Restart eases fears of blackouts

TARANAKI DAILY NEWS

POWER TO THE PEOPLE: New Plymouth Power station is about to lend a hand as the power crisis develops

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Restarting part of the mothballed New Plymouth power station will "help a whole lot" in the power shortage, according to some analysts, but others say blackouts remain a risk and high spot prices may get worse.

Wholesale power prices have been averaging about 20c a unit recently, but hit 30c this week, and may rise more, despite the surprise decision by Contact Energy to bring 100 megawatts of power production capacity back on line at New Plymouth early next month.

Major Energy Users Group executive director Ralph Matthes said that, if drought continued in the South Island hydro lakes, there would still be a risk of blackouts in Christchurch by early July. "If the lakes keep on dropping [there is the risk] of more and more blackouts."

Independent energy analyst Molly Melhuish said the decision to restart 100MW at New Plymouth was "very clever, but they should have done it ages ago".

Another 100MW of capacity could have taken away any need for a public power-saving campaign. Now the need for a campaign would probably be "much reduced".

It has been six weeks since big users were first asked to be prudent about power use, Mr Matthes said, and sudden blackouts could be likely in about six weeks. They could be brief - perhaps half an hour - moving from one suburb to another in Christchurch.

By mid-June, rain would turn to snow in the South Island, adding little to lake storage.

Contact Energy chief executive David Baldwin said an extra 100MW capacity from New Plymouth on a system using about 6000MW would not have a "tremendous impact" on wholesale prices, but it was a reasonable chunk of energy.

"It means we can be more cautious with the use of hydro power water."

But without rain to top up hydro power lakes, a public power-saving campaign might still be started about the middle of next month, he said.

Mr Matthes said the Contact decision "came out of the blue ... that's amazing".

"It is good news, but the [wholesale] price won't change."

The diesel-fired emergency power station at Whirinaki was now running flat out at a cost of 30c a unit, effectively setting the market spot price.

That price was likely to rise even more when Whirinaki started using more-costly diesel supplies from next week. The market price would be "horrendous", Mr Matthes said.

"That will make New Plymouth very economic, with the short-run cost of gas half that [30c price].

"They [Contact] will be making a profit out of it and we will be paying for it."

However, it was unclear yet whether generators were making super-profits from the crisis.

The return to production of New Plymouth station would not bump off the Whirinaki plant, Mr Matthes said.

A fortnight ago a Contact spokesman said it was impossible to restart the New Plymouth station.

That changed a week ago during work at the plant, according to Contact.

Ms Melhuish said she would "guess" Contact decided to restart the plant after political pressure.

Keeping the plant out of action deliberately - which would effectively be "gaming" to keep power prices high - would not be illegal, she said.

Contact chief executive David Baldwin said the first time restarting the station was considered was last Thursday.

The possibility of restarting became apparent only after the remaining power unit was cleaned.

Mr Baldwin said the decision was purely the company's own and came as a surprise to the Government and officials.

- © Fairfax NZ News