What's happening here?
Contact Energy's decision to close its Otahuhu power station is the latest in an industry-wide move to move out of using gas to generate electricity. Contact joins Mighty River Power which will shut its gas-fired Southdown station at the end of the year, Genesis is ditching its coal burning units at its Huntly power station and has flagged away plans of building a gas-fired plant near Kaipara.
Why is this happening?
The stampede away from gas and coal is largely because of the rise of geothermal energy which last year surpassed gas generation for the first time since 1975. Contact has invested hundreds of millions of dollars in its geothermal operation, Mighty River more than $1.4 billion in its geothermal stations around Taupo. Gas costs money and can be expensive - depending on market dynamics. Geothermal heat to turn turbines is "free" and renewable. But like water that flows through hydro dams and wind to turn turbines, it does cost hundreds of millions of dollars to harness.
Reliance on renewable energy has led to shortages in the past, what's different now?
Geothermal energy, now more than 13 per cent of New Zealand's generation capacity is categorised as baseload. It works around the clock year round unlike other renewables. Wind turbines need wind and hydro dams need full lakes. The national grid has also been upgraded meaning moving hydro power from where most is generated - the South Island - to major markets in the North is much more efficient and reliable.
AdvertisementAdvertise with NZME.
What about other energy sources?
Although small, the volume of DIY power generation is rising. The price of solar power units is coming down quickly and more affordable game-changing battery storage for homes and factories is just around the corner. This will reduce reliance on electricity from traditional suppliers.
Is gas still being used to generated power?
Yes, Contact still has big plants in Taranaki and Genesis still has an efficient unit at its Huntly station. These can be cranked up at reasonably short notice when demand for power is high and prices are up. Todd Energy also has a new gas station planned. Gas is directly used in big factories, to make fertiliser for export and is used in homes. Exploration companies continue to look for gas which is more likely to be found in large quantities than oil. A world-scale gas find would give New Zealand the chance to export it directly as LNG.