Genesis’ plan to burn coal till 2030 causes shock

Rebecca Howard

Genesis Energy has pushed back plans to stop burning coal for power generation until 2030, a move that has angered environmentalists.

“We believe there is a future without coal but it is going to require some thinking and some planning and that’s why we are giving 12 years’ notice,” chief executive Marc England told BusinessDesk.

In 2015, the company said its last two coal-burning electricity generators at the 953 MW Huntly power station would be permanently withdrawn from the market by December 2018, but the next year it signed contracts with its rivals to keep the two coal/gas-fired Rankine units at Huntly available to the electricity market until December 2022.

Genesis chairwoman Jenny Shipley said the power company would phase out coal completely by 2030, and was committed to ruling out coal for electricity generation in normal market conditions by 2025.

Greenpeace New Zealand said the plan to keep burning coal until 2030 “stunned environmentalists”.

“The fact that Genesis Energy . . . is celebrating this plan as a positive step forward for the climate is farcical and misleading,” Greenpeace campaigner Amanda Larsson said.

However, England said the new timeline was not a delay. Rather, Genesis had always guaranteed the units would stay open until the end of 2022 “but that never meant they would be definitely shut at the end of that point”.

Genesis had carried out analysis and “we believe the market requires that capacity beyond 2023” and its commitment to use coal only in abnormal market conditions from 2025 was assuming those units to $199.5 million in the six months ended December 31 from $155.7m a year earlier, it said yesterday. Revenue climbed 26 per cent to $1.21 billion.

Net profit dropped 24 per cent to $28.4m as depreciation, depletion and amortisation costs jumped about 41 per cent to $103.5m and the fair value of financial instruments posted a loss of $19.7m, turning around a gain of would be available after 2022 “but that was always our intent” .

England noted that in 2017, of the total generation produced by the two units, 90 per cent was bought by other market participants, not Genesis.

“So, this is a market challenge, not a Genesis challenge.”

England said Genesis wanted to run Huntly’s Rankine units on gas rather than mothball them entirely.

“We have already reduced our emissions by 50 per cent and our coal use by 80 per cent over the past 10 years, so we have worked hard to make those units more capable $1.9m in the year-earlier period. Genesis’s wholesale division lifted earnings 29 per cent to $106.4m, the biggest contribution to the group, while Kupe contributed earnings of $55.7m, a gain of 75 per cent.

Genesis has a 46 per cent stake in the Kupe Joint Venture, which owns the Kupe oil and gas field in the offshore Taranaki Basin. of running on gas and we run on gas whenever we can,” he said.

“That is what has given us the confidence that we can remove coal from the system completely.”

Kupe gas production is supporting generation requirements at Huntly, although in the six months to December 31 the ratio of coal to gas was 63:27 versus 30:70 in the previous six-month period, according to a presentation from Genesis.

New Zealand has the thirdhighest rate of renewable energy as a portion of primary supply in the OECD, behind Norway and Iceland, with about 85 per cent of electricity sourced from renewable energy.

Norway, however, has two years of storage in its lakes while New Zealand has six to eight weeks, according to England.

“That’s a systemic problem for New Zealand.”

He said it would be “reasonably straightforward” to get to a 90 per cent renewable system, without too much impact on consumers. However, “we are worried about getting from 90 per cent to 100 per cent”.

Prime Minister Jacinda Ardern’s Government is committed to to 100 per cent renewable energy by 2035.

In a submission to the Productivity Commission in October, Genesis said it “did not currently see a case for pursuing a fully renewable energy system (100 per cent renewables) because of the significant levels of complexity and economic risk this would incur”.

Genesis said it would be possible only by significantly overbuilding renewable-only capacity to account for dry periods. This would risk the reliability of the electricity system and “expose consumers to much greater costs”. — BusinessDesk