New Coal Deal Secures Huntly Power Station’s Future Until 2035

The Commerce Commission has approved a significant agreement among major power generators in New Zealand that will ensure the Huntly Power Station remains operational until at least 2035. This deal involves a shared investment for a coal stockpile of 600,000 tonnes, which will support the station’s three Rankine turbines capable of burning coal, gas, or charcoal-like pellets.

This arrangement, finalized between Contact Energy, Meridian Energy, Mercury Energy, and Genesis Energy, was announced in August 2023 and aimed at mitigating the risk of power shortages in the coming years. The collaboration also seeks to distribute the financial burden associated with maintaining standby generating capacity, particularly as Genesis faces challenges in the electricity sector.

Commission’s Approval Highlights Public Benefits

The Commerce Commission authorized the deal for a decade, recognizing the pressing issues within the electricity market. Chairperson John Small emphasized that the commission thoroughly evaluated the implications of this arrangement. He stated, “We have found the public benefits of these proposed arrangements likely outweigh any potential lessening of competition.”

The approval indicates a dual focus on securing electricity supply and potentially lowering wholesale prices. The agreement is expected to be operational by January 2024, marking a pivotal moment for the industry. By maintaining operations at Huntly, the generators aim to prevent a scenario where one of the aging Rankine units could be retired, which would have exacerbated supply challenges.

Future Prospects and Environmental Considerations

This development is bittersweet, as Genesis Energy had originally planned to retire two of its Rankine turbines in 2018 and cease coal usage entirely. However, those plans were reversed, and a third previously-mothballed Rankine unit was brought back online to enhance the power station’s coal-burning capacity.

While the current deal reinforces reliance on carbon-emitting thermal energy, Genesis is actively exploring alternatives to transition away from coal. The company has indicated that it is “progressing its investigation of biomass as a fuel to gradually displace coal,” reflecting a commitment to sustainability amid ongoing energy demands.

The Huntly Power Station also includes two additional turbines that exclusively burn gas, further diversifying its energy generation capabilities. As the electricity market evolves, the balance between ensuring energy security and addressing environmental concerns will likely remain a focal point for both industry stakeholders and regulators.

In summary, the approval by the Commerce Commission serves to stabilize New Zealand’s energy supply over the next decade while also highlighting the ongoing challenges of transitioning to more sustainable energy sources.