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Meridian’s Early Decision Allows Adjustment

29 March 2004 Media Statement

Meridian’s Early Decision Allows Adjustment

Meridian’s announcement today that it will not proceed with its planned Project Aqua hydroelectric development will cause a major realignment of generators’ plans for new capacity, says Minister Pete Hodgson.

“Project Aqua would have added a significant 570 MW to NZ’s generation capacity at a moderate price,” Mr Hodgson said. “Its cancellation will cause all generators to revise their expectations of the opportunities they have for investment in new generation over the next decade.”

Mr Hodgson said the decision to abandon Project Aqua had come early enough for investors in generation, including Meridian, to adjust their plan for the future. New Zealanders should not be concerned that the country might run out of electricity, though the future price of electricity may well be higher without Project Aqua and some future increase in the use of fossil fuels was also likely.

“The Government’s position on Aqua has always been that if it is to proceed it should proceed on time, and if it is not to proceed the country needs to know that sooner rather than later. Meridian’s announcement today gives time for other generation options to be rescheduled and for new proposals to be developed. We can anticipate that various investors will bring forward alternative projects over the next year or so.

“Better demand management will progressively reduce the need for new generation as implementation of the National Energy Efficiency and Conservation Strategy continues. So far that strategy is on course to improve the country’s energy efficiency by 20% by 2012.

“However there will always be a need for extra generation capacity, and price will determine what generation is built first. The second main determinant will be the availability and price of gas ten years from now. The Government is reviewing current settings for gas exploration to see whether or not any adjustment is appropriate and will conclude that work within the next few months.”

Attached: MED assessment of the main generation options open to the industry, along with quantity and price.

Cost of Additional Electricity Generation Capacity Cost

Generation Type

Total
Cost

c/kWh

Potential Capacity

MW

Potential Supply

GWh pa

Potential
Avg. Load

%

Gas Combined Cycle (GCC)

  • 2005-2025
  • 2008-2025 (incl. C charge)

5.7 to 7.7

6.5 to 8.5

800

800

5000

5000

71

71

Wind

  • 2006-2010
  • 2011-2020
  • 2021-2025
  • 2006-2025

6.2

6.2

6.5

8.5

190

240

250

600

750

840

750

1800

45

40

35

35

Geothermal

  • 2006-2010
  • 2011-2020
  • 2021-2025
  • 2006-2025

4.0

6.2

6.2

8.5

25

225

380

60

200

1800

3000

475

90

90

90

90

Project Aqua

  • Stage 1 (from 2009)
  • Stage 2 (from 2012)

4.5

4.5

285

285

1600

1600

64

64

Other Hydro

  • Medium Cost: 2006-2025
  • High Cost: 2006-2025

7.0

8.5

50

280

250

1350

55

55

Coal

  • South Island:

2005-2025

2008-2025 (incl. C charge)

  • North Island:

2005-2025

2008-2025 (incl. C charge)

 

 

6.1 to 7.1

7.6 to 8.6

8.3 to 9.4

9.8 to 10.9

 

 

very large

very large

no limit

no limit

 

 

very large

very large

no limit

no limit

 

 

80

80

80

80

Cogeneration

4.6

350

1700

55

Liquefied Natural Gas (LNG)

  • 2005-2025
  • 2008-2025 (incl. C charge)

8.5 to 10.6

9.3 to 11.6

no limit

no limit

no limit

no limit

71

71

Fuel Oil

  • 2005-2025
  • 2008-2025 (incl. C charge)

11.3

12.0

no limit

no limit

no limit

no limit

75

75

Distillate

  • 2005-2025
  • 2008-2025 (incl. C charge)

16.0

17.0

no limit

no limit

no limit

no limit

75

75


SOURCE: Energy Outlook to 2025, Ministry of Economic Development, October 2003

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