3. Discussion
Combined cycle gas turbine plant, at just over 5c/kWh (for a fuel cost of $5/GJ), continues to be the lowest cost option for fossil fuelled electricity generating plant. Advanced open cycle gas turbine and Southland lignite fired plant are the next cheapest. If FGD is not required the Southland lignite plant is only slightly more expensive than the advanced CCGT. The lignite fired plant has a much higher capital cost/kW but this is more than compensated for by the cheap fuel. Economies of scale are illustrated by the 1.0c/kWh higher capital charge for the 150 MW lignite plant over the 500 MW plant. The plant on the West Coast (SI) comes out relatively costly overall as a result of its higher capital cost/kW (because of its lower MW output), assumed higher coal sulphur levels and an assumed higher coal price.
Whilst plant based in Southland is estimated to be the cheapest coal fuelled option it should be recognised that the bulk of the electricity load is in the northern half of the North Island and the cost of losses etc associated with transporting the electricity to the load needs to be taken into account. It should be noted that, while average transmission losses over the North and South Island networks, including the HVDC link, tend to vary between 5.5 and 6.5 %, the magnitude of the marginal losses can at times be high, reaching 5-10% over the South Island, 10-15% over the HVDC and 20-30% over the North Island,1 effectively making it less competitive with electricity generated from Huntly coals.
Transmission losses can be quite variable in both the short-term, as well as over longer periods where increasing demand, new generation and transmission upgrades will change the mix of factors that influence transmission losses and hence the associated electricity prices at the points of demand. With the cost of these losses assessed on a marginal loss basis, the increase in price for electrical energy can, even when the half-hourly price is 6c/kWh at the grid injection point in say, Southland, or the West Coast, be as much as 3c/kWh. However, it is more likely that losses for generation in the Southland or West Coast regions of the South Island that effectively responds to a demand increase in the Auckland region will be above, but closer to, the average losses than the high marginal losses referred to earlier. From the more detailed assessment of losses in Appendix G it can be inferred that the cost of losses for this scenario is about 0.75 to 1c/kWh.
500 MW is a large generating source for Southland and would require large loads such as another smelter or pulp and paper mill to take a large portion of the generation to limit the need to transport power northward. A smaller sized plant, say 150 MW, may provide a better increment of generation in this region, but has a higher capital cost/kW with an estimated unit cost of 7.0c/kWh, an increase of 1.3c/kWh over the 500 MW plant.
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