Commission warns of power shortages

With two major Waikato power station projects deferred during the recession and others around New Zealand on hold or cancelled, the Electricity Commission is warning of potential electricity shortages from 2013 onwards unless more new projects are committed to in the next 12 months.

A completely revised table of potential new power stations is presented in a draft Electricity Commission report – showing a decrease in new generation from the 1536 megawatts expected in 2008 to just 549MW, including Contact Energy's new 200MW gas-fired plant in Taranaki.

"Over 600MW of new generation that was rated as a medium or higher possibility for 2010 or 2011 in the 2008 assessment has since been deferred until at least 2013 or cancelled," the report says.

Among the biggest deferrals are Contact's new Te Mihi replacement plant for the Wairakei geothermal power station and its 540MW Hauauru Ma Raki wind development near Raglan.

"This assessment indicates that a substantial amount of new firm generation will be needed by 2013 in order to maintain winter capacity margins above the security threshold," says the commission, which will be replaced by an Electricity Authority when Energy Minister Gerry Brownlee's electricity reforms become law towards the end of this year.

A variety of factors is raising the risks to electricity system security for the winters of 2010, 2011 and 2012, although the commission does not believe the risk is enough to procure emergency reserve energy.

"There are ... serious concerns about peak capacity during winter 2012, with capacity margins projected to be below the security threshold" on a variety of scenarios analysed from normal to high risk.

The commission also raises the threats to risk margins that are posed by electricity generators declining to run slow-starting power stations to meet volatile peak demand.

In October state-owned Genesis Energy said the Huntly power station was not paying its way after writing off $261 million from its value because of the cost of running it on coal.

Huntly is the biggest power station in New Zealand, with four traditional 250MW coal-burning power units, built in 1981.

It has a lifespan of at least 20 more years but Genesis has said it will no longer run the power station unprofitably just to keep lights on, as it argues it was accustomed to doing in the past.

Genesis may decommission the plant in coming years unless it can gain profitable contracts such as one signed with Meridian last year.

"There is the potential for unit commitment problems to have a serious adverse effect on security of supply at peak times," the commission says.

Energy analysts have predicted such pressures will drive power prices higher.

Capacity constraints include weaknesses in the national grid, especially the Cook Strait cable until its upgrade in 2012, and the impact of fluctuating windfarm capacity on security of supply during periods of peak demand.

In its latest and probably last draft annual assessment of electricity security of supply, the commission says "very little investment has been committed for 2011 and future years".

The EC's draft report is out for public consultation until January 29.

- © Fairfax NZ News