Meridian Energy calls on Genesis to reverse Huntly coal-burner closure
Meridian has asked rival generator Genesis to keep its coal-burners running, shortly after environmentalists celebrated the impending closure.
The Huntly power station's capacity of 953 megawatts will be cut by more than half when it shuts its remaining coal-fired units in 2018.
The decision, sparked by flat power demand, was applauded by the likes of Greenpeace.
However, Meridian chief executive Mark Binns warned of potential under-supply following the closure, which would create challenges for the whole industry.
The renewable energy company has a contract with Genesis to buy up to 150mw a year at Huntly, which it uses as insurance against a dry year.
"This option ensures we can continue to supply customers at competitive prices without being exposed to purchasing electricity at extremely high spot prices if our fuel supply has literally dried up," Binns said.
Speaking at Meridian's annual general meeting in Auckland on Friday, he said the company had approached Genesis to extend the option beyond the planned closure and believed others would also want to see the units remain open.
"This appears to be the most efficient solution for the industry as a whole," Binns said.
"However, there is no guarantee that we will be able to complete any commercially acceptable arrangement."
Genesis spokesman Richard Gordon said the company was open to talking with other generators and retailers.
However, he said no discussions were underway at present, and the clock was ticking.
"If other market participants want to start talking to us about incentivising us to keep those units running, they need to get their act together," he said.
"Within a few months we'll be making moves and changes that will be irreversible."
Binns said Meridian would otherwise need to make arrangements with another generator to provide cover, or alternatively reduce load; "something we do not want to do".
On the positive side, he said Meridian's need for dry year cover would probably have reduced by 2019 or 2020.
A team was evaluating all generation options, including enhanced access to storage in Lake Pukaki, which is under consideration by Environment Canterbury.
Binns said if the Tiwai Point smelter closed, it would effectively buy the industry a few more years before a solution was required.
However, that was not a long-term answer to dry year or security of supply issues.
Binns said Meridian could manage its own risks well, but it would be unacceptable from an industry perspective if customers faced supply issues.
Anther flow-on issue from the closure that Transpower had identified was constraints on the grid at peak times in the upper North Island.
Chairman Chris Moller also provided the meeting with an update on the company's plans to return over $625 million of surplus capital to shareholders over the next five years.
The company had received a variety of feedback as to whether the payment of special dividends or a share buyback was more appropriate, with opinions divided.
Moller said all the perspectives would be discussed when the board looked at the matter again before the release of its interim results in February.
The directors did not currently see anything on the horizon that would prevent the cashback programme from going ahead, he said.