Thursday 7th March 2019
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Genesis Energy says its 400 MW gas-fired E3p plant could cease year-round operations within five years as part of the company’s initiatives to reduce emissions from its generation activities.
The 12-year-old plant, the country’s largest thermal generator and the electricity sector’s single biggest contributor to emissions, will probably stop running during summer and other periods of low power prices within that timeframe, wholesale general manager Shaun Goldsbury says.
Other base-load gas-fired plants, like the Otahuhu B plant Contact Energy shut in 2015, and the 20-year-old Taranaki Combined Cycle plant that firm retains at Stratford, have been pushed into more seasonal roles in recent years as more low-cost renewable generation was developed.
Goldsbury said E3p, also known as Huntly Unit 5, will suffer the same fate as more solar, wind and geothermal enters the market.
“So as we see geothermal, wind, solar and batteries coming into the market, that will decrease the need for us to run Unit 5 in that base-load role,” he told delegates at the Downstream energy conference in Auckland yesterday.
“And actually, because we see this as the future, we’re actually disrupting ourselves rather than waiting for others to do it.
“We’re working through a partnership with Tilt to build the Waverley wind farm. That will be the next wind farm built in New Zealand and that will allow us to reduce our reliance on Unit 5 – particularly during the summer and particularly during the low-priced times.”
Genesis Energy is the country’s biggest thermal generator. It operates the dual-fuel coal and gas-fired Rankine units at Huntly and is looking to add more wind to its other renewable assets, which include three hydro schemes and the small Haunui wind farm in Wairarapa.
Goldsbury said the 100 MW Wind farm the firm is looking to build with Tilt Renewables near Waverley, and more flexible gas contracts the firm expects to sign up from 2020, will enable it ease back on generation from E3p.
That decision, and the potential for the closure of other firms’ gas-fired plants in coming years, could help lift the renewable share of power generation in this country to about 90 percent within six years – from about 85 percent now.
But he said replacing the relatively cheap and very flexible back-up supply offered by the firm’s two remaining 250 MW Rankine units - which can run on both coal and gas - could be harder.
The government has proposed a goal of having the country’s power generation 100 percent renewable from 2035, assuming normal hydrology. But the industry, and the Interim Climate Change Committee, have signalled that is likely to be very expensive and deliver relatively little emissions reduction.
Goldsbury told delegates that Genesis believes the country’s wholesale power prices are already the most volatile in the world. Going to 100 percent renewable just half the time would make them even more volatile and would increase them by more than 20 percent.
That volatility would make retailing very challenging, and could see wind farm owners lose money seven out of eight years.
Genesis has committed to stop using coal at Huntly in normal conditions from 2025 and entirely by 2030.
Goldsbury noted that the primary risks the Rankine units cover are peak winter demand and periods of low lake inflows. But they have also provided important cover in recent years for gas outages and last year ran in late June when for three days there was hardly any wind generation and bitterly cold weather boosted demand and power prices. That was despite above average hydro storage at the time.
Replacing the deep energy storage provided by the firm’s coal stockpile will not be easy. The company continues to assess biomass but that is “way too expensive” and logistically challenging, Goldsbury said.
Hydrogen may become an option, given the resources being invested in research globally, but whether it could be economic by 2030 is unclear.
Goldsbury said there is unlikely to be a single “silver bullet” but some combination of new technology, as well as increased gas storage and additional storage within existing hydro schemes on the South Island, may work.
Tracey Hickman, executive general manager of the firm’s generation and wholesale activities, says Genesis understands the critical role its thermal kit plays and will continue to play as the power industry absorbs more renewables.
And she said the industry should be positive about the choices that rapidly changing technologies may provide.
“We can’t rule any of those out. We have to go after them because we don’t have any other easier alternatives,” she said.
“But I think we’re also saying let’s not rule any of them in until they are tested and they are proven.”
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