Huntly Power Station. Photo: Lynn Grieveson
Genesis Energy is to resume importing coal, as reduced gas supplies and increased demand add to the problems of keeping the lights on in future years.
Minister for Resources Shane Jones was welcoming the move, with investment in New Zealand coal fields still stymied by the 2018 exploration ban, saying Genesis "should be on the honours list".
The company said it currently had about half a million tonnes at its Huntly power station, which it expected to be well through after this winter, but would then replenish to maintain a stockpile of 350,000 tonnes, enough to meet its own needs.
Chief executive Malcolm Johns said coal use was necessary as gas supplies were down a third on a year ago, hydro-lake inflows were 13 percent lower, and solar and wind power were intermittent.
In addition, demand had risen about 4 percent.
"The solid fuel transition toward lower carbon options like biomass will take some years and during this transitionary period, in order to ensure energy security and stability, there will be a need to use some coal, with imported options currently being the most efficient for the quantity we need."
Genesis's Huntly station has coal and gas-fired units which provide backup power for the network when demand rises or generation from other sources falls off.
Genesis Energy to resume importing coal
However, Johns said Genesis would no longer carry the cost of coal reserves for the industry, and if other power companies want to insure against shortages they would have to be willing to pay through special contracts for the next couple of years.
"The market will ultimately determine the level of solid fuel held above our 350,000 tonne operational stockpile."
He said Genesis was looking for sources of biomass - specialised wood pellets - that would replace coal in due course, but that was likely some time away.
"We are acutely conscious of the desire of many to see our solid fuel transition go faster to support gas in lowering the carbon outcomes of thermal generation.
"We are committed to driving this as fast as we can. However thermal generation remains critical to keeping the lights on in a high renewables grid."
Out of gas
Meanwhile, the government highlighted the fall in gas supplies and pointed the finger at the previous Labour administration for banning offshore exploration and putting obstacles in the way of investment.
Energy Minister Simeon Brown and Resources Minister Shane Jones said in a statement they had been told that some large gas consumers were concerned about being able to secure gas contracts.
"The previous government stifled investment confidence in the natural gas sector. We are now seeing the serious impacts of these decisions with significant reduction in gas being produced which is leading to significant supply constraints and higher prices for consumers," Brown said.
"Reduced gas supply is forcing industrial users such as Methanex to reduce production. Less gas will also mean more coal will be needed to keep the lights on."
Jones said the government would bring in law changes to increase gas production.
"New Zealand has abundant natural resources, including energy resources such as natural gas. It is a tragedy to leave this abundance in the ground while our manufacturers suffer and our industrial base moves overseas. We are going to fix it."
Appearing on Morning Report on Wednesday, Jones said his proverb was "coal before dole".
"I'm told that it's easier to import Indonesian coal because of the investment required in redeveloping our own coal fields, and the fact that as we continue the march towards clean green energy, it's only on an intermittent basis that coal will be needed, and therefore it's a more rational decision to bring the coal in."
He called the 2018 ban "unicorn thinking", despite the fact he and his party voted for it as part of the coalition formed with Labour in 2017. The party's deputy leader at the time Fletcher Tabuteau told the House, during the Crown Minerals (Petroleum) Amendment Bill's third reading, he would be "happy to be defined by this legislation".
"We already have Bathurst and other companies in New Zealand that are in the coal business, and Genesis is capable of buying from who they like," Jones said.
"The fact that we've had disruptiveness in the gas industry means we're now relying more on coal. How perverse. How perverse from 2018/19 when Jacinda Ardern promised this new nirvana, now we're going to burn more coal."
In the long-term, he said investment in greener sources of energy were needed "without a doubt". But in the meantime, the country needed to use more fossil fuels - including gas - to keep the lights on.
"[Green energy options are] viable, providing that investors can make money out of them, and bring the energy to the market at a level that the market can stand. Other than that, the market is going to continue, and I think Genesis should be on the honours list."
Asked what our Pacific neighbours threatened by rising sea levels would think of the move to use more fossil fuels, Jones said that was just "left wing catastrophisation."
"Us keeping the lights on and the hospitals functioning, you can't hold that type of thinking responsible for the tide lapping around Tuvalu. Come on, give us a break."