Genesis Energy's coal and gas-fired facility at Huntly. Photo / 123RF
Genesis Energy says it will increase the coal stockpile at its Huntly Power Station for what the industry expects to be another challenging winter in 2025.
The generator-retailer said the move was to ensure supply for its customers as a result of the country’s gas supply issues and changes in supply chain processes.
Wholesale power prices spiked to over $800 a megawatt hour in early August due to low lake levels and constrained gas supply.
Gas made available at the time by methanol exporter Methanex, followed by heavy rain, took the pressure off the system, which has seen wholesale prices return to more normal levels.
However, national grid operator Transpower has already signalled tight market conditions experienced this winter were possible again next year.
Transpower earlier this month said it was critical the industry continued to focus on fuel storage and availability ahead of 2025, including both controlled hydro storage and thermal fuel arrangements.
Peak capacity risks, especially in cold snaps, would persist until there was sufficient investment in flexible resources such as batteries, demand response deals and peaking generation, it said.
Genesis — which supports the hydro-dominated system when lake levels are low — said its stockpile target is about 500 kilotonnes (1000GWh) to cover the autumn and winter peak demand period for its customers between March and August 2025.
The target will then reduce to about 350 kilotonnes (700 GWh) from September to February 2026.
The only other coal stored at Huntly will be for the holders of Huntly firming options (HFOs) and market security options (MSOs) where they have committed to orders.
Genesis said it would report on the size of the two stockpiles each quarter to provide greater transparency to the market.
As of September 30, there were 243 kilotonnes stored, including 11 kilotonnes equivalent for HFO and MSO counterparties.
Chief wholesale officer, Tracey Hickman, said Genesis’ priorities were to ensure its customers could rely on supply through the winter and to play its role in the country’s energy security.
“With the continued strain on the gas market, securing a larger coal stockpile for Huntly Power Station is a necessary step to provide that certainty and stability.
“Energy security is about both supply and flexibility.
“The HFOs play a key role by providing system security through giving market participants the opportunity to secure generation at predetermined prices, helping them manage the uncertainties of peak demand and dry periods,” she said.
“We are also thinking about how to maintain fuel diversity while supporting energy resilience as part of New Zealand’s transition to a lower-carbon future, with options like biomass and longer-term contracts.”
HFOs allow generators, retailers and large businesses to secure supply and price certainty.
The current HFOs are for two years with 85 MW secured by multiple parties.
The stressed gas market that contributed to this winter’s issues is expected to remain under pressure for the next two to three years.
Huntly Power Station requires a specific type of coal, which Genesis can currently only source from a limited number of mines in Indonesia.
“Upon resuming imports this year, we became aware of regulations governing mineral and resource extraction in Indonesia which allocate producers quotas of coal for domestic supply and export,” Hickman said.
Quotas are set ahead of each calendar year. Once the export quota has been reached, mines wanting to extract further coal for export are required to apply to the Indonesian Government for approval.
While applications are usually approved quickly, delays have been experienced recently.
Accordingly, to manage the risk of delays, it is prudent to order expected fuel supplies well before the end of the calendar year. Genesis has informed HFO holders of this development so they can factor that into their planning and ordering.
New Zealand’s coal and gas-fired generating assets are getting old.
Contact Energy’s gas-fired Taranaki Combined Cycle plant is due to be retired at the end of this year.
Genesis Energy’s gas-powered Unit 5 supplies baseload power to the system.
It also has three Rankines, which can run on coal or gas. A fourth was retired from service some time ago. As it stands, one unit was taken out of service earlier this month to replace transformer bushings.
“The unit isn’t required at the moment by the market and while it’s out we’re taking the opportunity to undertake maintenance,” a spokesman for the company said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.