Posted on 1-4-2004

Hodgson Cold On Coal
01.04.2004, Liam Dann, NZ Herald

Energy Minister Pete Hodgson is trying to dampen enthusiasm for a
coal-powered solution to New Zealand's electricity generating problems.

He told delegates at the National Power Conference in Auckland that
renewable sources would ultimately meet most of the country's needs
because they were cheaper. Coal-fired power stations might be built in the
next 10 years, he said, but they would have to be economic with the carbon
tax. Those in the industry who were hoping the carbon tax would go away if
the Kyoto Protocol was not ratified had missed the point, he said. "A
price on carbon is being irreversibly embedded in the global economy," he
said. "New Zealand cannot shut itself off to development. Attempting to
would simply turn us into a museum for outdated technology, just as we
once turned our nation into a quaint South Pacific car museum."

The carbon charge would add about 1c a unit to the cost of power generated
by gas-fuelled plants and about 1.5c a unit for coal-fuelled power. "A
carbon charge is not so much about pricing fossil fuels out of the market
as about pricing alternative, low emission, energy efficient technologies
into it." The extent to which coal was an option would be determined by
the amount of new gas found, he said. Hodgson said that after Project
Aqua's demise the days of large-scale hydro-electric projects were over.
"We are at a turning point in New Zealand's energy history," he said.
"Future hydro development is likely to be small to micro in scale."

The gradual erosion of hydro's dominance of the electricity system would
at least decrease New Zealand's vulnerability to shortages in dry years,
he said. But no new source would be as cheap as hydro electricity. Hodgson
said comment after the axing of Aqua had not recognised that work had
started on other energy projects. Projects which would start producing
between now and 2007 would provide 840MW of power. He included among those
the 400MW Genesis gas turbine at Huntly, which is scheduled to be running
by December 2006.

But Genesis chief executive Murray Jackson cast doubt on the timing of the
project, telling conference delegates the company had not been able to
find enough gas to go ahead with it.

Hodgson also included the Government's 150MW oil-fired reserve generation
plant at Whirinaki in Hawkes Bay. That plant has been commissioned for
emergency use and will not add to baseline capacity.

Among smaller projects, Hodgson highlighted Meridian's 90MW Te Apiti wind
farm. The resource consent process for that project took only four days.
Wind power was becoming more attractive as capital costs fell and
electricity prices rose, he said, and was expected to develop rapidly over
the next few years. "Clearly wind cannot be the only answer to our growing
electricity needs," he added, raising a chuckle from delegates who had
already expressed a lack of patience with political hot air.

Hodgson also repeated his confidence that more natural gas reserves would
be found. "There is no doubt that New Zealand has plenty of gas," he said.
"We just have to drill enough holes to find it."

The Government was investigating whether it could provide a more positive
environment for gas exploration, and decisions would be made in the next
month or two.