Power options in a post-Maui world

By BRYAN LEYLAND*

The Centre for Advanced Engineering and Leyland Consultants (now part of Sinclair Knight Merz) have reviewed electricity supply and demand every two years since 1992.

Every report has recommended that the Government maintain a watching brief on electricity supply and demand.

We are therefore delighted that the Government has realised that electricity supply is too important to be left to the vagaries of the market and will commission more detailed modelling of electricity supply and demand than we have been able to do.

So what are the risks of shortages in the next few years? Let us look at the facts. We had shortages last year. Yet no major new generation is likely to be commissioned until 2006 when a 400MW combined cycle station is due to come on line.

By 2006, the demand will have increased by about 500MW. On top of that, the supply of Maui gas is declining rapidly and it can no longer provide additional gas in a dry year. (In the 1992 shortage and again last year a very large proportion of the hydro shortfall was provided by Maui.)

We won't be able to do this again. In dry years from now on, we will have to burn more coal and oil or reduce our demand substantially.

The amount of demand reduction needed would make the 1992 shortage, which cost the economy $500 million, look like a picnic!

Our reports have always highlighted the problems that could arise when the supply of Maui gas runs down and our recent reports identified the period from next year onwards as being critical for electricity supply.

This report lists 10 actions that the Government could to take to mitigate the risk of shortages. I hope they are given serious consideration.

The ministry engaged Tom Halliburton, an independent consultant, to compare our predictions with those of Transpower.

He concluded that some aspects of Transpower's modelling were optimistic and this led it to conclude that there was a serious risk from 2005, while our modelling - which was more detailed - identified a risk from next year.

Some of our scenarios assumed that in a dry period there would be a loss of generation of 1000GWh due to equipment failures or transmission constraints.

Halliburton suggested that this may be pessimistic, and he may well be right. But his most important recommendation was that more detailed modelling is needed. We couldn't agree more.

Our report developed two scenarios for mitigating the dry-year risk. The "short-term" scenario was based on providing for dry years by burning oil at New Plymouth and building a coal-fired station either at Marsden Pt or in the South Island.

Our modelling shows that under this scenario Huntly burns large amounts of coal in a normal year.

The second scenario we called "kia mahi tahi tatou" - "all of us pulling together".

This scenario shows that by developing our prime renewable resources - geothermal and hydro power - together with some wind farms and co-generation stations, we could increase our proportion of renewable energy and eliminate the need to burn large amounts of coal in a normal year.

But it does not eliminate the need to burn coal or oil to make up for the hydro shortfall (about 20 per cent of demand) during the critical four-month dry period.

Wind power, on its own, cannot fill the gap. Wind is intermittent and, to back it up, we need to continue develop hydro power or build more coal-fired stations.

We do not believe that demand-side response - massive load reductions - can solve the problem. To reduce demand by 20 per cent, a huge increase in power price would be needed, forcing many productive industries to reduce output.

Our report recommended that studies be carried out to determine the balance between the cost of holding reserves and the cost to the economy of power shortages.

In conclusion, there is a real risk of power shortages in any dry year from now on.

The options are: power shortages and high prices, burning large amounts of fossil fuels in a normal year or continuing to develop our best renewable resources. The choice is ours.

* Bryan Leyland is a consulting engineer specialising in the power industry.

Further reading
Feature: Electricity

Energy Efficiency and Conservation Authority