The dominance of oil in New Zealand’s supply and demand energy balance for 2011 is outlined in Figure 20. Statistically there is greater demand for natural gas as a consumer energy than supply can meet, represented by a shortfall of 2.06 Petajolues (PJ). As an energy transformation source, natural gas provides 78.33 PJ which is greater than the supply for coal and oil combined at 50.96 PJ. Transport and electricity are high consumers of energy while there is greater demand for natural gas at 1.67 PJ from the agricultural, forestry and fishing industries than there is from renewables at 0.68 PJ.
This trend indicates that there are good opportunities for natural gas to be utilized as a clean energy source in the dairy industry.
Figure 20: Energy Supply and Demand Balance 2011 (Gross PJ) Patajoules (Gross
The supply of natural gas, as shown in Figure 21, has grown significantly over the past 35 years from 3% to 20% due to the development of sizeable gas fields since the 1980’s.
Figure 21: New Zealand Total Primary Energy Supply
Source: International Energy Agency
However, as New Zealand is not able to import natural gas because of a lack of liquid natural gas (LNG) terminals or pipeline connections to other countries, it is dependent on supply from existing gas fields or major gas discoveries in the future. There may be a business opportunity for natural gas suppliers Nova Energy - part of the Todd Energy Group and one of New Zealand’s leading gas explorers and producers - (http://www.novaenergy.co.nz), or for Contact Energy, a leading energy generator and retailer providing electricity, natural gas and liquid petroleum gas (LPG) to around 650,000 customers nationwide (http://www.contactenergy.co.nz). These suppliers could develop and own a LNG receiving plant and then on-sell gas to other distributors.
“Contact Energy, for example, opened New Zealand’s first underground gas storage facility and a new 200 megawatt gas-fired peaker plant in May 2011.
Capable of powering 200,000 homes in ten minutes from a cold start to full-power, the
$400 million development is able to inject gas at up to 32 terajoules (TJ) per day and withdraw gas from the facility at rates of up to 45 TJ per day. Contact Energy is giving consideration to expanding the facility and ultimately it could extract or inject up to 160 TJ per day” (Contact Energy). Such developments are encouraging for a dairy industry that becomes reliant on natural gas as a clean energy source for producing its products.
4.1 Oil and Gas
New Zealand had 20 million tonnes or 162 million barrels of crude oil and natural gas liquids: proved recoverable reserves at end 2008 (World Energy Council, 2010). It also had 46 billion cubic metres or 1,612 billion cubic feet of natural gas: proved recoverable reserves at end 2008.
“There are some 20 fields and wells in the Taranaki region of the North Island that produce natural gas which is distributed throughout New Zealand and is used for electricity generation, petrochemical production and fuel for industrial and domestic purposes. Gross natural gas production was 186 petajoules (PJ) in the year to June 2011” (New Zealand Treasury, 2012). Many residential housing developments throughout the North Island have reticulated gas available for heating and cooking.
Indeed, “over 75% of new home owners in new subdivisions are choosing natural gas as their fuel of choice” (Gas Association of New Zealand, 2012). Many households that do not have reticulated gas supply often use a combination of electricity and large LPG gas bottles for cooking and water heating mostly throughout the South Island, where
Source: The NZ Energy Sector Report
Figure 22: New Zealand Energy Map
reticulated gas is not available. In the North Island, the Kupe light oil and condensate gas field lies in the Taranaki basin, a hydrocarbon producing region, approximately 30 kilometres off the west coast in waters about 35 metres deep and covering an area of about 100,000 square kilometres. Most of the basin, including the Maui field, is offshore. Marsden Point is New Zealand’s only oil refinery opened in 1964 and expanded in 1979 after the second global oil shock in order to maintain some degree of supply certainty. The Solid Energy website states that the Huntly coal mines produce approximately 1.8 million tonnes of coal a year, which is supplied to Genesis Energy for its Huntly Power Station and the New Zealand Steel Glenbrook Mill (http://www.coalnz.com). Operated by Contact Energy and located on New Zealand’s North Island, the Wairakei geothermal power station produces 1,550 gigawatt-hours of electric power per year. It has been generating geothermal power since 1958.
