• Contact cancels LNG terminal.
• Genesis cool on Rodney.
• Gas shortages for electricity by 2015.

The hardy perennial conundrum for gas-fired generations is back: where will the new gas come from? Both the Ministerial Electricity Market Review and Contact Energy, in its latest earnings result, have highlighted the gap that is emerging again between gas supply and demand for gas-fired generation towards the middle of the next decade. While it’s too early to be panicking about it - Maui re-estimations and the Pohokura bonanza effectively blew away the mid-2000’s predictions of gas shortages by now - the reality remains that there need either to be big commercial gas finds in NZ soon, or liquefied natural gas will come back on the table before 2015 to help run existing plant.

Contact wrote off $5.1m its latest result to end its involvement in the Gasbridge project, which proposed an LNG receiving terminal at the port of New Plymouth, saying if LNG became a viable gas source, it would look to new, ship-based technology which regasifies LNG. It could then be piped to the company’s Ahuroa gas storage facility, in a depleted gas reservoir, near Stratford. Likewise, Genesis is looking to ship-based technologies should LNG become necessary, while showing ever less enthusiasm for the combined cycle gas turbine plant it has been proposing to build at its Rodney site, near Kaukapakapa. The Rodney site now has all the consents it needs to envisage becoming operational, especially now that Vector has been granted consents to build a pipeline from south of Auckland through the city and up to the Rodney site.

However, a stalwart local opponent of the Rodney plant, Pip McAlwee, maintains the plant will never be built because gas is fast falling down the rankings as a viable new electricity fuel, mainly because the cost of imported gas could be as much as twice the current price of around $7.50 a Gigajoule. That makes even high cost wind and hydro plants more attractive than an imported gas solution. This means new gas-fired power stations are unlikely to be built ahead of renewable options, starting with geothermal, and followed by hydro and wind options, with hydro options on average producing slightly cheaper power than wind projects. However, hydro plant is regarded as far harder to get resource consents for than wind.

Unresolved and largely unremarked in the Ministerial Electricity Market Review are the lurking political and commercial issues created by placing a price on carbon emissions. Genesis and Contact are major emitters, especially when the Huntly power station is running on coal. Both will likely be able to recoup some of the cost through higher tariffs, which in turn will give lesser emitters a chance to raise their tariffs and increase profit margins. This will be seen by consumer advocates as “windfall profits” for renewable energy sources, even though the intent of carbon pricing is to encourage and reward non-emitting energy forms.

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