25 Jan 2016

Energy leaders discuss industry future

6:43 am on 25 January 2016

Talks are underway which could perpetuate the use of coal to generate electricity in New Zealand.

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Photo: AFP

New Zealand's last two coal-fired power plants are in Huntly and are scheduled for closure in 2018.

Electricity industry leaders are worried this could leave a shortage of power from 2019 and have been meeting with the owner of the Huntly plants, Genesis Energy.

Genesis chief executive Albert Brantley said the plants were uneconomic under current arrangements but he was open to commercial suggestions.

Genesis Energy Huntly Power Station is a thermal power station that can use coal, gas or both simultaneously as fuel.

Genesis Energy's Huntly Power Station Photo: SUPPLIED

"There has continued to be speculation about the logic of keeping coal fired generation at Huntly open.

"We have been open that if we can see an economic justification for doing so which allows us to make a reasonable return for our shareholders, then we will do that.

"We are engaged in discussions with various parties right now and we will continue to look for solutions."

Mr Brantley would give few details about the talks but one of the main contenders is Meridian Energy, whose chief executive Mark Binns sounded the alarm last November.

"It is the biggest issue for the industry as a whole," he said at the time.

Industry observers told RNZ Meridian was particularly exposed to risk from the Huntly shutdown and Mr Binns has himself warned his company might have to reduce the number of customers it serves.

But Transpower has also warned of risks after 2018.

In the second of two reports, it called the security of supply in 2019 'highly uncertain'.

It said the dry winter risk would still be very high, even if 100 Megawatts of new electricity generation were installed after the Huntly plants shut down.

If 350 Megawatts were set up, the risk would slip from very high to high, and it would be moderate if 600 megawatts were installed.

Genesis Energy said any developments on keeping the Huntly plants open would have to be settled sometime this year, to give enough time to revise the 2018 deadline.

Tiwai Point aluminium smelter.

Tiwai Point aluminium smelter. Photo: Wikicommons

The issue is affected by uncertainty over the aluminium plant at Tiwai Point in Southland.

The plant uses one seventh of New Zealand's power and could shut down from 2018 or could stay open, leaving the electricity industry frustrated about how to plan for the future.

The Electricity Authority has taken a dissenting view over the effect of closure of coal-fired plants, saying consumers would not be left short of power.

Electricity Authority chief executive Carl Hansen said the industry would work it out, as it did during a significantly dry period in 2012.

"What we're seeing from the industry themselves, in the way they're pricing the contracts for 2019, they're essentially saying this will be sorted out," he said late last year.

In another development, Genesis said as well as debating its coal fired plant, it would look at a new gas-fired plant at the same site, which could be fired up quickly to meet a sudden jump in demand.

Mr Brantley said planning for this was well advanced.