Emissions continue to climb as coal replaces gas

Sunday, 30 June 2019, 1:35 pm
Article: NZ Energy and Environment Business Week

Emissions continue to climb as coal replaces gas

First published in Energy and Environment on June 20, 2019.

Last year’s gas shortages continued into the first quarter of 2019 driving up coal use and greenhouse gas emissions for another three months.

This combined with increasing petrol and diesel use does not bode well for the Government’s plan to reduce emissions or at the very least stabilise them.

The Ministry of Business, Innovation and Employment’s Energy Quarterly Data show how ongoing reduced production at the Pohokura field due to ongoing maintenance continued to drive the energy sector. The gas supply constraint was most clearly seen in electricity generation, which showed a 16% reduction compared to March 2018. Methanex also reported reduced output for the quarter, citing gas constraints and scheduled maintenance at their Waitara facility. The Pohokura field reported to have returned to near full production in late May 2019.

Increased demand from the Tiwai aluminium smelter of 6.9% from March 2018 saw national demand increase by 0.6%.

The ongoing gas shortages saw some generators turn to coal to meet demand, with coal showing a 138% increase over March 2018. This adjustment to the generation mix meant the proportion of renewable electricity generated during the quarter fall to 80%.

The drop in renewables combined with the shift from gas to coal meant quarterly electricity generation greenhouse gas emissions increased again from 1,211.28 kilotonnes carbon dioxide equivalent in the December quarter to 1,327.28 kt CO2-e in the March quarter. For comparison the equivalent in March 2017 was 770.22 kt CO2-e.

Energy and Resources Minister Megan Woods said the problem was not a lack of gas, but that the system relied on too much gas. She said the answer was more renewables and believed recent announcements about building more renewable capacity was a sign the sector saw this as the answer as well.

Woods also reiterated the Government’s intention to set a target of 100% renewable electricity by 2035 in a normal hydrological year saying only a small amount of gas peaking would be required in the future. The Government is still yet to release the advice of the Interim Climate Committee on the merits of this target and how it may be achieved.

The Energy Quarterly data also showed hydro storage levels were below the historical average until the very end of the quarter, when high rainfall in key catchment areas returned overall national storage to above average levels. The low lake levels coupled with reduced gas supply resulted in wholesale gas prices for the quarter being higher than in March 2018.

Wholesale energy prices reached a peak of $276.79/MWh on 13 Feb 2019 and averaged around $150/MWh for the quarter. The industrial sector experienced a 15% increase in average cost per unit in the March 2019 quarter when compared to the March 2018 quarter.

This was largely because some industrial users purchased their electricity directly from the wholesale market. Retail electricity data over the period showed a flat picture nationwide for residential prices with small drops in line charges offset by a small increase in energy charges. However, the picture is different in different parts of the country with some areas facing much higher electricity costs.

Solar generation also continued its rise, up 27.3% on the same quarter in the previous year, though still at relatively low levels.

The data also showed a large drop in the import of oil products in the March 2019 quarter compared to the March 2018 quarter, this reduction needs to be considered in the context of unusually high imports during the March 2018 quarter. The petrol imports during the March 2019 quarter can more accurately be considered a return to expected levels, rather than a reduction.

The Marsden Point refinery underwent a major upgrade over the period April to June 2018. With the refinery output reduced over this period, there was a requirement to import more refined products, like petrol and diesel, than normal. The increased imports began to be noticeable in the March 2018 quarter when imports of petrol were slightly higher than would normally be expected had there not been maintenance at the refinery.

Petrol prices have almost returned to March 2018 levels after the peak in the September 2018 quarter, however retail diesel is still 11% higher than in March 2018 quarter.

First published in Energy and Environment on June 20, 2019.

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