Debate ignores impact of rising gas prices

New Zealand Wind Energy Association: Electricity price debate ignores impact of rising gas prices

Recent debate about the impact that increased renewable generation may have on electricity prices has missed the potentially greater impact of rapidly increasing gas prices, according to Fraser Clark, CEO of the New Zealand Wind Energy Association.

“Suggestions that the future price of electricity will be set by the cost of renewable generation such as wind appear to ignore evidence that the cost of fossil fuel generation will continue to increase,” says Mr Clark.

Last week’s Contact Energy results showed gas prices rising from $5.75/GJ at the end of 2007 to $8.75/GJ in 2010/11. This 50% rise could add $15 to $25/MWh to electricity prices, lifting electricity prices to between $85 and $95/MWh, which is similar commentators’ forecasts for future renewable costs.

The proposed Emissions Trading Scheme will require generators to meet their emission costs, which will also increase the cost of electricity generated from gas and coal. Increased renewable generation will minimise our exposure to these rising costs. In particular, wind generation is not affected by fluctuations in fuel prices, unlike gas and coal generation. “The benefits of wind energy are not just about climate change, it also contributes to our security of supply,” Mr Clark says.

These benefits of renewable energy are being recognised internationally as investment in renewables increases and countries set targets for future renewable generation. The Confederation of British Industry recognises that investment is needed in renewables to ensure energy security in the UK. “Industrial consumers and energy commentators here need to consider the electricity system as a whole and advocate for solutions that will provide us with long-term supply and price security. Investment in renewable generation will contribute to our energy security,” says Mr Clark.

ENDS

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