Brian Leyland: Bold power move will secure supply

COMMENT


Eighteen months ago, the Centre for Advanced Engineering reviewed electricity supply and demand. The study concluded that "the country appears to be facing a crisis situation: the dry year risk is high in 2003 and 2004 and extremely high after 2005 when there will be little reserve capacity available to meet even a one-in-five dry year."

Events since have shown that most of the key assumptions of the study were optimistic.

Load growth is higher than we assumed, the gas supply is declining faster than predicted, and Project Aqua (560MW) and the Huntly combined-cycle station (400MW) are delayed by at least one year. Gas from the Kupe and Pohokura fields will be available about a year later than expected, and the prospects of finding a large gas field have not improved.

On the positive side, the Government has commissioned the Whirinaki station, which will provide 150MW of reserve power, and Genesis will soon commission a 40MW gas turbine at Huntly. These two stations will struggle to meet one year's normal load growth.

What we need is a range of projects that will meet the growth in demand over the next 10 or 15 years. Something like 500MW of new base-load generation is needed now, and another 500MW in the next few years. Between now and 2020, we may need 3000MW of new generation to meet load growth and another 2000MW to replace aging thermal stations like New Plymouth (400MW), Huntly (1000MW), Otahuhu (350MW) and Stratford (350MW).

The main reason we face serious shortages is that generators can't get at the "fuel" - gas, coal, water, geothermal steam - they need to generate electricity. If they could, an overhauled electricity market plus the reserve capacity provided by the Electricity Commission might be able to provide the power we need to meet load growth and replace Maui gas.

Why are we short of fuel? Gas is in short supply but the country has plenty of undeveloped hydro and geothermal power and coal reserves that could provide all the electricity we need for several hundred years.

There are three problems: the Resource Management Act, the Government's commitment to the Kyoto Protocol, which has made it impossible to turn these reserves into electricity in time to avoid the risk of increasingly severe power shortages, and the fact that most of the coal and hydro resource is in the South Island, not the North Island where it is needed. The South Island may also have large offshore gas fields.

Some people believe that renewables such as wind power can save the situation. While there is no doubt they can help, the best wind power can do is provide for one or two years' load growth. Wind power is unpredictable and intermittent, and overseas experience has shown there is a definite limit to the amount that can be absorbed by a power system such as ours.

Fifty years ago, when long-term planning was taken for granted, wise engineers decided that New Zealand had to choose between meeting the North Island load growth by building a series of coal-fired power stations, or developing South Island hydro power and shipping it to the North Island over a direct current (DC) link from Benmore to Wellington.

They needed a DC link 10 times larger than the only other DC link in the world, and much of the technology was unproven. Undeterred, they made the bold, far-sighted decision that has given us the low-cost and reliable supply of electricity we have enjoyed until recently.

Once again, there is a need for foresight and an opportunity for another bold decision that could give us a reliable, low-cost supply into the foreseeable future. The alternative is continued power shortages, and increasing dependence on imported coal or imported natural gas, which would give us a massive increase in power prices. Dependence on imported fuel should not be contemplated until all options for using indigenous energy reserves have been investigated.

Most of our reserves are concentrated in the bottom half of the South Island. We have huge reserves of Southland coal, Project Aqua, the potential for more hydro development on the Clutha, and the possibility of offshore gas. These could easily supply the power we need at a low cost (about 5c/kWh).

Although this power is not where it is needed, it would cost only about 2c/kWh to transmit it over a new DC link. So South Island power could cost less than new power stations in the North Island running on imported fuel (7 to 12c/kWh).

We need to investigate building a new 2000MW direct current link from the lower South Island to north of the Auckland isthmus.

Transpower is contemplating spending more than $1.5 billion upgrading the existing 220kV alternating-current transmission system between Benmore and Christchurch, between Whakamaru and Auckland and across the Auckland isthmus. It seems that Transpower is assuming a single-generation scenario - Project Aqua in the south and more thermal generation somewhere in the north. It has not presented any alternative scenarios. This would be the first stage of a project with an eventual cost of $2.5 to $3 billion.

A new DC link would cost about $2 billion. It would provide a new "motorway", bypassing the existing overloaded system, and eliminate the need for the upgrade of the 220kV grid. The existing DC link would continue to supply Wellington and could be tapped off to boost supply into Christchurch.

With this new DC link, several options for low-cost power generation become viable. These include a 1000 to 2000MW power station using Southland coal, completing the hydro-power development of the Waitaki and Clutha rivers to give us more than 1500MW of renewable energy, tapping South Island wind resources, and providing a market for offshore gas fields.

A new DC link may be the key to another innovative concept. The building of a large pumped storage scheme near the Roxburgh power station has been suggested. This could store so much water that it would effectively eliminate the problem of dry years. In addition, the flexibility of the storage station would make it possible to substantially increase the amount of wind power on the system by balancing the fluctuating output from wind farms.

Fifty years ago, we faced severe shortages and high prices. Bold decisions based on long-term planning avoided them.

Before we burn our boats by deciding to upgrade the 220kV system, we again need to consider imaginative schemes - and be prepared to follow up with bold decisions that would give us a secure supply at a price independent of exchange rate fluctuations and international gas prices.

* Bryan Leyland, of Auckland, is an electricity industry consultant.