As consumers receive their winter power bills, many are puzzled and some are incensed that they are so high.
There is a simple answer: wholesale prices are elevated (they have been very high for some time and reached $215 a megawatt/hour last week).
And there’s a not-so-simple answer:
The latter relates to New Zealand’s complicated generating system which – to the casual observer looking at the power stations – inspires admiration at their construction, as for example on the Waikato river or at Benmore in the south.
NZ’s system generates more than 80 per cent of its power output from renewable sources, but under the Ardern government aims to get to 100 per cent to minimise carbon emissions.
As Australian consumers are finding out, however, closing down fossil fuel plants, and relying on renewable sources can send prices soaring and brings another set of headaches.
NZ has relied on the Huntly power station with its fossil-fuelled generators as a back-up to its renewable system, but as long ago as 2016 its operator, Genesis, signalled the coal-fired generators would be phased out by 2025.
That would leave only two gas-fired units in operation.
But the government has come under pressure from lobby groups like Greenpeace to shut down its fossil-fuelled units because coal produces far more greenhouse gas emissions per therm of energy than gas does.
Genesis drew on cheap Indonesian coal to fuel the coal-fired plant, but now the price of Indonesian coal is around $US250-275 a tonne, up from $US150.
Former Genesis CEO Marc England said that by 2025, Genesis would only use coal in its thermal units in abnormal market conditions.
There would need to be help from the rest of the industry to provide energy security in a world without coal, England said.
Over the past 12 months, only 10 per cent of the electricity produced by the coal and gas units at Huntly were used for Genesis customers. The rest went to other companies to meet their own shortfall, he said.
As a result, the industry as a whole would have to come up with a solution to ensure there would always be a reliable source of electricity after coal is no longer available to be used in a crisis.
Those comments from Genesis’ former boss are instructive in light of the recent issues in the power system.
The NZ Herald, in a report by one of its top journalists Jamie Gray, explained that Transpower’s (recent) power supply warnings have highlighted the system’s reliance on renewable energy sources, particularly as the country aims to cut its carbon emissions.
On Tuesday a week ago, grid operator Transpower issued a consumer advice notice (CAN), a routine measure aimed at letting generators know there was a low level of residual generation in the tank for expected evening peak demand.
The week before, Transpower issued a “grid emergency” after Contact Energy’s 105 m/watt peaker at Stratford failed to start, one of Genesis Energy’s units at Huntly had to temporarily reduce output by 150 megawatts, and wind generation dropped from a forecast 90 megawatts to 30 megawatts.
Normal power supply was maintained throughout both events.
About 85 per cent of New Zealand’s power supply comes from renewable sources, a figure expected to hit 96 per cent by 2030.
As it stands, the country’s thermal generators step in during times of high demand.
Gray quoted Greg Sise, managing director of Dunedin-based consultants EnergyLink, who said CAN notices were not unusual and were a successful way of managing the system.
Sise said the ratio between peak demand and average demand is usually fairly static.
Wholesale power prices had been elevated, reaching $215 a megawatt hour.
Sise said hydro lake water levels were looking “quite reasonable” but tight gas supply and higher coal prices – US$250 a tonne from $125/tonne – had put upward pressure on spot power prices.
Analysts said the system was likely to be challenged as the country progressively used less thermal generated power and more renewables-generated.
New Zealand has several renewable power projects – mostly wind generation – under way.
This is the lesson which NZ could learn from Australia which, in shutting down its vast coal-fired generating system and turning to wind-power and solar systems, has seen the cost of electricity soaring, particularly when the sun doesn’t shine or the wind doesn’t blow.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
NZ’s system generates more than 80 per cent of its power output from renewable sources, but under the Ardern government aims to get to 100 per cent to minimise carbon emissions.
As Australian consumers are finding out, however, closing down fossil fuel plants, and relying on renewable sources can send prices soaring and brings another set of headaches.
NZ has relied on the Huntly power station with its fossil-fuelled generators as a back-up to its renewable system, but as long ago as 2016 its operator, Genesis, signalled the coal-fired generators would be phased out by 2025.
