As the Government moves to reduce New Zealand’s greenhouse gas emissions, the public will be asked to make a tradeoff. Less fossil-fuel generation equals more dams, wind turbines and pylons.
In a valedictory appearance at the National Power Summit this week, outgoing Meridian Energy chief executive Keith Turner was in no doubt about the fundamental issue facing the electricity sector over the next decade.
“The big issue in the next five to 10 years is how the New Zealand Energy Strategy is going to play out,” he said.
The centrepiece of the strategy, which was released by the Government late last year, is a target that at least 90 per cent of the country’s electricity generation will come from renewable resources, such as wind, hydro and geothermal, by 2025.
“These are lofty goals,” Dr Turner said. “You can already see resources starting to mobilise toward them. But the biggest challenge will be the government response and how much teeth the Government gives it. It’s one thing to say what we should do. It’s another thing to give us the tools to enable us to do it.”
At present, 68.5 per cent of New Zealand’s 8900 megawatts of supply is generated from renewable resources.
Based on an estimate of a 20 per cent to 25 per cent increase in total electricity demand by 2025, Energy Minister David Parker reckons the country would need an extra 175MW of renewable supply a year to meet the target.
A significant amount of this will come from geothermal projects around Taupo, and about 10 major wind farms and more hydro projects will probably be needed, he says.
“We don’t need to dam every river or put turbines on every ridge, though. History will show it’ll be pretty easy.”
Contact Energy chief executive David Baldwin says the 90 per cent target is world-leading, but he differs on how easy it will be to achieve.
“It will be very visible, with large dams, wind farms and transmission lines. It will be a lot harder than we think. But we are absolutely committed to help meet this goal.”
Perhaps seeing a chance to advance unpopular large hydro projects, Mr Baldwin says he thinks they will be necessary to meet the target and Contact has some in the pipeline.
Dr Turner not only agrees with Mr Baldwin on the need for big hydro projects but says Meridian has been trying to get some off the ground.
“Project Aqua [called off in 2004] was the starting point. The Northbank tunnel follows on from that and we’ve got Mokonui on the West Coast, and another two or three up our sleeve.”
“All companies have their favoured projects,” Mr Parker says. “If the energy strategy was reliant on major hydro projects I would be worried. South Island rivers are as important to South Islanders as Auckland beaches are to Aucklanders.
“We’ve got considerable geothermal and wind that come in below the cost of most hydro. That would suggest we are going to see more wind and geothermal than hydro. But it’s not the Government’s decision about which projects go ahead.”
Those decisions will be made by local authorities through the Resource Management Act and the Environment Court. Mr Baldwin sees project consents as the key executional risk for the target.
To ensure national interest arguments are considered, the Government hashas signalled increased use of call-in provisions under the RMA which allow the environment minister to refer decisions to a board of inquiry or directly to the court.
In January, the minister called in Contact’s Te Mihi geothermal project near Taupo and Unison’s Te Waka wind project near Hastings.
The Government is also preparhing a national policy statement under the RMA which, Mr Parker says, will give renewable projects a greater chance of being approved.
He is confident that once the statement is in place the Government will have the policy tools to meet the 90 per cent target.
“It won’t result in central government taking the planning decisions. That will still be taken by local government and the Environment Court. What it will do is require those authorities to take into account the need for more renewable projects to get consents.”
But how committed will future governments be to the target?
“Big policy swings inside the life cycle of investments can be very expensive and affect security of supply,” says Dr Turner.
“One thing the industry cannot deal with is a dramatic change in policy direction,” says Dr Turner.
“Big policyswings inside the life cycle of investments can be very expensive and affect security of supply.”
National’s energy spokesman, Gerry Brownlee, says the 90 per cent target is “laudable” but adds that the Government’s strategy has cut off a number of fuel options.
“[Mr Parker’s] determination to outlaw new thermal generation has ensured that [coal-fired power station] Huntly will continue to bellow out copious quantities of carbon dioxide for the next 20 years.”
Mr Brownlee is also far more optimistic than Mr Parker about the potential for Solid Energy to use coal seam gas to generate electricity.
National will have emission reduction and renewables targets and would make more use of call-in provisions, but believes changes to the RMA will be required to achieve the targets, he says.
“We believe it’s fundamentally unfair to require local authorities to go through exhaustive processes to assess projects which in many ways are beyond their capacity. They are also being put in a position where they must protect local interests ahead of national ones.”
A better-funded electricity grid will also be required to meet the 90 per cent target. A heavier reliance on an intermittent power source such as wind requires more capacity and a more technically advanced grid as more electricity needs to be moved around in times when the wind is not blowing.
“Everybody in the world who is looking at significant wind is having problems with what sort of upgrades they need because they all recognise you have to have a grid with greater capability,” says Transpower’s general manager of grid investment, Tim George.
New wind farms and dams also need new transmission lines to connect to the grid. Genesis Energy chief executive Murray Jackson is cautious, though: “Every nook and cranny of New Zealand can’t end up with a wind farm and a $300 million transmission line feeding into the national grid. We may want to zone different areas for wind.”
Genesis Energy chief executive Murray Jackson describes six or seven companies all helicoptering around New Zealand looking for different wind sites as scary.
“Every nook and cranny of New Zealand can’t end up with a wind farm and a $300 million transmission line feeding into the national grid,” he says.
“We may want to zone different areas for wind.” Zoning areas would make it a lot easier for Transpower to plan its grid investment, Mr George says.
“The amount of wind is going to be limited by the cost of things we have to do to the grid. In my honest opinion, everyone is running around saying ‘yes, we need a robust grid’ and ‘yes, we should develop it’ but no one has thought it through carefully in terms of what it means and how we are going to get approvals for some of these issues.”
Most big electricity generators, and particularly those with strong renewable portfolios, seem to have bought into the 90 per cent target, but they are under no illusions as to the difficulty of getting consent for some of these plans.
“It’s ambitious but achievable,” Mr Baldwin says. “But it goes well beyond the energy industry to achieve it.”
By Andrew Janes
The Dominion Post
1 March 2008
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