MAJOR ELECTRICITY USERS' GROUP

Wednesday, 26th March 2008

Electricity security being compromised

“The latest report concluding that security of electricity supplies will be compromised by Government policies should be of concern to all Ministers,” said Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG).

He was commenting on the release today of a report by the NZ Centre for Advanced Engineering (CAENZ) analysing the effects of the renewable energy targets in the electricity sector on the gas industry prepared for the Petroleum Exploration and Production Association of NZ.

“Not only does the report conclude that the moratorium on thermal generation will put supplies of electricity at risk; CAENZ also forecasts electricity prices will rise more quickly than would have occurred with a balanced approach to new generation. The CAENZ report fills in some of the analytical work that government should have done.

“The message is clear – persisting with the renewable generation targets and a ban on new thermal power stations will be costly for all consumers because of higher and more volatile spot electricity prices plus higher transmission costs. The difference between an all renewables target and a more balanced mix of new generation will add another 2 c/kWh, or in aggregate approximately three quarters of a billion dollars per annum to consumer power bills.

“Security of supply will also be at risk because some renewables are significantly less predictable than conventional thermal power stations. While some of the security of supply risks associated with a high renewables scenario can be reduced by adding lots more thermal back-up power stations, the costs per unit of output from thermal back-up plant are much higher than modern highly efficient base load gas fired combined cycle power stations such as the existing Taranaki Combined Cycle plant (TCC), Otahuhu B, the new e3p plant at Huntly and proposed Otahuhu C and Rodney power stations.

“Petroleum exploration and development investors will on the one hand see a relatively reasonable regime to explore but on the other hand see government intervening to eliminate gas power stations as possible customers when new gas discoveries are found. The failure of the NZES to take a strategic view and detailed analysis of the risks to the viability of the gas market is appalling.

“The CAENZ report is a further nail in the coffin of the NZES and clearly exposes the shortcomings of the politically mandated renewables targets and proposed moratorium on thermal power stations” concluded Mr Matthes. It is time the Government took the moratorium proposal off the table and a strategic approach designed to protect electricity supplies and keep costs competitive was put in place.

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