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Generation Technologies - Already in NZ, New Zealand Energy System, New Zealand Oil and Gas

#4 Wind Energy – Economics and LNG Import Gas Price

The most obvious way to get New Zealand to 100% renewables is by installing more wind energy, much more of it (along with reducing our reliance on Gas and Coal).  A recent analysis by Infometrics shows that a savings of $390 per person every year is realistic by 2030 if we can achieve 20% wind generation – FreeNRG4NZ believes it would be worth even more than this !

Infometrics Analysis Excerpt

The ‘business as usual’ case is based on the Ministry of Economic Development analysis which shows wind capacity doubling to 8% of electricity. The Infometrics modelling looked at a number of scenarios, based on increasing wind energy’s contribution to 20% electricity.

The results show;

    • $60 per person per year benefit with carbon (CO2) priced at $50 per tonne (the figure planned under the current ETS).
    • $90 per person per year if traded carbon emissions cost $100/tonne.
    • $390 per person per year better off if the wholesale gas price rises to $17/GJ (it is currently over $9/GJ and forecast to increase) and carbon at $50.
    • $170 per person per year if the transport mix changes to include 800,000 electric vehicles and carbon at $50.

The benefits mainly stem from substituting costly fuels for free renewable resources, and the savings from not having to buy carbon credits.

“To put these figures into perspective, current electricity cost per person is around $400 per year,” says Eric Pyle. “I believe we can grow wind generated electricity to 20%, from 4% today, because it is a cost effective form of electricity. This report indicates that every Kiwi will be financially better off with more wind farms.”

[read the full analysis here]

This all makes for interesting reading, especially bullet point 3 relating to the cost of gas.  One of our assumptions in pushing for 100% renewables in New Zealand is the fact that NZ will soon be in a position where our native gas supplies dwindle.  There are already plans to build a costly and ugly LNG import facility in New Plymouth (more about that to follow in another Blog) which will mean New Zealand is subject to International LNG Gas prices.  For New Zealand companies to broker a gas importing deal, they would have to sign a long term LNG supply contract that would be indexed against the price Crude Oil (a scary long term prospect for our electricity generation requirements).  A quick look at the IEA key world energy stats can give us an indication of the international gas price NZ would be in for today under the LNG import scenario….

Japan are by far the largest importer of Gas by LNG in the world, the price that they pay is based on a massive quantity / long term contract of gas supply from LNG liquefaction suppliers in Asia.  New Zealand will probably have to pay more than this to lock in small scale supplies from Australia.  In any case, lets just say that we are in for $12USD per MBtu, the same as Japan is paying today, how does that realate to the $17/GJ figure for 2030 stated in the analysis by Infometrics above?

Now, 1 BTU = 1,055.06 joules [ref] so 1 Million BTU = 1.055E9 Joules, that is 1GJ = 1 MBtu.  

After an adjustment of say 70cents to turn the 12 Greenback’s into New Zealand Dollars, ($12/0.7 = $17.00), we can see where the $17/GJ figure comes from.  However, it should be noted that this appears to be the base price for the gas, one must also allow for transportation and the costs of capital to build the import facility in New Plymouth.  So the $17 / GJ figure looks like it allows for the best case scenario AT TODAY’S LNG IMPORT PRICE.  So if all the other aspects of the Infometrics work are correct, we would agree that New Zealander’s  would basically be $390 per person per year better off!

This is quite a claim.  FreeNRG4NZ totally agrees that we need to get on with the work of installing much more wind energy (along with a centralized pump storage scheme to totally displace gas peaking requirements).  But we still have a major question about this analysis:

What is the world market price for LNG going to be 20 years from now ?

If you look at the upward trend prior to the GFC in the graphic above, we would suggest it is going to be much more than allowed for in this computation.  Also, we note that a Crude Oil price of only $150 / bbl (todays terms) has been assumed for 2030 – cough cough, splutter splutter + expletive.  While, at one level, we hope this is correct, on another level we are convinced it is going to be much more than this – try north of $300 / bbl.  What we are suggesting is that after an honest consideration of global peak oil shortage, worldwide population / energy demand growth and the probable understating of the 2030 LNG price used in the analysis is:

“” New Zealand will all be much much better off than the the $390 / per person per year that was calculated if we can get to 20% wind penetration by 2030

So lets get on with the work of adding more renewables starting with the technologies that are already proven – namely wind.


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Contributions sought for this blog > If you have ideas on how New Zealand can move towards 100% renewable electricity as the first step and then onward towards full energy independence - contact us. Lets all work together to get the conversation moving more.


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