Contact Energy plans to build back-up station

By CHRIS DANIELS energy writer

Contact Energy is planning to build a power station that should be ready next winter to fill the looming gap in electricity supply and demand.

The small station, most likely to be built at Contact's existing Otahuhu site, would generate up to 192 megawatts of power.

By comparison, the Huntly power station can generate 1000 megawatts, while the Clyde Dam can produce 432 megawatts.

Assuming resource consents are granted, Contact hopes to have the station built and generating electricity by June next year.

Designed as a back-up station, its four jet engines would run on oil distillates (diesel and/or jet fuel) and natural gas.

They would sit idle most of the time, but be available for use in the event of a dry winter affecting South Island hydro storage lake levels.

Contact is also looking at building a station at Whirinaki, near Napier. This station would generate 150 megawatts of power, using distillates, but could later be converted to run on natural gas. While the Whirinaki project has more suitable resource consents in place, its disadvantage is its distance from Auckland, where most power demand is.

The speed at which such a station could be built is dependent on what changes the Government may be planning for the electricity industry.

Contact chief executive Steve Barrett said while the company thought such a new station would be economically viable "a swift decision will be impossible if there is a change to Government policy which materially changes market structure".

Contact was not holding the Government to ransom, he said, but needed clarity on how it would be able to earn money from the station and the $100 million needed to build it.

His hopes of limited change to the market system seem to have already been quashed by comments made by Prime Minister Helen Clark.

"What I signalled quite a few weeks ago now is my complete dissatisfaction with the nature of the energy market, which I don't think gives appropriate signals about the level of investment needed to secure energy supply," she said from Europe.