Oil production is dominated by the off-shore Maui gas field which was discovered in 1969 but this resource is running out and accounts for only 17% of remaining gas reserves. More recently the Pohokura field, which started production in 2006, has dominated production. There are large hydrocarbon basins around New Zealand which the private sector continues to explore as the prices for oil and gas increase on the international market. The government is supportive of companies wishing to undertake oil and gas exploration around New Zealand. Proven resources are mostly centred on the Taranaki region but international interest has been shown in the exploration of the Canterbury basin off the east coast of the South Island, and in the Great South Basin, south of New Zealand.
4.2 Coal
At the bottom of the South Island is the Southland District where the local industry and the domestic market make good use of the supplies of coal and lignite at the regional level. Southland has 60% of New Zealand’s total in-ground coal resources (9,392Mt) and represents 72% of New Zealand’s renewable resources (6,257Mt). New Zealand’s total in-ground coal resource is approximately 15.5 billion tonnes of coal. The South Island contains just over 13 thousand million tonnes (84%) of the total due largely to a huge lignite resource in the Southland coal region (9.2 thousand million tonnes) (The New Zealand Energy Sector, 2006). Since 1882, coal mining has been a major industry on the west coast of the South Island and in 2005, 2.5 million tonnes of coal was produced (Minerals West Coast Trust, 2012). About half of New Zealand’s coal is exported (e.g. Japan, Australia) and 9% meets New Zealand’s consumer energy needs with much of it being used to generate electricity and for use in steel mills (e.g. New Zealand Steel’s Glenbrook Mill). While there is an abundance of coal, the difficulty is extracting useable quantities. The problem is twofold; firstly New Zealand has legislation protecting the environment which includes the RMA, and a lot of coal deposits are located in protected National Parks.
The RMA regulates access to natural and physical resources such as land, air and water, with sustainable management of these resources being the overriding goal. There would be large opposition by the community if open cast coal mining was to take place on the west coast of the South Island. However, this may need to be revisited after the Pike River Coal Mine disaster when 29 men died in an explosion in November 2010. It could be argued that open cast mining is a safer means of extracting coal resources,
particularly when only 55% of coal is considered economically recoverable in New Zealand and most of that is in the South Island. So while there is plenty of coal the question remains how to safely and economically extract it from the ground. Hence the reason why New Zealand must look at other renewable and clean energy resources instead of relying solely on coal, which does not sit very well with New Zealand’s clean green image. On the question of safety, perhaps there is a case for nuclear power plants, given that China’s coal mines kill 2,000 to 3,000 workers a year, and coal-smogged air there and elsewhere kills many more (The Economist, 2011). The key cost driver for coal electricity generation is fuel cost.
4.3 Nuclear
A discussion of New Zealand’s energy sources would not be complete without comment about nuclear power, which was considered in the 1950s, then again in 1968 and throughout the 1970s (particularly during the world oil crisis). With the discovery of large quantities of natural gas off the Taranaki coast in the early 1970s, and large quantities of coal in the Huntly area that could support a 1000MW thermal power station, the introduction of nuclear power stations was deferred until the late 1980s. At this point, because of New Zealand’s abundance of natural or renewable resources the general mood of the population moved further away from nuclear power, especially after the problems arising from the partial core nuclear meltdown at Three Mile Island in the United States in March 1979. Furthermore, there was an increasing movement against all things nuclear. Many New Zealanders took part in protests against French nuclear weapons testing which took place at Moruroa and Fangataufa, between 1966 and 1996, with fallout deposited throughout the South Pacific (New Zealand Listener,
2011). After the first act of terrorism on New Zealand soil in July 1985 when the French bombed the Greenpeace ship Rainbow Warrior in Auckland Harbour, most New Zealander’s were strongly against nuclear power. While nuclear power is not specifically covered under The New Zealand Nuclear Free Zone, Disarmament and Arms Control Act 1987, it has generally been accepted by all political parties and the population that New Zealand’s “nuclear free” status is included in the general intent of the legislation and policy framework. For a small country like New Zealand, another financial question is raised about the benefits of nuclear energy and that is one of cost affordability to build a nuclear power plant. Modern nuclear plants are among the most capital-intensive structures ever built. Initial construction of a new reactor consumes close to 60% of a project’s total investment, compared to about 40% for coal and 15%
for natural gas power plants (the remainder goes to costs such as fuel, maintenance and operations). The nuclear industry is typically the most capital-intensive business in any country that builds nuclear plants (The Wall Street Journal, 2011).
