Major energy provider Genesis Energy Ltd (NZX & ASX: GNE) has warned the Government of “exceptional”’ market challenges on the issue of the provision of gas.
The New Zealand Herald reported that Genesis was now looking at importing coal as it grapples with a tight wholesale electricity market and a shortage of gas.
The Herald said the wholesale electricity market is under pressure from a raft of factors, such as lower-than-normal lake levels, temporary disruption of gas supply from the Pohukura field, extra demand from the South Island and the ramp-up of a fourth pot line at Tiwai Point aluminium smelter.
The Huntly gas and coal0fired power station owned by Genesis has recently been using its two generating units, known as Rankines, to make up the shortfall. The units can run on gas or coal, but the gas shortage, caused by an outage on the offshore Pohukura production platform, means coal has been providing the generation.
Genesis chief executive Marc England told the Herald current constraints faced by the market were exceptional and should serve as a reminder to the Government, which has stopped issuing offshore oil and gas exploration permits, as to the importance of gas.
“We are close to pushing the button on some coal imports because we need to keep our stocks up at Huntly so that we can keep the lights on,” he told the newspaper.
Genesis has a local supply contract with Bathurst Resources Ltd (ASX: BRL) from nearby mines in the Waikato, which England said had only limited supply.
“When we do that (import coal), New Zealand is suddenly not self-sufficient for its energy,” he said.
The Herald said adding to the supply-demand problem was a planned outage of Unit-5 - a highly-efficient, gas-fired turbine at Huntly - for five weeks later this month and next month. Unit 5, which serves 400,000 households, is already running at half its capacity due to the gas shortage.
“It's a bit of a warning for the change that New Zealand will have in a world without gas," he said.
He said Genesis supports the move towards renewable energy but that “we need to do it in a more orderly way. We are worried that removing gas from the mix will make it harder to remove coal from the mix, and gas has half the emissions of coal.”
When South Island hydro levels fall, thermal plants kick in but Marc England said what's happening in the market is bigger than that. Hydro storage levels across the North Island and South Island are at 82% of average for this time of year.
“At 82% of average, and no meaningful rainfall forecast for the next two weeks or so, the projections are for levels to be at 75% to 78% by the end of this week, and for it to fall from there,” he reportedly said.
“What is interesting in our industry is that, unless there is a big rain storm between now and Christmas, there is a risk we will go through summer with low lake levels and start next winter low as well, so that's something to keep a close eye on.”
Huntly's two Rankines have been used more often over the last 18 months than in the previous 18 months.
Sources: nzherald.co.nz; nzresources.com