That would leave only two gas-fired units in operation.
But the government has come under pressure from lobby groups like Greenpeace to shut down its fossil-fuelled units because coal produces far more greenhouse gas emissions per therm of energy than gas does.
Genesis drew on cheap Indonesian coal to fuel the coal-fired plant, but now the price of Indonesian coal is around $US250-275 a tonne, up from $US150.
Former Genesis CEO Marc England said that by 2025, Genesis would only use coal in its thermal units in abnormal market conditions.
“It is our intent to remove coal completely by 2030. Abnormal market conditions would be a shortage of gas or a shortage of electricity.”
There would need to be help from the rest of the industry to provide energy security in a world without coal, England said.
Over the past 12 months, only 10 per cent of the electricity produced by the coal and gas units at Huntly were used for Genesis customers. The rest went to other companies to meet their own shortfall, he said.
As a result, the industry as a whole would have to come up with a solution to ensure there would always be a reliable source of electricity after coal is no longer available to be used in a crisis.
Those comments from Genesis’ former boss are instructive in light of the recent issues in the power system.
The NZ Herald, in a report by one of its top journalists Jamie Gray, explained that Transpower’s (recent) power supply warnings have highlighted the system’s reliance on renewable energy sources, particularly as the country aims to cut its carbon emissions.
On Tuesday a week ago, grid operator Transpower issued a consumer advice notice (CAN), a routine measure aimed at letting generators know there was a low level of residual generation in the tank for expected evening peak demand.
The week before, Transpower issued a “grid emergency” after Contact Energy’s 105 m/watt peaker at Stratford failed to start, one of Genesis Energy’s units at Huntly had to temporarily reduce output by 150 megawatts, and wind generation dropped from a forecast 90 megawatts to 30 megawatts.
Normal power supply was maintained throughout both events.
About 85 per cent of New Zealand’s power supply comes from renewable sources, a figure expected to hit 96 per cent by 2030.
As it stands, the country’s thermal generators step in during times of high demand.
Gray quoted Greg Sise, managing director of Dunedin-based consultants EnergyLink, who said CAN notices were not unusual and were a successful way of managing the system.
“It’s not unusual for Transpower to issue CAN notices advising that there is not enough generation in reserve – it does happen reasonably often,”.
Sise said the ratio between peak demand and average demand is usually fairly static.
“But it feels like the peak is picking up relative to the average, which is probably a sign of some underlying demand growth to come. Last week’s event was unusual because thermal plant is very well maintained,” Sise said.
Wholesale power prices had been elevated, reaching $215 a megawatt hour.
Sise said hydro lake water levels were looking “quite reasonable” but tight gas supply and higher coal prices – US$250 a tonne from $125/tonne – had put upward pressure on spot power prices.
Analysts said the system was likely to be challenged as the country progressively used less thermal generated power and more renewables-generated.
“That’s a big question,” Sise said.
“A lot of people are looking at this to look at how this is going to be managed, especially as New Zealand approaches 100 per cent renewables.”
New Zealand has several renewable power projects – mostly wind generation – under way.
This is the lesson which NZ could learn from Australia which, in shutting down its vast coal-fired generating system and turning to wind-power and solar systems, has seen the cost of electricity soaring, particularly when the sun doesn’t shine or the wind doesn’t blow.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
2 comments:
And will NZ learn from the dire energy policy of Australia, as well as Europe, the UK, the US etc?
Of course they won't. Most certainly not under this bunch of cabbage-brained green virtue-signallers. And I suspect, National won't be a whole lot better.
You see, both Labour & National are WOKE! That means they are filled with people who are pre-disposed to doing a whole raft of things which don't make much sense, despite expert scientific and engineering advice to the contrary. They'd rather believe in taking advice from the UN, Greenpeace or Extinction Rebellion.
Until we flush this generation of woke MPs, public officials, policy makers, academics and educators down the dunny we'll follow the same "I told you so" path that the rest of the West has.
I fail to see how a market driven electricity sector best serves consumers.
Perhaps there is a good case for nationalizing the generation and transmission sectors.
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