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Increasing gas prices drive electricity price rise

Increasing gas prices drive rising electricity prices

To say the 90% renewable energy target will be directly responsible for increased electricity prices ignores current electricity price trends, say Fraser Clark, CEO of the New Zealand Wind Energy Association. Recent rises in electricity prices have been driven by the depletion of Maui gas field. “If we want a secure, reasonably priced supply of electricity in the future we need to maximise the use of our natural, renewable resources.

“Wind farms in a range of locations around New Zealand, taking advantage of our world-class wind resource, will provide a reliable supply of electricity as favourable conditions at one wind farm will balance calm weather at another site.”

The costs associated with developing wind generation are less than the costs associated with continuing to rely on thermal generation. “For example, many of the costs associated with relying on thermal generation are uncertain, but trends suggest they are likely to rise. The recent New Zealand Centre for Advanced Engineering report identifies gas supply beyond 2017 is unknown, so while more gas may be found, we do not know what the cost of discovering, developing and utilising it will be. In addition, the ETS will require generators to meet their emission costs. If the price of carbon is $25 per ton, electricity prices are expected to rise $14 per MWh – a 19% increase.

“In contrast an independent study has shown that the additional cost of 2600MW of wind energy capacity in New Zealand is about $4.60 per MWh.” While this cost does not take into account transmission, Transpower has acknowledged a need to invest in transmission regardless of the source of new electricity generation.

The future of our energy use is inextricably entwined with climate change. The renewable path will enable us to have a reliable and secure supply of electricity while reducing harm to our environment. “The cost of electricity generated by wind will not be affected by gas and coal price rises or costs associated with green house gas emissions.”

Wind generation meets only 2% of current demand. “That a calm day in the Manawatu, where most of our wind generation is based, is perceived to cause supply constraints simply highlights the need for more investment in generation.”

Global uptake of wind energy is phenomenal – over 20GW of capacity was installed in 2007, and total wind capacity is forecast to reach 240 GW by 2012. One of the reasons for the huge uptake in wind energy is recognition that wind can provide a reliable and environmentally friendly source of energy, says Mr Clark.

ENDS

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