Gas businesses needed to ensure supply
New gas-based businesses may need to be developed to ensure the country has sufficient flexible fuel resources to back up its growing fleet of renewable generation, the Gas Industry Company says.
Use of gas in power generation and for petrochemical production is expected to fall during the next 30 years, and by 2050 the country’s electricity supply could be 98 per cent renewable, GIC chief executive Andrew Knight says.
However, long-term scenarios developed for the gas regulator by Concept Consulting show that gas-fired generation will still play a critical seasonal and dry-year back-up role, he noted.
But filling that role will only be possible if there is sufficient investment by the upstream sector to keep bringing that gas to market, Knight told delegates at the New Zealand Petroleum Conference in Queenstown yesterday.
Gas can provide that generation support “when the wind does not blow, the sun does not shine and the rain does not fall”, he said. There are gas resources to do that, but investment by producers will be required to develop them and then to supply the infrastructure to ensure they can be delivered in the volumes required when they are needed.
Knight said there needs to be a much deeper discussion between generators and the gas sector to establish commercial frameworks to ensure that investment can occur. Even then, development of new gasbased projects, such as 8 Rivers’ proposed Pouakai project — a combined generation, urea-and carbon capture development — may be required to ensure there is sufficient load to maintain a viable and efficient gas industry.
“Without additional load in the market, you don’t have sufficient incentives for gas to continue to be developed,” Knight said. “The renewable electricity market will need to have that gas available for peaking.
“If we have a market where the only use for gas is a bit of residential and peaking electricity, there is no incentive for the upstream to invest.”
The Government last year banned new offshore exploration, which historically has produced the large, longlived fields that have underpinned long-term industrial or generation developments. It has so far also refused to confirm new onshore exploration permits will be available after 2020.
It has resisted funding research into carbon capture and storage, which would reduce emissions from many gas-based activities and keep them in the market pending development of emission-free technologies. Gas meets about a fifth of the country’s primary energy needs.