“Energy worries” become a year-round national event

The Southern Star oil rig in Taranaki.
photo: supply

analyze – For the second time in three months, a sense of panic has gripped the country’s power sector.

In May, temperatures plummeted, demand rose, supplies were short, and there was the threat of lights out. There were no power outages in the country At the best price.

Now, natural gas shortages and lack of wind and rain have caused wholesale electricity prices to soar, forcing Large industrial users reduce usage and cut productionIn some cases, even closing stores.

This time, Canada’s Methanex, the world’s largest methanol producer and New Zealand’s largest natural gas user, came to the rescue, reaching an agreement with the company to shut down its production until the end of October and sell its natural gas for power generation to Contact and origin.

End of crisis

In the short term, the gas supply agreement will provide both power companies with security of fuel supply, allowing Genesis’s large Huntly power station to operate at full capacity with the help of imported coal, while Contact will be able to start up its fast-start gas-fired power station in Stratford.

But this is only a short-term fix and is far from providing a permanent solution.

A range of other measures are being considered, including Transpower changing its rules to allow hydro generators to draw more water from its storage lakes.

In addition to buying more gas, Genesis Energy appears to be increasing coal imports, with a dozen cargoes expected in the near/medium term.

Unless the spring is wet and windy, fossil fuels will help the system through the short term, but at the cost of increasing carbon emissions.

More powerful

One temporary solution to the gas supply problem is to import liquefied natural gas (LNG), which the government is currently studying.

The prospect that renewed oil and gas exploration will deliver ample supplies seems a pipe dream given costs, distance and New Zealand’s relative lack of appeal as an exploration location compared with other parts of the world. The gap between discovering commercial oil and gas and exploiting it can be as long as 10 years and cost billions of dollars.

The counterpoint to fossil fuels is more renewable electricity—solar farms, wind farms, geothermal power—but the current woes show that these plants are not always reliable, and that power companies are reluctant to invest too much in new projects too early until they are sure they can make a commercial return.

There are still people who support similar Labor’s Lake Onslow Hydroelectric Storage ProjectBut the new government quickly rejected the proposal.

Changing electricity market structure and rules

Deputy Energy Minister Shane Jones led a political attack on power companies and industry regulators, particularly the Electricity Authority, which he likened to a chocolate teapot.

The authority said it was unhappy with current high electricity prices and concerns about too little supply so it had begun a new “in-depth investigation” to provide closer scrutiny of the industry’s performance, although it launched the inquiry less than a year ago. Report published Take steps to increase competition in wholesale electricity markets.

In response to the latest market turmoil, the authority said there was no quick solution.

Other measures suggested include forcing the big four companies to separate their generation and retail businesses. Another is reviving an idea abandoned a decade ago in which state-owned companies would buy electricity from wholesalers and sell it to retailers.

The Commerce Commission is likely to look at power company pricing. It already regulates electricity, gas and broadband distribution costs because they are largely run by companies without competition.

Power companies have either maintained diplomatic silence or said the government should stay out of the equation and let the market decide.

But now, energy concerns have become a year-round national event.

To paraphrase Irish writer Oscar Wilde – “One power crisis in a year might be misfortune, two would be negligence”.