Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they’d be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up.
The Auckland-based power company has signed a ‘swaption’ contract with Meridian Energy “and other market participants”, according to a statement from Meridian chief executive Mark Binns. Meridian, but no detail of the trigger price for firing up Huntly has been given and there is no indication of how much of up to 150 Megawatts of additional capacity is committed to Meridian versus other generators.
Meridian only owns wind and hydro power stations and appears to have led the charge to pay to have the two 250 megawatt Huntly ‘Rankine’ units on standby for any periods of low inflows to hydro lakes that could compromise security of electricity supply. The contract will make up to 100MW available year-round and an additional 50MW in the winter months, from April to the end of October.
The move will disappoint environmental campaigners seeking less fossil fuel use in the New Zealand electricity system, which is roughly 80 percent renewable at present, with a target of 90 percent renewable by 2025.
By 2025 it is likely Huntly will have closed anyway. The decisions on individual power stations are for the company directors. It is not a decision for Government. The Government has correctly placed a charge on greenhouse gas emissions, so that coal costs more than previously. But if Genesis has decided it is more profitable to keep it open for now, that is fine. The price they pay for emissions through the ETS will help pay for offsets such as forestry. That is why an ETS is a good market response, rather than central Government decision making.
Energy Minister Simon Bridges said the move was a “pragmatic” and “transitional” measure, while the national grid operator Transpower also welcomed the decision.
“There were times in 2019 that we forecast a shortfall of energy, which could have been difficult to manage,” said chief executive Alison Andrew in a statement. “In extreme cases (for example a dry year when the hydro lakes are very low), we could have experienced a situation where consumers would have been asked to conserve their power usage.”
Basically without Huntly there would have been risks of power shortages. As more generation comes online, Huntly won’t be needed eventually.