Hydro generation provides between 60 and 70% of New Zealand’s electricity and low lake levels have forced the country’s electricity generation industry to turn to fossil fuels.
The country’s largest listed energy company, Contact Energy, has been running its gas-fired power plants hard this year, taking advantage of New Zealand’s increased wholesale electricity prices and conserving water in its hydro lakes as winter approaches.
Contact told the New Zealand Stock Exchange yesterday that its total electricity generation for the March quarter was 2892GWh, 15% higher than total generation for the corresponding 2005 period.
The mix of generation was also different during the latest quarter, with gas-fired generation, at 1720GWh, being 70% higher than the March 2005 quarter. Contact burned 55% more natural gas in its three thermal power stations, using 14 petajoules compared with only 9PJ for the three months to March 2005.
The higher gas-generation levels reflected Contact’s response to the significant increase in average wholesale electricity prices, according to chief executive David Hunt.
The company’s average wholesale price was $NZ115.83 per MWh, compared with only $NZ55.57/MWh a year ago.
The increase also reflected the increased use of gas-fired stations to compensate for reduced hydroelectricity generation, 737GWh (1067GWh in the 2005 first quarter) due to low hydro inflows for Contact’s 432MW Clyde and 320MW Roxburgh stations in the South Island.
Meanwhile, the Electricity Networks Association is unenthusiastic about proposed changes to the Electricity Industry Reform Act that Energy Minister Trevor Mallard says will encourage lines companies to invest more in electricity generation.
The Economic Development Ministry has recommended the removal of a ban on lines companies trading in financial hedges so they can insure against volatilities in the electricity spot market and against variabilities in plant output.
The ministry also said it would consider changing the “arm’s-length” rule that currently limits network companies to 5MW of non-renewable power generation unless a separate company runs that plant independently. However, it would not lift the limit as high as the 50MW wanted by the ENA.
Lines companies can already invest in unlimited amounts of renewable generation
However, ENA chief executive Alan Jenkins said geothermal power was the only renewable source that was constant enough to be base-loaded and network companies would still be limited in dealing with variable outputs from hydro or wind projects, either having sell to a trader or to sell on the spot market for likely unacceptable risks.
“It’s still all back to front, with lines companies constrained and facing legal challenges on every front – none of it is very satisfactory,” he told EnergyReview.net from Wellington.
Jenkins said the proposed changes would still mean network companies were constrained compared to the big five generators/wholesalers/retailers – Contact, Genesis Energy, Meridian, Mighty River Power and TrustPower.
