Our Inconvenient Truth: NZ will keep burning coal

In a move that has polarised Green politicians and activists, Genesis Energy has announced it will keep burning coal until as late as 2030. With James Shaw and Greenpeace lining up on opposite sides of the issue, Thomas Coughlan reports on why Huntly's smoke stacks could stay up for at least another decade.

Genesis Energy will keep burning fossil fuels until 2025 under normal market conditions and may keep burning it until 2030 under a plan announced today, having previously suggested weak demand would allow it to stop burning fossil fuels from its Huntly plant by December this year.

In 2015, Genesis said it would be retiring its last coal-burning Rankine units by December 2018 because of a lack of demand, but since then demand has risen again with strong population and economic growth.

"While the Huntly Power Station has been, and remains, a great asset for Genesis Energy, the Board has taken the decision to retire the remaining Rankine Units. New Zealand's changing electricity market has seen improvements in the management of dry year events, along with a significant decrease in coal-fired generation, and by 2018 the two coal units will no longer be required unless market conditions change significantly," Genesis Energy Chairman, Dame Jenny Shipley said at the time.

Greenpeace climate campaigner Amanda Larsson told Newsroom that she had little faith Genesis would keep to the 2030 target.

She said Genesis' decision was preventing the country from exploring renewable solutions to New Zealand's electricity challenges, like large-scale battery storage to ease out peaks in demand. Electricity is difficult to store, meaning it must be used at the same time it is generated. This is a problem for renewables as peaks in demand (half-time during the rugby for example) may not always occur when the sun is shining or the wind blowing.

Another problem for New Zealand is our often-dry climate can deplete hydro lakes, which feed the dams that supply most of New Zealand's power. Marc England, CEO of Genesis Energy told Newsroom that New Zealand usually has six weeks' worth of electricity stored in its hydro lakes. By comparison, countries like Norway, which also rely heavily on hydroelectric power have two years' worth of generation stored in their lakes.

England said fossil fuels were used mainly to even out generation capacity when the lakes got low, as they did this summer.

Larsson countered that Genesis' continued reliance on coal made it less likely to explore investment in renewables.

"According to the Electricity Authority, over 3GW of renewable power generation already have resource consents in place, but are not being built. Keeping these dirty power stations running is preventing important investments in clean energy," she said.

England disputed the claim that it had pushed out its target for its move from coal, given the initial indication of a 2018 closure was dependent on demand not returning.

He said that in 2015 Genesis had been unable to sell swaptions for electricity generated from its Huntly plant, which lead to the commercial decision to close the last Rankine generators. A swaption gives electricity companies the right but not the obligation to purchase added supply at a later date, should they need to, like a form of insurance for times when generation capacity is low.

When demand revived, Genesis decided not to close the Rankine generators, but has said that it will aim to move, by 2025, to a model where coal is only used in exceptional and abnormal circumstances. By 2030 at the latest, it hopes to move to a system where only gas-fired thermal energy was as a back up during the dry season.

"It is an inconvenient truth that we have a great hydroelectric generation, which is frustrated by a lot of dry periods," England said.

"Only 10 percent of Genesis' coal-derived power was used by Genesis itself. The remaining 90 percent was sold to other electricity companies to ease their own supply issues."

He said the uptake of electric vehicles would probably add 10 percent demand to New Zealand's supply in the next decade, which he suspected would only partially be compensated for by efficiencies gained in generation, leaving a net demand increase of five percent.

"We're at 80 percent renewable now and we're confident we can get to 90 percent fairly easily. The last ten percent will be more difficult."

Coal mining at Huntly. Photo: Sandra Mu/Getty Images

Green party leader and Climate Change Minister James Shaw was unconcerned by the announcement when interviewed before question time on Wednesday.

"We want to get out of fossil fuels by 2035. I think the Genesis announcement is consistent with that," he said.

Shaw said he had been contacted by England on Tuesday night in his capacity as Minister of Climate Change.

He hoped that technological advances would help Genesis get out of fossil fuels before 2030.

"The technology is changing all the time. I hope that will give Genesis help to get out much quicker than that," he said.

However not all Green MPs shared their leader's optimism.

Later on Wednesday, Green MP Gareth Hughes who, unlike Shaw, is not a Government minister, issued a critical statement critical of Genesis' move.

"While it's all well and good that Genesis has made this announcement around its intentions, in reality the time to stop burning coal is now," he said.

"While it is a positive statement, it is set too far in the future and hedged with qualifications. It's like saying you'll quit smoking in 12 years - maybe."

(Updated to reflect Genesis saying it will have to keep burning coal until 2025 under normal market conditions, and possibly until 2030.)