Genesis Energy’s chief executive Marc England is fond of metaphor.

For him, New Zealand’s quest to decarbonise is like climbing Everest.

Ironically Genesis’s coal and gas-burning power station at Huntly may become part of the answer.

At a recent strategy day, England said he was not about to try and deflect the fact that Huntly is itself a big carbon emitter.

“My central commitment as a chief executive of Genesis is that we will do our best not to greenwash or sugarcoat the reality,” he said.

“We are one of the largest emitters in our sector and one of the largest emitters in New Zealand, but we do believe that there are things that we can do about it.

“Some things are going to be very hard to change in the short term but the company will try to minimise our self-interest.”

New Zealand’s energy scene was “full of nuances and complexities”.

“Understanding the interdependencies between sectors, applying systems thinking and not operating in silos are all important to the country transitioning to a low-carbon future.”

Part of that complex equation means that Huntly will play a big part in New Zealand’s power game for some time yet.

“We realise that we are at the intersection of the energy sector where we are involved in upstream gas (Kupe) all the way down to retailing electricity, gas and LPG.”

Genesis is also New Zealand’s biggest natural gas retailer.

“As we go on a transition in New Zealand we see part of our role as empowering customers to make choices and giving them facts and information to make those choices.”

Electricity generation accounts for only 5 per cent of New Zealand’s carbon emissions.

New Zealand emits about 80 million tonnes a year, and about 4 million tonnes of that comes from the electricity sector.

About 85 per cent of the electricity generated comes from renewables.

Genesis -through its Future-Gen programme – plans to lift that to 90 per cent, with the help of wind power.

The renewables sector has gone ahead in leaps and bounds – powering just 65 per cent of the grid 20 years ago.

Efficient renewables

The cost of renewables continues to fall as production ramps up, technologies are scaled up, and efficiencies are gained.

Wind turbines installed today have 16 times more output capacity than the first turbine which was installed in Wellington 20 years ago.

Genesis’s chief financial officer Chris Jewell says the challenge for the system is in managing the changing seasonal demand and supply patterns.

“Put simply, hydro inflows are largely in summer, and demand is in the cooler winter months, and our lakes, underground gas storage, and the coal stockpile are the inventory that gets us between the seasons.”

Jewell says electricity is transitioning, but the last few per cent on the way to being carbon neutral will be challenging.

“The common view is that we will get above 90 per cent quite easily and may get close to 95 per cent.”

“The last 5 per cent will be harder and more expensive,” he says.

Assault on the summit

England says the real opportunity is to use electricity to decarbonise other sectors, such as transport.

According to his metaphor, New Zealand is at camp 4 – that’s the last stop on Everest before a final assault can be made on the summit – energy from totally renewable sources.

But if New Zealand is to reach the summit – it is going to have to do it without supplied oxygen.

“There are only two other countries in the OECD that are anywhere near the summit – Iceland is already there and Norway is nearly there at 98 per cent.”

But Norway’s assault on the renewables summit has the benefit of “oxygen” in the form of interconnectors with Denmark and Sweden.

Norway also has the European grid at its front door. If anything goes wrong with its domestic power grid – Norway’s lights will stay on.

“When Norway runs out of water – and they have a lot more water than us – it has backup,” England says.

New Zealand, as an island nation, has no such luck.

At any given time, the country has just two months’ worth of storage to carry it through drought.

As Jewell puts it, a renewables-only system would require the equivalent of five more Lake Taupos to get it through a dry year.

The Huntly power station was built to provide backup for what was a highly volatile and intermittent renewable hydro power system.

Huntly – built in the 1980s specifically to deal with Auckland’s “brown-outs” – had four coal and gas-fired Rankines.

One has been decommissioned, one has been put into mothballs while the remaining two are available when the renewable sector comes up short.

“The more wind, solar we put into the system, the more we have to make sure that we are able to back it up when the wind stops blowing and the rivers stop flowing,” England says.

Since the 1980s there has been the added dynamic of wind power generation.

England says there will be a point in the future when New Zealand can head to a 100 per cent renewable electricity system.

In the meantime New Zealand is still well ahead of the game; Australia has just 20 per cent renewable energy and UK has 30 per cent.

In England’s Everest terms, that’s base camp.

Relic or saviour

With New Zealand already ahead of the game, and with technology racing ahead in leaps and bounds, it could comfortably wait for the other countries to also reach camp 4, with improving technology, before making the final push for the peak.

That’s where Huntly comes in.

“It might be best for us in the next decade at least to wait at camp 4 for the other countries to arrive and to then head there together to work at how we are going ascend the summit without oxygen, because today the best technology at the lowest cost happens to be a small coal stockpile at Huntly.

“In the meantime, over the next decade, there is an awful lot more that we can do to decarbonise other parts of the economy,” he said.

Huntly, it seems, can buy time.

England said defending Huntly did not mean Genesis was digging its heels in.

For the last 18 months, Genesis has been working on Future-Gen.

A big part of that involves the company’s Waipipi Windfarm venture with Tilt Renewables, which will be operational in 2021.

Genesis will buy Waipipi’s entire output generated by 31 wind turbines – enough to power 65,000 homes.

All in all, Future-Gen is aimed at displacing “baseload” thermal power – that’s electricity pumped into the grid 24/7.

Specifically, baseload thermal is Genesis Energy’s high-powered “Unit 5” gas-fired turbine at Huntly.

When that happens, Huntly would be there for backup power only, through its two remaining Rankine units.

He says the challenge will be to get more renewables built in New Zealand to displace baseload thermal.

Decarbonising Genesis

“Over the next decade we might be better off focusing on using this wonderful asset (Huntly) to decarbonise other sectors and wait for others to get to camp 4 and wait for the technology to evolve, and maybe in the last decade of the 30 years we will get to the summit,” England says.

Genesis has made a commitment to reduce carbon emissions consistent with limiting warming to 1.5 degrees, meaning it will ramp up replacement of baseload thermal generation with renewable energy.

Forsyth Barr saidGenesis’s emission plans, together with its move to review its 46 per cent stake in the Kupe gas field, were steps in the right direction.

“Whilst its coal units will likely be in use for the next decade, it is a positive step, and along with the sale of Kupe will see Genesis Energy’s environmental credentials improve,” the broker said in a research report.

“Genesis offers better value than several of its peers and its intention to reduce carbon emissions will only help,” Forsyth Barr said in a report.

England says reaching his metaphorical renewables summit will require a different mindset.

“We have a very renewable electricity system,” he says.

“But with that comes some challenges in order for us to get past camp 4.”

How green is New Zealand’s electricity?

Greenhouse gas emissions come from multiple sources in New Zealand.
The most common greenhouse gasses are CO2 and methane.

Half of NZ’s greenhouse gas emissions are from agriculture, and about 40 per cent are from various forms of fossil fuel combustion for creating energy.

In 2018, 55 per cent of carbon emissions related to transport – cars, busses, trucks, trains – 25 per cent process heat and 10 per cent electricity production.

NZ’s electricity system is the third most renewable system globally, runs at a 99.99 per cent reliability factor, and sits around the middle of the pack for retail prices globally. It is in the bottom half for wholesale prices.

Wind turbines being installed today have 16 times more output capacity than the first turbine installed in Wellington.

New Zealand has about two months’ of storage to carry the country through a drought period.

There are only a small number of countries with more renewable electricity penetration than New Zealand.

Norway’s hydro storage is four times larger than New Zealand’s, however their system is still only 98 per cent renewable.

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