maui field as its 'savior' to help prevent widespread power shortages in cold, dry winters.
He said 2001 was a critical year for the Maui gas field, with it providing 50% of this country's electricity generation needs to avoid generation shortfalls and associated 'brown outs' in some cities. Maui gas production was consistently 115% above normal rates throughout the crisis period.
However, such consistent deliverability was now unachievable, Taylor said, as field production continued to decline and gas deliverability rates continued to fall.
He said this highlighted the essential role of gas to New Zealand's security of energy supply; the urgent requirement to bring the Pohokura gas field onstream; and the urgency of exploring for new gas to underpin the long-term security of gas supply as New Zealand entered its 'new energy era'.
The Centre for Advanced Engineering report said there were only two new big generating projects planned - the 360MW combined cycle unit at Huntly, expected to be in service from 2006, and Meridian Energy's Project Aqua in the South Island, which was scheduled to add 285MW in 2008 and another 285MW in 2011. These projects would barely meet projected load growth.
There were several factors underlying the failure of the market and the reforms to provide an adequate supply of power, including the inability of Transpower to provide an adequate transmission system and that the present market structure did not reward a generator which held plant in reserve for a dry year. The market structure also did not provide consistent long-term price signals to flag the need for new capacity.
Centre executive director George Hooper said that unless these issues were dealt with quickly, productivity and investment in New Zealand would be compromised.
The report recommended the establishment of an industry-wide team to make a more accurate supply and demand model; the investigation into the costs and economics of wind-power generation and other new renewable generation technologies; as well as a wide-ranging review of the electricity market here and overseas to see if a better market model existed.
In the short-term, power stations could be built or upgraded to mitigate the risk of shortages, including converting the aging and partly decommissioned New Plymouth gas-fired station to oil, or installing oil-fired gas turbines at the existing Marsden A site in Northland.
