Stand-By Generation Plant In Wrong Place
January 28th, 2009
A review of last year’s winter electricity shortage has proposed the $150m Whirinaki back-up power station needs to be re-located, and run on gas rather than diesel if the reserve energy scheme is continued. The report which is being undertaken for the Electricity Commission by energy sector consultant David Hunt and company director John Isles makes eight recommendations. They include:
• Ensure electricity companies face the costs of forced cuts to consumers, or enact compulsory dry-year insurance;
• Review the operation and cost efficiency of the emergency Whirinaki plant;
• Define and publish plans for emergency measures in a dry year;
• Formalise the improvements to information sharing;
• Improve risk disclosure around suppliers’ demand expectations and their ability to supply;
• Improve certainty around the commission’s role in terms of consent access to emergency generation capacity;
• Clarify the roles of the Minister and the commission relating to security of supply and confirming the commission’s independent functions;
• Prioritise initiatives which are likely to promote competition.
Other electricity experts have argued the stand-by plant which was installed as a buffer against generation demand outrunning supply in a dry year was not sensibly located near Napier and its shortcomings were exposed last year, which was one of the driest on record, cutting cheap hydro generation and sending spot prices soaring as the Whirinaki plant was brought on stream. The situation was exacerbated by the high price of diesel at that time, used to fuel the back-up plant.
Energy Minister Gerry Brownlee says relocation is one option which will be considered over the next couple of months, along with other recommendations. While the Hust-Isles report accepts there is better co-operation within the sector than in previous dry years it says there were periods when the EC’s security of supply policy of maximizing thermal generation to conserve water did not happen. Clarifying the EC’s role in the security of supply area should sharpen incentives on suppliers and users to manage their security risks. “We also see merit in providing the EC with a greater independence in monitoring and the exercise of regulatory functions.”
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