4.4 Hydro
“Between 600mm and 1600mm of rainfall falls in most of New Zealand” (NIWA, 2012). The South Island is particularly wet during winter and as snow melts from ski-fields and the mountain ranges in the Southern Alps over summer, much of the water flows into rivers and dams and feeds the network of eight hydro power stations. The Encyclopedia of New Zealand homepage provides extensive information on the country’s hydro power stations. Constructed between 1925 and 2007, the eight hydro power stations in the South Island are: Aviemore, Benmore, Clyde, Manapouri, Monowai, the Opuha Dam, Roxburgh, and Waitaki. Manapouri is the largest hydro
power station in New Zealand and is located 220 metres underground in Fiordland National Park and supplies electricity to the Aluminium Smelter at Tiwai Point in Bluff, Southland. Operated by Meridian Energy, Benmore is the site of the High Voltage Direct Current (HVDC) link for electricity transfer between the South and North Islands. Collectively the eight hydro power stations produce 2,140.8 MW of electricity.
(http://www.teara.govt.nz) While New Zealand has a relatively high annual rainfall there is a lot of demand on water resources, particularly with dairy farming which accounts for an increasing level of water usage from those farms reliant on irrigation.
The RMA is also a piece of legislation that protects the use of water resources from overuse by farmers wanting to irrigate, and with the increasing period of droughts each year being experienced in many regions of New Zealand, a lot of the hydro generation schemes in the South Island are being compromised due to the lack of storage levels in lakes and reduced flow of water in rivers.
The problem has become so great that most summers the territorial local authorities impose restrictions on the use of water (e.g. hand-held hosing days for households located in urban areas during certain hours and days of the week). Dairy farming has a large impact on the sustainable use of water in New Zealand. A typical dairy farm creates about one tonne of effluent a day (2kg per cow based on milking 450 cows) which is washed off the yard with about 20,000 litres of water a day into effluent ponds.
“The former Environment Minister, Nick Smith commented in May 2010 that water usage by all major users would be metered from July 2010 at a cost of up to $40m, with users of more than 20 litres a second following within two years and users of over five litres a second within six years. He said water usage is worth $5 billion a year but only
31% nationally is being metered. Domestic users will not have to be metered, but in some areas have that option already” (Executive News, 2010). A number of regions have been investigating the idea of smaller scale hydro generation schemes that do not require high water storage capacity so they can provide electricity for small communities in rural areas. “New Zealand has 5,375 MW capacity of hydropower in operation with actual generation in 2008 of 22,091 GWh. Under construction is capacity of 18 MW with planned capacity of 612 MW. As to the status of development for small-scale schemes (<10 MW) New Zealand has operational capacity of 95 MW generating 402 GWh in 2008” (World Energy Council, 2010).
4.5 Wind
“New Zealand has 322 MW of generation capacity installed with wind power providing annual output of 1,047 GWh. Some 2,500 to 3,000 MW will possibly be installed by 2025, supplying 15-20% of power generation. Currently wind energy is supplying about 2.5% of electricity” (World Energy Council, 2010). Power generation from renewables will become an increasingly popular option for New Zealand but cannot be relied upon to fully meet supply demands. Hydro generation will continue to be a dominant player in the market but other sources like wind generation will be increasingly used to meet shortfalls in electricity supply. “New Zealand Windfarms Ltd website states that it installed 30 metre high turbines which generate enough electricity to power about 200 households a year. Up to 97 turbines have been constructed in stages on the Tararua Ranges near Palmerston North in the North Island as part of the Te Rere Hau project. In total, the wind farm will produce 48.5 MW” (http://www.nzwindfarms.co.nz). The amount of power that a wind farm can produce is subject to wind flows at the site. This
will impact on the ability to produce a consistent supply of electricity; unlike nuclear for example, which is able to generate a consistent level of output without interruption. The geographical location of New Zealand is conducive to wind farms but they are expensive and require a long lead-time to completion. Resource consents need to be obtained for wind farms and many people will object to them on the basis that they are unsightly and noisy. Therefore, they are ideally located in rural areas but do have a somewhat negative impact on the landscape from an aesthetics view. Wind power generation is very expensive and the payback period can often take many years. “It is interesting to note that nuclear power in the United States received subsidies of US$15.30 per kilowatt hour between 1947 and 1961 – the first 15 years during which nuclear technology was used for civilian power generation – compared to subsidies of US$7.19 per kilowatt hour for solar power and 46 cents for wind power between 1975 and 1989, the first 15 years when those technologies came into more widespread use”
(The Wall Street Journal, 2011). This raises the question as to whether governments should provide greater subsidy levels for solar and wind power, particularly given the state of the losses experienced by New Zealand Windfarms Ltd in its operation of the Te Rere Hau project. “Electricity sold in the six month period to 31 December 2010 achieved an average wholesale price of NZ$43.23/MWh (forecast NZ$69.09/MWh).
