Pete Hodgson dark on coal

By LIAM DANN

Energy Minister Pete Hodgson is trying to dampen enthusiasm for a coal-powered solution to New Zealand's electricity generating problems.

He told delegates at the National Power Conference in Auckland that renewable sources would ultimately meet most of the country's needs because they were cheaper.

Coal-fired power stations might be built in the next 10 years, he said, but they would have to be economic with the carbon tax.

Those in the industry who were hoping the carbon tax would go away if the Kyoto Protocol was not ratified had missed the point, he said.

"A price on carbon is being irreversibly embedded in the global economy," he said.

"New Zealand cannot shut itself off to development. Attempting to would simply turn us into a museum for outdated technology, just as we once turned our nation into a quaint South Pacific car museum."

The carbon charge would add about 1c a unit to the cost of power generated by gas-fuelled plants and about 1.5c a unit for coal-fuelled power.

"A carbon charge is not so much about pricing fossil fuels out of the market as about pricing alternative, low emission, energy efficient technologies into it."

The extent to which coal was an option would be determined by the amount of new gas found, he said.

Hodgson said that after Project Aqua's demise the days of large-scale hydro-electric projects were over.

"We are at a turning point in New Zealand's energy history," he said. "Future hydro development is likely to be small to micro in scale."

The gradual erosion of hydro's dominance of the electricity system would at least decrease New Zealand's vulnerability to shortages in dry years, he said.

But no new source would be as cheap as hydro electricity.

Hodgson said comment after the axing of Aqua had not recognised that work had started on other energy projects.

Projects which would start producing between now and 2007 would provide 840MW of power.

He included among those the 400MW Genesis gas turbine at Huntly, which is scheduled to be running by December 2006.

But Genesis chief executive Murray Jackson cast doubt on the timing of the project, telling conference delegates the company had not been able to find enough gas to go ahead with it.

Hodgson also included the Government's 150MW oil-fired reserve generation plant at Whirinaki in Hawkes Bay. That plant has been commissioned for emergency use and will not add to baseline capacity.

Among smaller projects, Hodgson highlighted Meridian's 90MW Te Apiti wind farm.

The resource consent process for that project took only four days.

Wind power was becoming more attractive as capital costs fell and electricity prices rose, he said, and was expected to develop rapidly over the next few years.

"Clearly wind cannot be the only answer to our growing electricity needs," he added, raising a chuckle from delegates who had already expressed a lack of patience with political hot air.

Hodgson also repeated his confidence that more natural gas reserves would be found.

"There is no doubt that New Zealand has plenty of gas," he said.

"We just have to drill enough holes to find it."

The Government was investigating whether it could provide a more positive environment for gas exploration, and decisions would be made in the next month or two.