Leave the gas where it is – we can always ship in coal (at a price) to keep the lights on

Fabulous,  isn’t it?  We  mean it’s the stuff of  fables, rather than  “fab”  in the  modern idiom.

The  country might have to  import coal  to keep  the lights  on.  And  yet the government says we can  do  without  the cleaner-burning  gas  which may lie  undiscovered  off the  NZ  coast.

Latest  news on the electricity front  is that – because   of  declining hydro storage, the drier outlook and the shutdown of production from the  Pohokura gas  field – NZ  will have to bring coal in from abroad as fuel for the Huntly power station.

Genesis  Energy says  it is  “close to pushing the button on some coal  imports”  because it needs to  maintain stocks at  Huntly  so it  can keep the  lights on.

Wholesale power prices averaged $290 a megawatt-hour at Otahuhu last Tuesday when modest wind generation compounded the impact of the reduced gas supply and declining hydro storage. That was up from about $102/MWh at the end of September.

National hydro storage has been relatively static in recent weeks – when usually it would be rising with the spring melt. It is now about 21% below average for this time of year, according to NZX Energy data.

Other factors  putting  pressure  on  electricity  supplies  include extra demand because of  the cold  snap in the South Island and  the ramp-up of supply  to the Bluff aluminium  smelter as  it  brings on the fourth potline.

Genesis Energy’s gas and coal-fired station  at Huntly has been using its two  Rankine units to  make up the shortfall.

It  has a  local supply contract  for coal  from  Bathurst Resources, but this has only  limited supply.

Meanwhile, wholesale  electricity prices  are higher than usual at this time of the year and some  reports  suggest they may stay high for another month, with full production from the Pohokura gas field not expected to resume before late November.

Output from the field, the country’s biggest, was reduced about three weeks ago after the operators found a shutdown valve on the offshore production platform was not working as designed.

The shutdown, coupled with falling hydro storage, pushed wholesale electricity prices to a 13-month high.

Operator Shell said a replacement valve has been tested and prepared for installation. The current forecast is Pohokura offshore production will not resume before late November.

Pohokura is owned by Shell, OMV and Todd Energy. It typically delivers more than 70 PJ of gas annually from five offshore wells and three wells drilled from onshore.

Output from the onshore wells is unaffected.

Genesis’s  Rankine units   can   run on gas or coal but the  gas cut from Pohokura  means  they  are  operating  on coal.  CEO  Marc England told the  NZ  Herald  the  current constraints  should serve as a reminder to the government on the   importance of gas.

“It’s a bit of  warning for the change  NZ will have in a world without  gas”.

 As  Genesis sees  it, the government’s ban on new offshore exploration will create uncertainty over long-term gas supplies and risks delaying the shift away from coal in electricity generation. The company, which aims to stop using coal at its Huntly site by 2030, said it has been able to halve its emissions and its coal use by 80% during the past decade because it has had access to gas.

The industry can play a key role in meeting the country’s emissions targets – through the wider electrification of the economy – but an increasing reliance on wind and hydro generation will still require thermal backup for “multi-month” dry periods and when the wind doesn’t blow.

The company says in its submission on the Crown Minerals (Petroleum) Amendment Bill:

“Based on currently available technologies, without thermal generation capacity and the development of gas storage capability, security of supply in NZ will be dependent on coal or be compromised,” 

It recommended the government delay considering the bill until the Climate Change Commission has laid out the most effective path to get the country to net zero emissions by 2050.

Genesis said that, while the electricity sector can play a critical role in reducing emissions from sectors like transport, doing so while also reducing its own emissions and without reducing security of supply will be “challenging.”

Without new gas discoveries, NZ has about 10 years’ supply at current consumption.

Uncertainty over the source of gas in the 2030’s will make it more difficult to remove coal from the generation system and harder to justify the capital investment in the additional gas storage that will be required.

Genesis said that diminishing domestic gas supplies will require imports of LNG – currently two to three times the cost of local supplies.

Meanwhile   those  who believe  NZ  should be the world leader  in action to  curb   global  warming are  urging  a halt to any fossil fuel (including gas)  production.  This would mean  not  just a cut in living standards,  but also power shortages when the  hydro  dams  are empty, the wind is not blowing and the   sun isn’t shining.

But,  hey,  that’s an  opportunity for Megan Woods  (or her successor)  to  tell   people  living  in  the southern  regions  how to  construct an igloo in the backyard,  when the  snow storms  come.

One thought on “Leave the gas where it is – we can always ship in coal (at a price) to keep the lights on

  1. We need a government that will finally declare that the climate change thing is natural and that declaring ecomonic war on oursleves is madness. How long before we get to that I wonder…

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.