Due to a combination of factors (e.g. construction delays, low wholesale electricity prices), New Zealand Windfarms expects losses during the period of NZ$1,813,000 on its activities with the Te Rere Hau project” (New Zealand Wind Farms Ltd, 2010).
4.6 Geothermal
“The New Zealand Energy Strategy to 2050 (published in October 2007) has a government target that by 2025 a total of 90% of electricity is to be generated from renewable resources, and approximately 20% of this is expected to be supplied from geothermal fields” (World Energy Council, 2010). Most of the geothermal resources in New Zealand are based in the central North Island (e.g. Rotorua/Taupo/Bay of Plenty) but there is also an area in Northland. This is a rich resource for New Zealand and geothermal production of power has probably the greatest future potential. “Installed capacity is 585 MW providing 3,962 GWh annual output of electricity generation”
(World Energy Council, 2010). Consents under the RMA for future development is likely to be easier to gain when compared to wind farm consents and people are already aware of the benefits of harnessing this energy stream. For example, the Kawerau pulp and paper mill in the North Island is the largest direct user in the world of geothermal heat, accounting for approximately 55% of its 210 MW capacity.
4.7 Biomass
Residue from forest harvesting provides a good energy source that can be reused in a number of areas. For example, an environmentally friendly and clean burning heating option in New Zealand is wood pellet burners. The pellets are made from 100% wood residues (e.g. sawdust and wood shavings) and wood burning from sustainable forests is carbon neutral (EECA Energywise, 2012). Wood waste fuel has the potential to be a more economical fuel source when compared to gas and coal. While there are other bioenergy categories such as energy crops, agricultural residues, food and industrial waste, it is worth noting that wood waste fuel currently has a solid following and has a
multitude of uses (e.g. chip bark for gardens with export potential to countries such as Japan). The key cost driver for biomass electricity generation is fuel cost.
4.8 Solar
Solar energy use in New Zealand has been limited to solar water heating applications in the domestic and commercial sectors. While photovoltaic (PV) solar generation is fast becoming a serious option for renewable energy in many countries, it does not have a strong following in New Zealand largely because of the inclement weather conditions.
It is more suited to countries with a consistent level of high sunshine hours where the energy can be harnessed or converted back to the grid. Solar energy users in New Zealand are mostly utilizing the resource off the grid (e.g. incorporating solar panels in house construction) where those users are leading a self-sufficient lifestyle. However, there are areas in national parks and camping grounds in isolated locations where solar energy is used to heat water for showers and as a means to provide lighting. The key cost driver for solar electricity generation is capital cost.
4.9 Tidal
“Tidal energy is a relatively new technology but is worth noting because New Zealand waters have some of the highest average annual wave power levels as kW/m of wave front (i.e. 72, 43, and 81)” (World Energy Council, 2010). The government has approved the first large-scale commercial tidal power generation scheme to be operated by Crest Energy. “The company will install 200 tidal turbine generators in an eight kilometre by one kilometre submarine field in Northland’s Kaipara Harbour.” (Steward, 2011). The key cost driver for tidal electricity generation is capital cost.
4.10 Biogas
Wikipedia states that biogas is produced by the anaerobic digestion or fermentation of biodegradable materials such as biomass, manure, sewage, municipal waste, green waste, plant material, and crops. “Biogas comprises primarily methane (CH4) and CO2 and may have small amounts of hydrogen sulphide (H2S), moisture and siloxanes.
Biogas can be used as a fuel. It can be used in anaerobic digesters where it is typically
Biogas can be used as a fuel. It can be used in anaerobic digesters where it is typically