Cheaper renewables force closure of NZ’s last coal-fired power units

Utility-scale coal-fired power generation will soon be a thing of the past in New Zealand, after local gentailer Genesis Energy said it would close the last two coal-burning units at its coal and gas Huntly power station in Waikato, on the North Island, due to falling demand and lower-cost renewables.

Stuff.co.nz reports that the 953MW plant’s remaining two coal-burning units – the two others have already been retired – will be shut down in 2018, after running “at the margin of the market” for a number of years, according to Genesis.

Indeed, the gentailer said it had been on track to retire the four coal/gas fired “Rankine” units – which were commissioned in the early 1908s, when they were seen as less expensive than building extra hydropower – since 2009.

“The development of lower cost renewable generation, principally wind and geothermal, investment in the HVDC link (the Cook Strait cable), and relatively flat growth in consumer and industrial demand for electricity have combined to reinforce the decision to retire the remaining Rankine units, which will deliver further operational efficiencies to Genesis Energy,” said Genesis chief executive Albert Brantley.

Closure of the coal units – which Genesis said would mark the end of large scale coal-fired generation in New Zealand – is expected to produce operational and capital cost savings for the company of approximately $20 to $25 million a year.

It will also cut the Huntly power station’s capacity by more than half (around 500MW), limiting it to the two existing gas-fuelled units – the high efficiency 400MW “Unit 5”, and the smaller 50MW open cycle “Unit 6″ – and shifting NZ’s electricity market further into renewables.

While this has concerned some analysts, who warned that future dry spells could lead to drastically reduced hydro capacity and, thus, to power shortages, Genesis said New Zealand’s power system was now better able to cope with dry years, even without coal.

“While there was a dry year in 2007/08 the extra generation required from Huntly came from Unit 5, not the Rankine coal fired units – their output decreased in this year from the previous year and kept on decreasing year on year to now,” a Genesis spokesman said.

The shuttering of the coal plants has been welcomed by NZ green groups, and – in stark contrast to Australian PM, Tony Abbott, and his response to the likely abandonment of the proposed Adani mega-coal mine project in Queensland – even by NZ Prime Minister John Key, who is reportedly “unsurprised” by the closures.

“I mean, in a lot of ways it’s unsurprising because the costs actually for Genesis, with the ETS and the likes, means that probably in the long-term coalfire power plants aren’t the most sensible plants to have,” Key said. “From New Zealand’s emissions perspective, this is actually probably a good thing.”