New gas plants bill tops $1bn

By FIONA ROTHERHAM

Three New Zealand electricity generators are considering building gas-fired stations in the North Island within five years to meet increased demand.

TransAlta and its majority shareholder, Natural Gas Corporation (NGC), said yesterday that they were investigating the feasibility of a new gas-fired plant capable of generating 400MW.

Contact Energy confirmed the potential for further development at its Otahuhu site to build another co-generation power station.

And Tauranga-based TrustPower said it was looking at building a gas-fired station in the central Waikato for use during peak demand.

The combined proposals could represent investments of $1 billion.

TransAlta is the country's largest electricity retailer but holds only 12 per cent of the generation market. That leaves it vulnerable to price rises in the electricity spot market.

Its announcement came as peak power prices continued to hit high levels this week, Contact's Otahuhu B power station, the country's newest power plant, having been sidelined since last month.

TransAlta and NGC said the feasibility study would be completed within a few months and a decision made soon after. Preliminary work indicated a 400MW station would be needed in three to five years.

Contact said its Otahuhu site was appropriately zoned, had gas transmission running through it, and was close to the biggest market, Auckland.

By industry rule of thumb, it costs $1 million per MW to build a thermal power station, and double that for hydro.

Some additional hydro supply is either coming on stream or being considered at existing stations.

State-owned Meridian Energy said the second Manapouri race tunnel would boost the station output from 590MW to 760MW, an increase large enough to service Dunedin. Because of tunnel drilling difficulties, the project will not come on stream until mid-2002.

Despite industry speculation, the country's largest generator said it had no plans to build a North Island station to gain a national spread.

It is unlikely environmental objections will allow any new hydro to be developed and wind technology is still too expensive to compete with current gas prices.

Uncertainty remains on gas reserves as Maui runs out, despite the Pohokura find. This makes it harder for generators to grab long-term gas contracts.

The other big question is the impact of burning more fossil fuels on the Government's agreement under the Kyoto Protocol to lower carbon dioxide emissions.

A carbon tax is under consideration and would have to be factored into the costs of any new gas-fired generation.

TransAlta and NGC said modern technology gas-fired power generation would help achieve environmental emission objectives by displacing generation from older, less efficient thermal stations.