Prime Minister Helen Clark and Energy Minister David Parker today launched the New Zealand Energy Strategy (NZES), saying it set the country “firmly on a path towards clean, renewable energy”.
They also announced that there should be no new gas-fired power stations built over the next 10 years and that electricity generated from coal or gas would cost more as generators faced the cost of burning fossil fuels through a carbon emissions trading scheme, likely to be about $NZ25 per tonne, from 2010.
Parker said the Government’s favouring renewable energy sources over fossil fuels would also minimise the risk that New Zealand’s electricity system could become reliant on imported liquefied natural gas (LNG).
“If that happened, New Zealand’s electricity prices would be linked to international oil and gas prices for the first time in our history. The resultant price increases would make the increases in the last decade look modest.
“Focusing on renewables makes an LNG future very unlikely,” Parker said.
He also said the Government was considering amending the Electricity Act to limit new baseload fossil fuel generation over the next 10 years and that it expected to make a decision on this before Christmas.
“Over time, pricing emissions, and other initiatives contained within the Energy Strategy, give a strong economic signal to investors to build renewables rather than more gas or coal fired (power stations),” he added.
However, PEPANZ executive officer John Pfahlert said the NZES increased uncertainty for the oil and gas industry and heightened the risk to the electricity system of not being able to cope in dry years, where hydroelectricity generation is limited, without adequate gas-fired back-up.
“This means fossil fuel electricity will effectively be priced out of the market, there will be no Rodney or Otahuhu C,” Pfahlert told PetroleumNews.net, referring to Genesis Energy’s planned gas-fired power station at Rodney and Contact Energy’s second station at Otahuhu, Auckland.
“There will also be no LNG,” he added.
“The NZES will act as a disincentive for oil and gas explorers, and it may adversely affect the economics of future developments, particularly gas-based ones,” Pfahlert said.
Parker admitted that fossil fuels, “especially gas", will continue to have an important, albeit declining role for some time to come.
“They provide security, versatility and stability in how electricity is supplied.
“The Government’s recent successes in stimulating gas and oil exploration will help to ensure we can use our indigenous resources, rather than imports.”
But Pfahlert said the Government was still sending mixed messages to the petroleum and electricity sectors.
“They welcomed the Tui Area oil development, which will lessen our balance of payments problems through earning valuable foreign exchange, and they welcomed ExxonMobil and others into the Great South Basin,” Pfahlert told PNN from Wellington.
“If the GSB explorers, or any other explorers for that matter, make some gas major finds, there is the option of exporting the gas as LNG.
“But what about smaller discoveries, either offshore on onshore, if the Government is not encouraging the development of a domestic gas industry?” Pfahlert asked.
But he wondered if methanol manufacturer Methanex might actually benefit by being able to continue its New Zealand operations for longer if it could buy gas that was “unwanted” by electricity generators because they had switched to renewables.
Methanex presently plans to run its sole surviving NZ operation at the Waitara Valley until year-end at least, given the present small surplus of domestic gas.
Meanwhile, Genesis Energy is today due to start its Court of Appeal bid to clear the way for its planned Rodney power station north of Auckland – the country’s main electricity load centre.
Greenpeace has won a High Court ruling that climate change must be considered in Resource Management Act (RMA) consent applications for such proposals as the Rodney project. However, Genesis will be arguing that climate change should not be a consideration of the RMA.
Genesis has already reduced its greenhouse gas emissions by up to 1.8 million tonnes per annum (MMtpa) through the commissioning earlier this year of its 400MW combined-cycle gas-fired station at Huntly known as e3p.
That more efficient station allows Genesis to run its nearby inefficient 1050MW coal-gas fired power station, which used to emit over 4MMtpa, less.
Its proposed Rodney project would further reduce carbon emissions by another 1MMtpa or so from the planned 2009 start date, effectively allowing the aging Huntly plant to be kept in reserve to protect New Zealand’s electricity system during droughts and low hydro lake levels.
