Genesis to close last two coal-fired power units at Huntly

Thursday, 6 August 2015

The last two coal-burning generators at the Huntly power station are to shut down in 2018 in the face of flat power demand, but adding to risks of of a power shortage in dry years, a market watcher says.

The Huntly power station is the country's biggest with capacity of 953 megawatts, but the decision to close its remaining coal-fired units would cut that by more than half. Two other coal units have already been shut down.

Losing the two coal units would expose consumers to a greater risk of power shortages in a dry year and potentially boost profits for generators with geothermal plants one market watcher said.

The country most recently saw a bad dry year in 2008 which had the driest March to June period since 1947.

In 2013 when hydro lake levels fell sharply and the Tekapo power stations were out of action for canal repairs, Huntly was producing 800MW of power. There were other hydro power shortages in 1992 when the government had to ask for voluntary power savings and again in 2001 and 2003.

Genesis Energy said the closure of the coal units at Huntly would mark the end of large scale coal-fired generation and associated carbon emissions, in New Zealand.

The move was welcomed by Greenpeace, which said it exposed the National government's inability to act on climate change.

The two coal units units had largely been running 'at the margin of the market' for a number of years, and were little used, Genesis said.

'While it is sensible for Genesis to shut the station down it exposes electricity consumers to increased risk of shortages in a dry year. Electricity shortages hit the economy much harder than they do the generators –  geothermal generators, for instance, would substantially profit from the resulting high prices,' independent energy consultant Bryan Leyland said.

Shutting down the Huntly coal-fired plant was in line with keeping the country on the 'edge of a shortage', Leyland said.

'The basic problem is that you need long term planning to manage the risk of shortages in a dry year but the electricity market concentrates on short-term objectives – extracting the maximum amount of money from consumers,' he said. 

But Genesis said on Thursday that the power system was better able to cope with dry years for hydro power plants and there had been a big fall off in coal-fired generation.

Genesis said it did generate more from its thermal coal and gas units in the year to end of June 2008, the last bad dry year, but that included a full year of operation of the new gas turbine, Unit 5.

With that giant 403 megawatt unit coming on stream in July 2007, it added considerable volumes and capacity to Huntly.

'So while there was a dry year in 2007/08 the extra generation required from Huntly came from Unit 5, not the Rankine coal fired units – their output decreased in this year from the previous year and kept on decreasing year on year to now,' a Genesis spokesman said.

Prime Minister John Key said the decision made economic sense. 

'I mean, in a lot of ways it's unsurprising because the costs actually for Genesis, with the ETS and the likes, means that probably in the long-term coalfire power plants aren't the most sensible plants to have. 

'From New Zealand's emissions perspective, this is actually probably a good thing.' 

Green Party co-leader James Shaw said Genesis' decision had highlighted how unambitious the Government's emission reduction targets were. 

'If the Government's aim is to reduce greenhouse gas emissions by 11 per cent on 1990 levels by 2030, this move takes care of more than one fifth of that – and that's just one business representing only 40 per cent of the country's coal use.'

New Zealand could achieved the Government's target 'sleep walking'.

Meanwhile, Greenpeace NZ Campaigner Simon Boxer said it was an 'embarrassment' that businesses were now leaving the supposed leaders of our country in the dust when it comes to moving away from dirty energy. 

'The announcement by Genesis Energy is another good piece of news for anyone wanting their kids to have a future without runaway climate change,' he said.

'But it's something that our government should be leading on. It's just another example of John Key and his cronies dropping the ball for New Zealanders. They don't have their finger on the pulse of the global move away from fossil fuels.'

Old king coal

The last big coal-fired power plant in New Zealand at Huntly will close in 2018, shutting down 500 megawatts of power capacity.

Genesis Energy said it had been on track to retire the four coal/gas fired 'Rankine' units since 2009.

The remaining Rankine coal/gas units were commissioned in the early 1980s.

A coal-fired station was seen as less expensive than building extra hydropower stations which could be hit by a dry year.

Closure is expected to produce operational and capital cost savings of approximately $20 to $25 million a year.

Electricity generation would carry on at the Huntly site from the two existing gas-fuelled units, the high efficiency 400MW 'Unit 5', and the smaller 50 MW open cycle 'Unit 6'.

Genesis chief executive Albert Brantley said:  'The development of lower cost renewable generation, principally wind and geothermal, investment in the HVDC link (the Cook Strait cable), and relatively flat growth in consumer and industrial demand for electricity have combined to reinforce the decision to retire the remaining Rankine units, which will deliver further operational efficiencies to Genesis Energy.'