Geothermal powers ahead of gas

Renewable generation has grown from 65 per cent in 2008 to 79 per cent in the year to June with the target of 90 per cent renewable generation by 2025.

Big breakthrough for renewable generation as sector makes progress toward 2025 target.

Geothermal has pipped gas generation for the first time as more plants come on stream.

The 12-month milestone has been welcomed by Energy Minister Simon Bridges who said this showed there was good progress being made towards the target of 90 per cent renewable generation by 2025.

"We've always been clear that should be on market principles rather than any subsidies or government regulatory regime. What we're seeing is that is happening," Bridges said.

Electricity Authority figures show for the year ended October 30 geothermal generation accounted for 16.3 per cent of the total and gas 15.8 per cent.

Bridges said that the percentage of renewable generation had grown from 65 per cent in 2008 to 79 per cent in the year to June.

"I'm very excited about geothermal It's the single area where New Zealand has most expertise in the world and I have the view that companies with some help from government should be doing more to leverage [that]," he said.

Mighty River Power generates around 55 per cent of geothermal power. Its chief executive Fraser Whineray said the rise of geothermal from fourth to second was significant for the country.

"It's a great achievement for New Zealand to see hydro and geothermal at the front of the grid for the first time," he said.

Relatively flat wholesale prices meant generators, including Mighty River, were pulling back on using expensive gas for generation.

Whineray said the company had already mothballed part of its fast start Southdown gas plant with capacity down from 175MW to 140MW.

Contact Energy, the other big geothermal generator, had also scaled back its gas generation and its baseload plant at Otahuhu remained under review.

Chief executive Dennis Barnes said gas prices had more than doubled in a decade and forced generators such as Contact and Mighty River to develop geothermal and others, such as Meridian and Trustpower, to build windfarms.

"The market inclination is to go somewhere cheaper," Barnes said.

The final part of Contact's geothermal development had come on stream in the past year and meant big savings on gas. "I used to have a gas bill that was $300 million to $400 million - next year I'll have a gas bill that is $100 million. I've replaced that with internally produced geothermal. It's the culmination of a natural efficient market responding," Barnes said.

Geothermal stations had a lead time of up to six years - two years to consent, a year to get the money and two to three years to build.

"Geothermal is the only true baseload renewable energy so a country not capitalising on it would be mad."

Mighty River is enthusiastic about using electricity to help power the country's 2.8 million strong vehicle fleet and the growing contribution of geothermal was key. "What it means is energy independence for the country so we're not reliant on imports. We've got enough consented renewable electricity projects to power every car its average distance and that's unique globally," Whineray said.

He said it was possible to drive four to seven times as far in a plug-in or hybrid car for the same cost using renewable electricity as on petrol.

He expected the cost of electric powered vehicles to come down as they were cycled through fleets here and overseas.

"This is less a story about near-term demand it's more a story about helping accelerate something that is great for Kiwi customers."

Generation mix
12 months to November:
• Hydro 59.6%
• Geothermal 16.3%
• Gas 15.8%
• Wind 4.6%
• Coal 3.0%
• Wood 0.7%.