The year The year for the energy sector has been less about new initiatives and directions and more about continuing projects and work from previous years. The high level direction from government continues to roll out through the New Zealand Energy Strategy and the New Zealand Energy Efficiency and Conservation Strategy. Within this direction, the dynamics and pressures within the sector are moving around and are likely to lead to a different energy mix and different options over the medium/long-term. In particular, the ongoing forecast for subdued electricity demand has seen a number of new wind projects consented but confirmation from generators that they will not be built while the demand outlook remains low. In this category are Castle Hill Wind Farm (860MW Genesis) and the Hurunui Wind Farm (71MW Meridian). Meanwhile, Meridian Energy is building new wind generation at Mill Creek and new geothermal generation has been brought on-stream at the 82MW Ngatamariki (82MW Mighty River Power) and is imminent at Te Mihi (166MW Contact). In contrast, the Methanex expansion, the opening of a new gas peaker at Todd Energy's McKee Field and reopening of trains at Waitara Valley demonstrates a confidence in the long-term outlook for the Gas market. Gas supply was up 14% in the March 2013 quarter over the equivalent 2012 quarter and we are heading into the largest ever summer drilling programme in Taranaki. The Gas Industry Company continues to focus on gas transmission capacity with the sector progressing toward a long-term, market based solution for a secure and efficient supply into Auckland. Electricity transmission has marked a number of key milestones this year, including the commissioning of the new HVDC Pole 3 and the North Island Grid Update Project. The regulatory environment remains under scrutiny with the new regulatory environment still bedding down and final court decisions expected shortly. The first application for a Customised Price Path for electricity distribution is being processed (Orion) with the Commerce Commission's draft determination issued in August. Resilience has also been a common theme with the follow up briefings and conclusion of reviews following the Maui pipeline failure, and work led by the Ministry of Business Innovation and Employment on oil security. Transpower are also participating in a joint resilience operational policy project with KiwiRail and NZTA. Increasingly, we are seeing technology and telecommunications playing a role, especially targeted at managing demand and giving end users greater information and control over their energy use. Most retailers now offer a web-based product or app for users, Transpower has launched a new Demand Response package (with 128MW offered) and Vector Ltd is rolling out a home solar power system with PV panels and Lithium-ion batteries. |
Overview The energy sector is looking well placed to meet future demand with a positive outlook on gas supply, a medium term projection of low growth in electricity demand, a strengthened transmission grid, and a number of consented generation projects ready to be built when required. |
Highlights from the past year » Continued upgrading of the electricity transmission grid, including commissioning of Pole 3 of the high-voltage direct current link and the North Island Grid Upgrade project. » Initial work completed and consultation on a range of measures to improve domestic oil security. » Greater sharing of information and collaboration across industry as progress is made to secure the long term outlook for gas transmission. » Strengthening the management of oil and gas exploration and production, the government moved to exclusive use of annual block offers for petroleum with the first round completed in 2012. » Three of shore drilling rigs are expected in New Zealand waters in the summer of 2013/14, complementing the on-shore drilling programme. » Recent investment in the liquid fuel supply chain infrastructure including the refurbishment of 20 million litres of storage at Timaru, and improved physical capacity of terminal stock through growing storage at the Port of Tauranga and Port of Lyttelton. » 73% of electricity production last year was from renewable sources. » Listing of Z Energy on the NZX and the partial sell down of Mighty River Power. » Methanex expansion of Motonui site and restarting of train at Waitara Valley - combined these add 700,000 tonnes of production. » New Zealand is becoming a global leader in the integration of a high proportion of renewable and intermittent generation into the electricity grid. | Opportunities/challenges » Challenges remain with strengthening competition in the electricity retail market and bringing into play the remaining elements of the regulatory regime for electricity and gas line businesses to reduce uncertainty affecting investment. » Continuing development of better gas transmission access and pricing arrangements to ensure efficient use of available capacity and to support timely investment in new capacity. » Attention to energy efficiency and the role of demand side management in facilitating efficient utilisation of energy infrastructure. |