Since the early 1990s it has been evident that electricity demand has
outstripped investment in generation and transmission. At the same time,
concerns were being expressed about the risks associated with the run down of
the Maui gas field. It is axiomatic that the necessary investments firstly
require a stable and supportive regulatory and fiscal environment, and secondly
that such investments have long lead times. A unwillingness by successive
Governments to fund the necessary infrastructure, however, lead to the profound
restructuring of the electricity with the ultimate objective of transferring the
investment risk from Government to the private sector. Successive power crises
since 1992 result from a failure to put in place a regulatory framework
necessary to provide the environment to allow the private sector to make the
needed investments within the necessary timeframe.
The electricity sector has now stabilised to the extent that the regulatory
risks associated with generation investment have been reduced. This does not
mean that risk has been eliminated, however, and both economic and environmental
issues will continue to constrain investment in some power proposals
particularly those in the South Island and especially any South Island coal or
gas thermal proposal.
This is firstly because of several very simple economic issues:
1. while the South Island may have significant coal resources it lacks
a significant electricity market;
2. except for a six to ten week period in a dry year, low cost hydro will price
any large-scale South Island thermal out of the market which will restrict any
large scale thermal station to a dry year and/or peaking load;
3. except for a sixto ten week period in a dry year, export capacity on the HVDC
link to the North Island is constrained to around 964 MWe (and 482 MWe
from North to South in dry years); and
4. construction of any new thermal plant in the northern half of the North
Island will price any South Island thermal station out of the market.
There are also significant environmental issues associated with the
establishment of a large scale thermally based power station in the South
Island. Because the South Island lacks any large scale economically proven gas
reserves, the environmental constraints considered are those associated with
coal production. A coal mine dedicated to power generation will have significant
on-site impacts associated, in particular those associated with disposal of
opencast overburden and visual impacts. These will, however, be partially offset
by the relative remoteness of such sites to population centres. What cannot be
offset, however, is the off-site impacts, in particular, CO2, SOx and NOx
emissions, water disposal and acid mine drainage.