Genesis Energy to increase coal imports amid dwindling gas supply

Genesis Energy will resume importing coal as shrinking gas supply and rising demand add to the problems of keeping the lights on in future years.

The company said it currently had around half a million tonnes at its Huntly power station, which it expected to finish after this winter, but would then replenish to maintain a reserve of 350,000 tonnes, enough to meet its own needs.

Chief executive Malcolm Johns said the use of coal was necessary as gas supplies were reduced by a third from the previous year, inflows to hydrolakes were 13% lower and solar and wind power were intermittent.

Furthermore, demand had increased by around 4%.

“The transition from solid fuels to low carbon options such as biomass will take some years and during this transition period, to ensure energy security and stability, some coal will need to be used, with imported options currently being the most efficient for the amount we need.”

Genesis’ Huntly Station has coal- and gas-fired units that provide backup power to the grid when demand increases or generation from other sources decreases.

However, Johns said Genesis would no longer bear 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 over the next few years.

“The market will ultimately determine the level of solid fuel that will remain above our operating reserves of 350,000 tonnes.”

He said Genesis was looking at sources of biomass (specialist wood pellets) that would replace coal in due course, but that was probably some time away.

“We are very aware of the desire of many to see our transition to solid fuels be faster to help gas reduce carbon emissions from thermal generation.

“We are committed to driving this forward as quickly as we can. However, thermal generation remains critical to keeping the lights on in a renewables-heavy grid.”

Out of gas

Meanwhile, the Government highlighted the drop in gas supplies and accused the previous Labor administration of banning offshore exploration and putting up obstacles to investment.

Energy Minister Simeon Brown and Resources Minister Shane Jones said they had been told some large gas consumers were concerned about being able to get gas contracts.

“The previous government stifled investment confidence in the natural gas sector. We are now seeing the serious impacts of these decisions with a significant reduction in gas production, which is leading to significant supply constraints and higher prices for consumers,” Brown said.

“Reduced gas supplies are forcing industrial users like Mtanex to reduce production. Less gas will also mean more coal will be needed to keep the lights on.”

Jones said the Government would introduce legal 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 offshore. Let’s fix it.”

Appearing on Morning Report on Wednesday, Jones said his proverb was “coal before dole.”

“I have been told that it is easier to import coal from Indonesia due to the investment required to redevelop our own coal fields, and the fact that as we continue on the path to green, clean energy, coal will only be needed intermittently. . and therefore it is a more rational decision to bring coal.”

He called the 2018 ban “unicorn thinking”, even though he and his party voted for it as part of the coalition formed with the Labor Party in 2017. The party’s deputy leader at the time, Fletcher Tabuteau, told the House, during the Crown Minerals (Petroleum) third reading of the amendment bill, 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 able to buy from whoever it wants,” Jones said.

“The fact that we have had disruptions in the gas industry means that we are now more reliant on coal. How perverse. How perverse since 2018/19, when Jacinda Ardern promised this new nirvana, we are now going to burn more coal.”

In the long term, he said, “without a doubt” there is a need to invest in greener energy sources. But in the meantime, the country needed to use more fossil fuels (including gas) to keep the lights on.

“(Green energy options are) viable, as long as investors can make money on them and bring energy to the market at a level that the market can support. Other than that, the market is going to continue, and I think Genesis should be on the honors list.”

When asked what our Pacific neighbors threatened by rising sea levels would think about the move to use more fossil fuels, Jones said that was simply “left-wing catastrophizing.”

“If we keep the lights on and the hospitals running, that kind of thinking can’t be held responsible for the tide hitting Tuvalu. Come on, give us a break.”

rnz.co.nz