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Old King Coal waits for rebirth

By Karl du Fresne

Friday 7th March 2003

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Solid Energy chief executive Don Elder has weighed into the energy debate, making a strong pitch for coal as a cost-efficient source of electricity to replace the rapidly diminishing Maui gasfield.

Mr Elder accused energy planners of placing too much reliance on gas and ignoring coal's "enormous potential" as an energy source.

He said planners remained locked into outdated perceptions of coal as dirty and expensive when technology had made giant strides in terms of cost and environmental acceptability.

The former state coal department has identified five sites, mostly close to coal sources in the South Island, where it says coal could still be generating power hundreds of years after the last known gas deposits have been exhausted.

The case for coal-fired power stations has been sharpened by the recently revised estimates of the Maui gas reserves, which generate a quarter of New Zealand's electricity needs.

The Maui field is now predicted to run out in 2007 and doubts have simultaneously arisen over whether the Pohokura gas field will be able to fill the gap.

Finance Minister Michael Cullen admitted to The National Business Review in a recent interview that while there were enough plans "on paper" to meet projected energy demand, he was uncomfortable with the outlook.

Dr Cullen dismissed coal-fired generation as an option, suggesting it would conflict with the government's commitment to cut carbon dioxide emissions under the Kyoto Protocol. But Mr Elder said modern technology could overcome long-standing objections to coal as a power source.

The perception that it was a dirty fuel was based on the smokestacks of 20-30 years ago, before the development of technology capable of removing virtually all sulphur dioxides and nitrous oxides.

Even the 20-year-old Huntly power station, which burns more than half a million tonnes of coal a year, produced relatively little pollution.

Mr Elder said technology was also being developed to eliminate the production of carbon dioxide ­ the so-called Greenhouse gas targeted by the Kyoto protocol.

He agreed that coal produced more CO2 per unit of electricity than any other fuel but said zero carbon dioxide emission was achievable within 10 years and the cost was coming down fast ­ "just as it does with all technologies where there is a big impetus for change."

The other key factor behind the aversion to coal was the perception that it was far too expensive, but in fact energy planners had greatly over-estimated its cost.

Solid Energy had determined that a 100MW coal-fired station close to the coal source on the West Coast or in Southland could deliver electricity at a wholesale price of about 5c per kilowatt hour ­ about half the cost assumed by energy planners, and half the recent wholesale price.

Mr Elder said state-of-the-art environmental control technology could add up to 1c to that price, and a carbon tax to meet the government's Kyoto commitments might increase the price by up to 2c more. "So you might end up with a price of up to 7.5c per kW hour. But even at the very top end of that range you're still 3c below the range talked about in most projections.

Known coal reserves were 100-150 times larger than the original Maui gas field, he said. "At five to 6c a kW hour there's enough coal to provide New Zealand with enough electricity for another thousand years."

Solid Energy had tested its figures very carefully and would soon be providing Dr Cullen with detailed costings which would enable a fair comparison to be made with other energy alternatives, Mr Elder said.

Asked how planners could have got it so wrong, Mr Elder said it was possible their figures were based on the low-tech, labour-intensive operations of the old government-run State Coal, the forerunner to Solid Energy. Coalmining now was very high-tech and the real cost of the fuel was probably less than half what it was 10 years ago.

Mr Elder said planners probably also factored in transport costs, which could add up to 75% to the price of coal.

But Solid Energy proposed to get around that by putting coal-fired stations close to the source of the coal, on the basis that it was far cheaper to transport electricity than to transport the fuel itself.

While New Zealand had been complacent about building sufficient electricity generation capacity, there was no such problem with transmission capacity. Mr Elder said there was 500mw of transmission capacity out of the West Coast, source of the best-quality coal in the world.

Solid Energy had undertaken a comprehensive study of optimum sites for coal-fired power stations, using its own energy model and advice from international authorities, and five locations emerged: Buller, Southland (site of an estimated 10 billion tonnes of lignite), Christchurch, the North Island east coast and the Auckland region.

The company was now doing further work on two or three of those options.

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