Genesis Energy has pushed back plans to stop burning coal for power generation to 2030, a move that has sparked the ire of environmentalists.
"We believe there is a future without coal but it is going to require some thinking and some planning and that's why we are giving 12 years notice," chief executive Marc England told BusinessDesk in an interview.
In 2015, the company said its last two coal-burning electricity generators at the 953 MW Huntly power station would be permanently withdrawn from the market by December 2018, but the following year it signed contracts with its rivals to keep the two coal/gas-fired Rankine units at Huntly available to the electricity market until December 2022.
Genesis chair Jenny Shipley today said the power company will phase out coal completely by 2030, and is committed to rule out using coal for electricity generation in normal market conditions by 2025.
Greenpeace New Zealand said the plan to keep burning coal until 2030 "stunned environmentalists".
"The fact that Genesis Energy, one of New Zealand's largest electricity generators, is celebrating this plan as a positive step forward for the climate is farcical and misleading," Greenpeace climate campaigner Amanda Larsson said in a statement.
However, England said the new timeline isn't a delay. Rather, Genesis had always guaranteed the units would stay open until the end of 2022 "but that never meant they would be definitely shut at the end of that point," he said.
Genesis has carried out analysis and "we believe the market requires that capacity beyond 2023" and its commitment to only use coal in abnormal market conditions from 2025 is assuming those units will be available and running after 2022 "but that was always our intent," he said.
England noted that in 2017, of the total generation produced by the two units, 90 percent was purchased by other market participants, not Genesis. "So, this is a market challenge, not a Genesis challenge."
The company's first-half earnings, released today, show the wholesale market was a big earner for Genesis, rising 29 per cent to $106.4 million, as low hydro-storage in the South Island caused rivals to buy power from Genesis.
England said Genesis wants to run Huntly's Rankine units on gas rather than mothball them entirely. "We have already reduced our emissions by 50 per cent and our coal use by 80 percent over the past 10 years, so we have worked hard to make those units more capable of running on gas and we run on gas whenever we can," he said.
"That is what has given us the confidence that we can remove coal from the system completely," he said.
Kupe gas production is supporting generation requirements at Huntly, although in the six months to December 31 the ratio of coal to gas was 63/27 versus 30/70 in the prior six month period, according to a presentation from Genesis.
New Zealand has the third-highest rate of renewable energy as a portion of primary supply in the OECD, behind Norway and Iceland, with around 85 per cent of electricity currently sourced from renewable energy.
Norway, however, has two years of storage in its lakes while New Zealand has six-to-eight weeks, said England. "That's a systemic problem for New Zealand in a highly renewable market," he said.
England said it would be "reasonably straightforward" to get to a 90 per cent renewable system, without too much detrimental impact on consumers. However, "we are worried about getting from 90 per cent to 100 per cent," he said.
Prime Minister Jacinda Ardern has said her government is committed to getting to 100 per cent renewable energy by 2035.
In a submission to the New Zealand Productivity Commission on a low emissions economy issues paper in October, Genesis said it "did not currently see a case for pursuing a fully renewable energy system (100 per cent renewables) because of the significant levels of complexity and economic risk this would incur. "
Genesis said it would only be possible through significantly overbuilding renewable-only capacity to account for dry periods or weather interruption. This would risk the reliability of the electricity system and "would expose consumers to much greater costs," it said.
England today said under current technology, there will be consequences, which could be costs to consumers or environmental.
"That is why I think the market needs to debate this over the next few years, to prepare to a coal-free system," he said.