Jeanette questions the wisdom of the Genesis board

Jeanette asked the Minister for State Owned Enterprises in the House yesterday whether he has confidence in the board of Genesis Energy. Genesis is proceeding with a consent application for a gas fired power station for which it admits it has no gas and is not economically viable “in a real-world, commercial sense”. The Rodney power station is a white elephant that will tie electricity and gas prices for all New Zealanders to the international price of oil.

19 Comments Posted

  1. Personally, I’d like to see more vehicles converted to operate on gas (CNG) and the investment in power stations focussed on the renewable resources, including wave power.

    Petrol and oil prices will rise. Using our own CNG instead of overseas oil makes sense, but this will push up CNG prices. In turn, this will improve the economics of wind and wave and other renewables, and taken far enough will favour electricity use over gas use for home and industrial heating applications, etc.


  2. The different forms of generation have different advantages and disadvantages, and complement the other generation capabilities of the different power companies to different degrees. Therefore the different power companies have different preferences.

    Gas power stations are relatively cheap per Watt, but the running costs are higher. Contact are putting in gas peaker units to avoid paying/taking advantage of high spot prices. The Combined cycle gas plants have better efficiency but higher cost and don’t start up quickly, suiting base load operation, such as meeting winter demand.

    Geothermal is more expensive ($3/Watt or higher) but has low running costs, so suits baseload generation. However there are limited opportunities and a significant portion are tied up so not all power companies can take advantage of these. I imagine we will see excess installed geothermal plant so it can run at less than 90% capacity, thus conserving the heat in the rccks when demand is lower so it can be used at periods of higher demand (or lower alternative supply), i.e. at times of higher prices.

    Wind has lower costs but isn’t always available, and is often available at times of low demand. Good for conserving hydro storage so preferred by power companies with hydro storage. Not so good for meeting peak demand when the winds aren’t blowing.

    Another factor is that different power companies probably have different expectations about the future prices of gas, or at least the gas that they expect to be able to get.


  3. I like the idea of coastal water driven turbines as generators – wonder how productive/efficient they are?
    Hi Eredwen – Welcome Home!

  4. In what way is wind power “not economically viable “in a real-world, commercial sense””?

    If you are privvy to undisclosed documents revealing that the government has been providing it’s electricity SOEs with tax rebates or subsidies to build wind farms then you really should share them with the rest of us.

  5. – “not economically viable “in a real-world, commercial sense””

    Like wind power, you mean?

    Or does the economic argument only apply to things you frown on?

  6. Only if it’s not “frivolous or vexatious”.

    A quick read through the decision shows that the Commissioners don’t consider their role is to examine (a) whether there is a need for the power station, (b) if there is a future commercial gas supply to run it, and (c) whether the project is economically viable.

    Commissioners do acknowledge though that the power station may not be built for several years “at least”. And that it is essentially a baseload plant.

  7. I think the “or for other reasons” is so that they can cover their ass if someone submits saying “but that power station isn’t consented yet, how can you solely justify the new pipeline on the basis of something that’s not yet consented”.

    If the power station doesn’t go ahead I would be hugely surprised if the pipeline went ahead.

  8. The new pipeline has already been notified and submissions close on 17 April. Here’s the link to the public notice

    My understanding is that the proposed new pipeline will only have the capacity to carry gas for the power station. After all, the only delivery point in the whole 30km will be at the power station site. But Vector says its primary objective for the project “is to make provision for future demand for natural gas including but not limited to demand from the proposed Rodney Power Station”.

    Vector also claims that “a range of development options can be accommodated, for example a range of gas-fired generation or industrial development options in the Rodney District could be supported”. Now we have no industrial zoning in Kaukapakapa and even the local shops aren’t zoned commercial. Are we destined to be the next big industrial park in Rodney District?

  9. Vector have, in the last week or so, lodged a Notice of Requirement for a gas pipeline from Taupaki to the site of this power station. I assume this is to feed it with some gas?

    Might be worth keeping an eye out for the public notice?

  10. This how the SOE Minister responded tonight to letters from Kaukapakapa residents:

    “With respect to the Rodney Power Station, as Genesis is a SOE, in accordance with section 5(2) of the SOE Act 1986, operational matters are the responsibility of an SOE’s board. As such, any decision to proceed with the Rodney Power Station would be a decision for the Genesis Board. I can assure you that the Government has no intention of fast-tracking the development of Rodney Power Station specifically, or interfering with the operational decision making of the Genesis Board.”

    So if shareholding Ministers won’t step in, who is Genesis’s Board accountable to? Under the SOE Act, the company is required “to operate as a successful business” and be “as profitable and efficient as comparable businesses”.

  11. The baby pukeko, with their great big feet, mange to stay on track and not to trip up

    … unlike the Genesis Board, apparently(?)

  12. Thanks for posting this Frog – made my day! I just have to say something about Gerry Brownlee’s comment that “this Government is encouraging people to go out and make those [gas] finds.” It’s not just “people” who are risking millions of dollars on gas exploration – it’s their own SOEs.

    Last year Genesis and NZOG lost $50 million when they abandoned the Momoho gas well. But then in January Gerry Brownlee gave Genesis the go-ahead to buy a further stake in the Cardiff well, despite Genesis saying in it’s annual report last year that Cardiff has “uneconomic reserves”.

    So how many millions has the SOE spent so far to buy a majority stake in a gas field that they admitted is uneconomic? You have to wonder what Genesis told Brownlee to get his approval on this.

  13. Change it for a waste to energy plant instead of sending all that recycled rubbish and colour coded bottles to the dumps.

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