Power shares

[Snoopy]

https://www.newsroom.co.nz/trade-off...-nzs-lights-on

And the comments below the article are possibly even more interesting than the article itself. Here is a fraction of one comment from Ciaran Keogh of Environmental Consultants Otago Ltd.

"The biggest flaw in the pumped storage idea is that it contains the expectation that dry spells will alternate with wet years but that is not how the climate works. The Interdecadal Pacific Oscillation causes a long-term drier and wetter phases, particularly in the South Island. NIWA notes in an item on its website titled “Long-term fluctuations in river flow conditions linked to the Interdecadal Pacific Oscillation” Flow data from 2000 onwards in the South Island support the idea that flows in those rivers are lower during the negative phase of the IPO. The data suggest that the post-2000 reduction in flow has been of the order of 10%. It is unclear for how long the IPO will remain negative, but previous IPO phases have lasted 20-30 years, so the current negative phase may last another 10-20 years. Pumped storage might just make the problem worse – not only does it use more electricity than it produces but it will suffer exactly the same problem as the existing “batteries” in the system in the lakes at the head of the Waikato, Clutha and Waitaki. Dry years happen in a multiyear series so what happens in year two once the water in the “battery” is run down in the first dry year? Back to where we started but with less electricity and $4Billion poorer?"

Another article on Onslow where the comments are more interesting than the text.

https://www.newsroom.co.nz/sustainab...ping-a-4b-coin

The first comment I quote being a 'come back' on Ciaran Keogh;s variable flow remarks quoted above. The following comment is from Professor earl Beardsly at the University of Waikato.

"Ciaran Keogh also feels that the past record indicates the presence of hydro dry decades as opposed to dry years. If that were the case, our hydro lakes (including Onslow) would indeed run dry within a few years of the onset of the next dry decade in a situation of 100% renewable power. Significant dry decades in river flows show up as changes of slope in time series plots of cumulative discharge. However, for example, the cumulative graph of the Clutha River discharge at Clyde has a boringly constant slope at decade scales. The mean Clutha discharge at Clyde was 500 cubic metres per second for the period 1997-2020. Within this time, the decade of lowest mean flow (2003-2012) had a mean discharge only 7% less than the 500 discharge mean value. In contrast, the lowest mean flow year (2005) was 18% less."

"The Clutha River flow duration curve is smooth away from high discharges. But that has nothing to do with river flow management. Discharge control from Lake Wakatipu is non-existent for practical purposes, there is minimal storage in Lakes Dunstan and Roxburgh, and Lake Hawea water is only a minor discharge component at Clyde and Roxburgh."

SNOOPY

[Snoopy]

At first glance the title of this post seems outrageous. You can't get more energy out of water that you push up hill, by getting it run downhill. That is a Law of Thermodynamics fact.

However, the missing piece of information that makes this possible is that there are two discharge paths from Lake Tekapo. The natural outflow being at the southern end, the Tekapo River (often now dry). The second, now main, discharge point being via control gates into a man made canal that feeds into the Waitaki River, which contains a series of dams operated by Meridian Energy.

https://www.newsroom.co.nz/sustainab...ping-a-4b-coin

Professor Earl Beardsly at the University of Waikato, explains:

"Consider Onslow net energy in the context of the operation of nearby hydro power schemes. The water source for pumping will be either Lake Roxburgh or the Clutha River at some point downstream of the Roxburgh dam. For a Lake Roxburgh connection, there will be some reduction in water lost to Roxburgh spill when Onslow is pumping during times of Clutha high flows. However, the energy gain would not be great."

"Nonetheless, Onslow pumped storage will almost certainly produce a net energy gain. This will come largely from reduced spill in the Waitaki power scheme. That scheme is susceptible to spill losses at times when there are high river flows flooding into already-high levels of Lakes Tekapo and Pukaki. For example, spill from Lake Tekapo down the Tekapo River is also spill with respect to the bypassed power stations Tekapo B, Ohau A, Ohau B, and Ohau C. Onslow operating in the electricity market will have the effect of reducing the frequency of high lake levels, so there will be more storage capacity available -on average- to hold at least a portion of the inflow floods when they happen. The mechanism here is that high lake levels correlate to low electricity market prices, so lake water would be then released to the Waitaki hydro stations to provide the power for Onslow pumping."

