Hunt told the National Power Conference in Auckland yesterday afternoon that the choices for New Zealand, in the face of a looming gas supply gap from later this decade, were not a “renewables versus fossil fuels” debate.
“When we look at the options there should be some balance,” he said.
He agreed that hydro electricity and wind power were a good mix, but said the hydro system only had so much “flex” in it.
“You need something for when the hydro lakes are low and when the wind don’t blow,” he told EnergyReview.net after his presentation.
Hunt also said more rational thinking was needed in the “indigenous versus imported” debate regarding possible scenarios should local explorers fail to find sufficient new gas during the next few years to ensure local fields can meet expected market demand is the next few years.
“No one particularly wants to import gas, – either as liquefied natural gas or compressed natural gas – but it’s an important backstop,” he told ERN, referring to the Contact-Genesis joint investigation into the feasibility of importing LNG from later this decade.
“But if we deny users the choice of importing gas, will the next best thing for our thermal power stations be even more expensive distillates or fuel oil?”
Only Contact’s aging 400MW New Plymouth power station could run on fuel oil instead of gas and of all Genesis’ existing, planned and possible fossil-fuelled station, only the 1000MW Huntly power plant could run on anything other than gas. Huntly presently runs mostly on coal, with only some gas.
Insufficient gas could mean expensive conversions for the other stations – Contact’s Taranaki Combined Cycle and Otahuhu B, in Auckland (each about 380MW), and Genesis’ planned e3p (about 370MW) station at Huntly and possible 360MW Kaipara plant, north of Auckland.
“I like to think if we need to import gas, it will because it’s the cheapest alternative,” he told ERN.
LNG importation would not sound the death knell for the local exploration and production industry, according to Hunt.
“If we do not have a secure gas supply, we will not see more investments by gas users – we can’t live with gas supplies only assured for a few years,” he said.
“The number of gas customers would start to decrease and there would start to be a dwindling gas market – it’s started already.”
Hunt said that if there was another Maui-sized gas find or two in the next few years, it would still take five or more years to bring that gas onstream from offshore fields.
As well, significant LNG or CNG contracts could be renegotiated or that gas onsold in an increasingly flexible global gas market.
“Domestic gas might lose some market share but only if it cannot compete on price. If domestic gas is cheaper it will always find its way into the market,” he said.
