|
|
A recent power conference debated the best ways for the world, and New Zealand in particular, to combat global warming while maintaining healthy energy and infrastructure sectors, says NEIL RITCHIE
Coupled with this is New Zealand finding the most pragmatic means of combating carbon emissions. Delegates to the ninth Power New Zealand Conference – organised by Terrapinn and held in Auckland earlier this year – heard a variety of international and national speakers debate the best ways for the world, and New Zealand in particular, to effectively combat global warming issues while maintaining healthy energy and infrastructure sectors. Some spoke on sustainable energy markets and energy efficiencies, while others spoke on climate change and carbon markets. Still others focused on the continuing role of the fossil fuels of oil, gas and coal. While they all supported the New Zealand government’s “brave new world” of carbon neutrality, they also believed moves towards this should be done in a pragmatic manner, not in isolated idealism. Energy – in one form or another – is an essential commodity for the developed and developing countries of the world and many countries are already pursuing “clean” coal and view natural gas as an acceptable transition fuel as the world weans itself off oil – one of the reasons for Australia’s burgeoning export trade in liquefied natural gas (LNG). As well, various technologies – from more efficient motor vehicle emission systems to geosequestration, the re-injection of carbon dioxide into the earth – are already improving energy efficiencies of plant and equipment, and reducing greenhouse gas emissions. Energy Minister David Parker said his government had made energy sustainability a priority – the sustainability of not exhausting energy resources or of exhausting the earth’s ability to deal with greenhouse gas emissions. He said the government’s draft New Zealand Energy Strategy (NZES) was a landmark document. “It is the first national energy strategy, and if implemented, will see energy related carbon emissions decreasing for the first time since industrialisation began in New Zealand. “In the NZES we have articulated our vision of a reliable and resilient system delivering New Zealand sustainable low-emissions energy.” Parker said New Zealand was fortunate to be able to produce large amounts of low-emissions electricity from renewable sources such as geothermal, wind and hydro. “Our renewable energy sources are plentiful and cheap by world standards. Therefore, it makes sense to maximise the proportion of energy that comes from our abundant renewable energy resources.” He said the draft NZES proposed all new electricity generation should be renewable, except where necessary to ensure security of supply, and added that there was likely to be enough geothermal, wind and hydro energy to meet forecast electricity demand for the next 10-20 years. Parker added that he was delighted the NZES was already having an impact, with Contact’s proposed $2 billion renewable fuels package and deferral of its proposed Otahuhu-C gas-fired power station in Auckland. “This is an exciting change in direction, which proves to me that once government puts good, clear signals in place, business will respond accordingly.” However, he conceded the NZES could see less petroleum exploration effort if companies assessed the investment potential of New Zealand, including any likely carbon charges for oil and gas, and decided to go elsewhere in the world. He also believed there was nothing hypocritical in the government helping explorers with developments of oil or condensate (light oil) and exporting most of that, while at the same time wanting the country to be carbon neutral. “No-one in government is pretending that the world, including New Zealand, will not depend on oil and gas for a long time to come . . . (but) without a commitment to greater sustainability in our resource use and way of life, we risk not only damaging our own environment, but also exposing our economy to significant risk. “We can aim to be the first nation to be to be truly sustainable, and can aspire to be carbon neutral in both our economy and our way of life. “We’re entering a brave new world, but I have no doubt the energy sector can respond in transforming itself in response,” Parker, who is also Climate Change Minister, concluded. However, LECG consulting director Toby Stevenson criticised the government’s draft NZES, saying that if it had been a business board paper it would have been sent back for further modifications. “There is no cost-benefit analysis; it needs to be sent back for more analysis.” Others, including Genesis Energy and Contact Energy bosses Murray Jackson and David Baldwin, said the government must maintain a level playing field, not slanted towards renewables, as natural gas would play an essential role in the national economy over the medium term. Contact chief executive David Baldwin said new gas-fired generation would play “an absolutely critical role” in the New Zealand economy over the medium term. The government had to recognise that natural gas was the