Thermal Ban Repeal

A Bill repealing the ten year ban on building thermal power stations has been tabled in Parliament by Energy and Resources Minister Gerry Brownlee.

The Electricity (Renewable Preferences) Repeal Bill overturns what was widely known as the "thermal ban", which made it a criminal offence to construct new thermal power stations, including gas-fired plants.

"The government strongly supports renewable energy but a thermal ban now puts our security of supply at risk," said Mr Brownlee.

"Thermal generation, particularly from gas-fired generation, is the insurance card underpinning the security of our electricity system."

"The ban would only put additional strain on the sector, and last winter demonstrated the critical importance of gas-fired generation. At the time electricity from thermasl sources was generating over 50% of our electricity needs, " he said.

The government believes banning new baseload gas plants would actually create the perverse effect of encouraging the coal-fired station at Huntly to keep belching out CO2 emissions.

"Reducing carbon emissions in the electricity sector remains a goal, and renewable technology will be encouraged through the Emissions Trading Scheme," said Mr Brownlee.

"The ban was a misguided policy from the previous government.  All the major power generators and line companies, as well other industry groups,  expressed concerns  and unease about it," he said.

"New Zealand cannot afford to have an insecure electricity supply. Our economic well-being, our growth prospects and our earning power depend on families and businesses knowing that they can rely on there being enough electricity for their needs," said Mr Brownlee.

Questions and answers:

What does the new bill do ?

This Bill repeals Part 6A of the Electricity Act 1992.

The previous government inserted Part 6A into the Electricity Act 1992, which made the connection of new thermal generation plant (above 10 MW) for which an exemption has not been granted a criminal offence, punishable by fine. The provision was known widely as the "thermal ban". Eligibility criteria and matters dealing with the exemption application process were to be dealt with in regulations yet to be made.

What does thermal generation include ?

Thermal power plants burn fossil fuels such as natural gas, coal or oil to produce and use steam to generate electricity. Thermal generation does not include hydro, geothermal or wind generation, which are known as "renewable" generation methods.

What proportion of New Zealand's current electricity generation comes from each of these sources ?

Approximately one-third is thermal (up to 50% in winter using reserve capacity) and around two-thirds is renewable (more in wet years and less in dry). The government's target is 90% renewable by 2025, but not at the expense of security of supply.

What was the sector's reaction to the ban in the first place ?

At select committee, the ban came under heavy criticism. All of the major electricity generators said they were opposed to it. Major lobby groups like the Major Electricity Users' Group and the Business Council for Sustainable Development said the thermal ban should be dropped. However, the previous Minister remained wedded to the policy and it became law in September this year, with the passing of the Emissions Trading Scheme.

Why is it important to allow thermal generation for security of supply ?

Gas is seen as an important part of the energy mix for security of supply. At times during this winter's shortage  thermal power was providing over 50 percent of New Zealand's power needs.

Can allowing gas fired plants help lower CO2 emissions ?

Gas has lower emissions profile than coal.  When Genesis switched to its 400MW combines cycle gas turbine (known as EP3) it reported a big reduction in C02 emissions from the coal fired Huntly plant.  Banning any prospective development of gas generation may actually cause greater reliance on the coal fired Huntly power station.

What are the next steps ?

It's the government's intention to repeal the thermal ban legislation. The Government is working in its policy goal is to have 90 percent renewable electicity generation by 2025. It expects a revised Emission Trading Scheme will not lead to any new coal fired stations and courage incentives for a new generation of wind, hydro, and geothermal stations.