Electricity Generation & the Gas Market · Electricity generation gas consumption static at be st...
Transcript of Electricity Generation & the Gas Market · Electricity generation gas consumption static at be st...
Electricity Generation & the Gas Market
Greg Sise, Energy Link Ltd
View from Paritutu Rock
A Question of Flexible Storage
Hydro lakes
Gas fields Coal
stockpile
Security of
Supply
Tasmania
South Australia
Exploration
Exploration has ground to
a halt
Success rate since 2005 is zero
And the average size of discovery falls over time
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
5
10
15
20
25
30
35
40
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Exploration Wells & Gas Discoveries
Exploration wells Gas discoveries Success rate
Modelled Gas Reserves
• Reserves run down over time and prices increase, even allowing for development well successes
0
500
1,000
1,500
2,000
2,500
2017 2022 2027 2032
Natural Gas Reserves - PJ
90th Percentile 10th Percentile Average
On and offshore
Taranaki
1
10
100
1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Imp
lied
Ye
ars
of R
es
erv
es
PJ
Proven Reserves (P50) versus Implied Years of Reserves
Maui Kapuni McKee Waihapa/Ngaere Kaimiro/Ngatoro
Tariki/Ahuroa Mangahewa Rimu/Kauri Kupe Pohokura
Kowhai Turangi Other Implied Years Reserve
Reserves & Consumption
-
50
100
150
200
250
Natural Gas Consumption by Sector (PJ per annum)
Energy Transformation Non-Energy Use Consumption
Electricity is still 25% of gas consumption incl. cogen or 22% excl.
cogen
Reserves/Production
Reserves & Consumption
• What about contingent reserves?
• 3P – 2P = 400 PJ
• 2C = 1,700 PJ 0
500
1,000
1,500
2,000
2,500
3,000
2009 2010 2011 2012 2013 2014 2015 2016
P50 Natural Gas Reserves (PJ)
Other
Kowhai
Mangahewa
McKee
Turangi
Kupe
Kapuni
Pohokura
Maui
At current rate of consumption:
reserves are zero in 2027
LNG ?
• LNG = Let’” Not Get excited!!
•Our gas market is small and isolated
no direct links with international gas markets
gas prices have a mixed relationship with oil prices
•Our LNG importation price is assumed to be $16/GJ
• Current wholesale gas price in NZ is $5 - $5.50/GJ
$0
$1
$2
$3
$4
$5
$6
$7
$8
Average Wholesale Gas Price ($/GJ)
Natural Gas Prices
The last time
reserves were
below 10 years
Over-supply
and low
methanol
prices
And Now to Electricity
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
20
13
GWh paHouseholds Residential Sector
Occupied Households Residential Consumption
7,000
7,200
7,400
7,600
7,800
8,000
8,200
8,400Average Annual kWh per Household
2,000
4,000
6,000
8,000
10,000
12,000
14,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
20
13
GWh paGDP ($millions) Commercial Sector incl. Ag
Calendar Real GDP Commercial Consumption
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
20
13
GWh paGDP ($millions)
Industrial Sector (excl Tiwai)
Calendar Real GDP Industrial Consumption excl Tiwai
• Industrial Demand
• Down 1,500 GWh pa in wood, pulp, paper & printing
• Tiwai down 460 GWh pa
Impact of Tiwai Closure
• 5,000 GWh pa (12.5% of national demand)
• Coal-firing might cease (Huntly Rankine units 500 MW)
• TCC would likely close (365 MW)
• Gas & coal reduce by 35 PJ p.a. immediately after closure
• BUT: Tiwai has significantly reduced the risk of closure
And Now to Electricity
$0
$1
$2
$3
$4
$5
$6
$7
$8
Average Wholesale Gas Price ($/GJ)
Price path to support demand
growth, exploration &
development:
gas + carbon
Price path to
compete directly
with the best
renewable projects
$0
$5
$10
$15
$20
$25
>$18
Early Warning Signs
•The market needs gas or coal-fired generation
•The gas-fired sector is already at risk
Southdown, OTAB closed in 2015
TCC is at risk
Huntly is under contract
$0
$1
$2
$3
$4
$5
$6
$7
$8
Average Wholesale Gas Price ($/GJ)
Market in Balance
•Renewables are not over-built: prices set by
thermals
•Most or all gas-fired generation remains
•New peaker(s) built
•Coal-firing ceases early to mid 2020s Stratford TCC and or e3p Huntly Rankines McKee & P40 Junction Rd Otorohonga
Subdued Gas Prices
•Gas prices do not climb due to
better drilling technology, new fields, lower demand
•Gas-fired generation remains directly competitive
Stratford TCC & e3p Huntly Rankines McKee & P40 Junction Rd Otorohonga
Coal Future
•Coal-firing increases at Huntly
•TCC shuts down
•Gas-fired peakers remain
•Thermal fleet supported by capacity contracts
Stratford TCC Huntly Rankines McKee & P40 Otorohonga e3p
Excess Renewables
•Renewables are extensively over-built
•Hydro storage held higher, spill increases
•Gas and coal-firing fall faster than expected
•Spot prices collapse
Stratford TCC & e3p Huntly Rankines McKee & P40
Capacity Market
•Capacity mechanism introduced
•Supports coal and gas
•Market progresses toward very high %
renewables
Stratford TCC & e3p Huntly Rankines McKee & P40 Junction Rd Otorohonga
Summing Up
• Electricity generation gas consumption static at best
higher renewables requires more flexible thermal plant (gas or coal)
• Upward pressure on gas prices
unless supply expands significantly
• If renewables in electricity are to approach 100%, but with flexible storage available:
electricity spot prices will collapse
capacity mechanism(s) will be required in some form
gas-firing will only be for emergency & dry year peaking
Greg Sise, Energy Link Ltd
Electricity Generation & the Gas Market