cleanest available fossil fuel. Baldwin also said it would be almost impossible to meet all future growth in New Zealand’s electricity demand from renewable sources. Genesis chief executive Murray Jackson said it was turbulent times for the two energy companies, which use over 100 petajoules (PJ) a year of gas out of New Zealand’s 170 PJ-plus annual total. Climate change publicity generated hysteria, demand for energy continued to grow, while costs, and hence prices, continued to increase. “I am not denying climate change but it does generate hysteria,” said Jackson. New Zealand needed to add a further 150 MW of electricity generation each year just to keep pace with predicted growth in demand, and gas-fired stations were an essential part of the industry. “New Zealand needs low cost electricity to match export competition and natural gas is the best of the base load options and the one that best of all can keep electricity prices down.” Jackson also said it was imperative that the current coal and gas-fired generation fleet be upgraded without incurring any carbon penalties. Huntly currently emitted more than four million tonnes of carbon per year, but Genesis’ latest project, the 350 MW-plus combined-cycle gas-fired station known as e3p, would effectively reduce greenhouse gas emissions by about one million tonnes per annum when fully commissioned in mid-2007. The company’s proposed Rodney gas-fired power station project would further reduce carbon emissions by another million tonnes per annum from the planned 2009 start date. Baldwin also said upgrading its gas-fired fleet was necessary. Contact could delay a decision about its 350MW-plus Otahuhu C combined-cycle plant by up to 18 months but it remained “one of the cleanest, most efficient types of generation in the world.” Solid Energy chief executive Don Elder presented several possible oil and natural gas price scenarios versus likely carbon tax charges. The two dominant drivers for businesses involved in the energy sector were the availability and cost of energy and costs of carbon. He said some overseas experts predicted the price of crude oil in 2017 could be anywhere from $US50 to $US400 per barrel, while the international price of carbon could be anywhere from $US5-170 per tonne of emissions. Elder said the price of natural gas in New Zealand could be in the range $NZ8-25 per gigajoule (GJ), up from the present $NZ5.50-6.50 per GJ. If this proved to be true, that would be good for Contact Energy, with its decision to delay any decision on Otahuhu C. Other fossil fuels – coal, lignite (brown coal) and coal seam methane – all became more economic if world oil prices increased, as did geosequestration. Wellington-based industry analyst Chris Stone said the government portrayed fossil fuels as “old and dirty” and renewable fuels as “new, clean and green”. However, it would be hard to substitute oil as a transport fuel and switching to renewables carried an economic cost – something the NZES seemed to ignore. He said that security of supply, particularly in electricity, was important and that natural gas would continue to play a critical role in the country’s electricity system for years to come. However, it was becoming scarce, with about 81 percent of known proven and probable (2P) gas reserves already used. New Zealand had also produced about 86 percent of its known 2P oil reserves. As the country’s energy consumption was growing at about three percent per year, a natural gas supply gap was likely to occur between 2010 and 2015. Stone said that with a strong sector, New Zealand could be 50 percent self sufficient in oil by 2012 and 100 percent self sufficient in gas. A weak sector would mean more reliance on imports, with oil self sufficiency dropping from its present 14 percent to only 10 percent and gas self sufficiency of only 50 percent, necessitating imports in the form of liquefied natural gas (LNG) or possibly compressed natural gas (CNG). He said there were significant economic benefits for New Zealand and for petroleum regions from a strong oil and gas sector. The current account benefits of having a strong domestic oil and gas sector were about $NZ3.7 billion per year greater than with a weak petroleum industry. There were also flow-on effects from a strong domestic exploration and production (E&P) industry. He said more needed to be done to encourage investment in oil and gas exploration as the level of local equity funding was restricted and the investment regime was poor. “The level of investment is not high enough and is less than demand growth.” Stone encouraged oil companies to continue exploring, saying there was still the potential for them to find more Maui-sized gas discoveries in the Great South Basin, off Canterbury or off Taranaki. Energy NZ Vol.1 No.1 Winter 2007 All articles on this website are copyright to Contrafed Publishing Co. Ltd. |
The main issue facing the New Zealand energy industry is ensuring the government’s preference for “new clean, green” renewable fuels is balanced by recognition of the necessity of fossil fuels, particularly natural gas, in the medium term.