New Zealand's Energy Composition and Future Needs
Hydroelectric generation currently accounts for approximately two thirds of New Zealand's electricity generation and approximately 20% of the balance comes from gas-fired generation. New Zealand's electricity generation system can be described as a mixed hydro-thermal system where hydro energy is used as much as possible, dependent on lake levels, and thermal power stations run as necessary to make up the rest of the required supply.1
However, New Zealand's energy composition is about to undergo significant change. With the run down of Maui and limited known alternative sources of indigenous gas, other forms of energy will likely be needed to fill the gap. The Ministry of Economic Development's Energy Outlook has projected that the rundown/depletion of the large gas fields will reduce the proportion of gas-fired generation from 21% in 2000 to 14% by 2010 and to 7% in 2025 (note there is considerable uncertainty around these projections). Furthermore, there is limited potential for new hydro developments, particularly on the scale of those built in the past.
Even with improvements in energy efficiency and changes in energy consumption patterns, new generation is likely to be needed in the short to medium term. While renewable forms of generation, such as geothermal and wind, are likely to make up a progressively increasing share of electricity capacity, generation from fossil fuels will be required for some time to supplement hydro production and manage variations in hydro output.2
The document Sustainable Energy: Creating a Sustainable Energy System, acknowledges that the availability of coal is a source of resilience in New Zealand's energy system. The document states that with tight gas supplies and rising prices, large industrial users such as steel, wood and dairy processing may switch from gas to coal to secure reliable energy supply at a more stable price. The document also acknowledges that increased coal consumption, such as via cogeneration, would increase greenhouse gas and other emissions from the industries concerned and possibly foreclose investment in renewable energy options.
Ensuring security of electricity supply is a critical issue for all New Zealanders and for the government. There are two aspects to security of supply. Firstly, it is imperative to minimise the risk associated with dry years, and secondly to ensure that New Zealand has the generation capacity over the long term to meet the projected growth in energy demand.
Dry Year Risk
Heavy reliance on hydro-generated electricity leaves New Zealand vulnerable to the effects of dry years. 2001 was very dry in the South Island hydro catchments and 2003 was similarly severe, necessitating public electricity conservation campaigns. Dry years highlight the dependence of both consumers and industry on energy as a key element of infrastructure and, consequently, how essential security of supply is.
One of the considerable advantages of electricity generated by coal is that supply is not dependent on rainfall. The Marsden B Project could help ensure continued electricity supply for both New Zealand consumers and industry during future dry periods.
Growth in Energy Demand
The most recent Energy Outlook provided by the Ministry of Economic Development projects that the composition of New Zealand's energy supply and demand will change as the demand for energy increases, the Maui gas field declines and new technologies for the production, delivery and use of energy become more economically viable. It should be noted that several developments since 2003 mean that some of the Outlook's predictions, particularly for the supply side, are dated. In particular, the Outlook included Project Aqua, which would have delayed the need for more generation. Since the Outlook's publication, Meridian Energy Limited have announced that Project Aqua will not proceed.
The Energy Outlook considers a range of scenarios, all of which predict increased electricity demand, ranging from average of 1.2 percent per annum to 1.8 percent per annum over the period to 2025.3 There is some evidence to suggest that in the shorter term, increases in demand may be higher than these figures. Analysis of Grid Exit Point data from 1999 indicates that electricity demand is currently increasing in the range of 2 to 2.5 percent on average per annum.
Electricity efficiency and demand side management help to reduce demand for electricity. The Electricity Commission has as a key goal the efficient provision and use of electricity. According to the Government Policy Statement on Electricity Governance, the Commission should ensure it gives full consideration to the contribution of the demand side as well as the supply side in meeting the Government's electricity objectives.
The National Energy Efficiency and Conservation Strategy (NEECS) aims to move towards a sustainable energy future for New Zealand by promoting energy efficiency, conservation, and a transition to the use of renewable energy sources. A specific target of the NEECS is to improve energy efficiency by at least 20 percent by 2012. The Energy Efficiency and Conservation Authority (EECA) also has a demand response programme to identify the demand response potential that exists in the electricity market and how industry participants can work together to realise this potential.
It is nonetheless expected that demand for energy will continue to grow, particularly if strong economic growth continues. It is important that, as the means become available, New Zealand undertakes to ensure that we have the capacity to accommodate the growth in demand and to compensate for the likely decline in the availability of indigenous gas. The Marsden B Project would contribute to the increased generation capacity required to satisfy both. Mighty River Power estimate that the power station would be capable of generating about 2200GWh per annum, which is approximately 5 percent of New Zealand's current electricity demand.
The Marsden B power station is also situated at an ideal location to improve the security of New Zealand's electricity system. Specifically the Marsden site is located north of the Auckland load centre and existing transmission lines at the Marsden site can take the electricity produced from the station to users in Northland and Auckland. This implies reduced pressure on the transmission lines south of Auckland which are nearing capacity. Transpower is currently planning a transmission upgrade between Otahuhu, in South Auckland and Whakamaru, north of Lake Taupo. The Marsden B power station would improve security of supply regardless of whether or not Transpower's upgrade proceeds. It is also likely to reduce transmission losses as it would reduce overall transmission flows.
Back to Top