SNOOPY

[alokdhir]

Huntly can probably use gas powered unit 5 five to boost power at short notice. But the forty year old Rankine Uniits? I don't think so. In general they would require too much time to start up. Switching them on and off would just speed up the heat cycles too, which would not be good for the life of old boilers



If Huntly closed down tomorrow and the coal was available to re-export, then yes. There may be some money to be made. But the coal was bought to burn at Huntly. Any extra value that Huntly generates with 'old price coal' will be needed to buy replacement coal at the new higher international price. So the fact that Huntly was fortunate enough to have good stock piles of coal when the price soared is of no net benefit to Huntly as a going concern. All it means is that their input costs will be higher in the future.

SNOOPY

I was looking at macro picture thru the eyes of GNE . Which sees it working for itself first unlike before then include other aspects of overall power industry thus NZ electric security etc . I can see they thinking on that lines when they announced how they will price their new swaptions ...they are not based on historic coal prices ...they are based on current coal prices and current freight and carbon costs ...that means they will need to replace their old stocks only if they burn it at current prices of replacement .

GNE realises its mistakes of the past which ended up it helping others out at its financial costs . Seems it has learnt its lessons . Maybe that fact is being recognised by analysts and GNE has become their current favourite even over previous CEN ...at least at Craigs ...after all SP follows profits . Profits can be more if u cut out your loosing deals .

[LaserEyeKiwi]

Remarkable comments by Genesis CEO:

“If I was a betting man, I would say that the energy market [in its current form] definitely won’t survive this decade in NZ, and it probably won’t survive the next two or three years."

[airedale]

Remarkable comments by Genesis CEO:

“If I was a betting man, I would say that the energy market [in its current form] definitely won’t survive this decade in NZ, and it probably won’t survive the next two or three years."

Remarkable indeed. One wonders if it is prudent to invest in any of the listed power companies at this stage. Who did he make that remark to?

[LaserEyeKiwi]

Remarkable indeed. One wonders if it is prudent to invest in any of the listed power companies at this stage. Who did he make that remark to?

In a Buisnessdesk article (this is from Marc England who actually just finished up at genesis) :https://businessdesk.co.nz/article/o...ex-genesis-ceo

[winner69]

Remarkable comments by Genesis CEO:

[FONT="]“If I was a betting man, I would say that the energy market [in its current form] definitely won’t survive this decade in NZ, and it probably won’t survive the next two or three years."[/FONT]

Seems he is saying power companies will do anything to make excess profits (greedy buggers) and don't really want Coaal to go away as they all benefit ..... and 'The best way to decarbonise NZ isn’t necessarily to seek 100% renewable electricity.” he said

[winner69]

Seemed a shame CHI gave up on the idea of exporting green hydrogen because electricity costs were goingbto be too high

NZ renewables doesn’t seem to give us a competitive advantage

[xafalcon]

Remarkable comments by Genesis CEO:

“If I was a betting man, I would say that the energy market [in its current form] definitely won’t survive this decade in NZ, and it probably won’t survive the next two or three years."

It's the final stage of grief - acceptance

In this case, acceptance that the status quo won't be tolerated much longer, and that Lake Onslow is almost a certainty

But this is an opportunity to embrace the green revolution. If the power companies do this, there will be plenty of profits for everyone

[Snoopy]

Remarkable comments by Genesis CEO:
“If I was a betting man, I would say that the energy market in its current form] definitely won’t survive this decade in NZ, and it probably won’t survive the next two or three years."

One interesting factor in the NZ power market is the wholesale/retail market and profit split. Vertical market compartmentalization is what allows small independent retailers to 'take on the big boys' and come up with innovative power plans of their own. But how does this market/profit split by the big boy gentailers pan out in practice? For the two gentailers I own shares in it looks like this:

Mercury Energy

	FY2019	FY2020	FY2021	FY2022	Average
Generation/Wholesale Revenue ($m)	1,458	1,318	1,621	1,671
Generation/Wholesale EBITDAF ($m)	442	485	442	545
Generation/Wholesale EBITDAF Margin	30.3%	36.8%	27.3%	32.6%
Retail Revenue ($m)	817	752	701	783
Retail EBITDAF ($m)	42	5	21	38
Retail EBITDAF Margin ($m)	5.1%	0.66%	3.0%	5.4%	3.5%

Contact Energy

	FY2019	FY2020	FY2021	FY2022	Average
Generation/Wholesale Revenue ($m)	1,827	1,449	1,961	1,772
Generation/Wholesale EBITDAF ($m)	464	426	527	548
Generation/Wholesale EBITDAF Margin	25.4%	29.4%	26.9%	30.9%
Retail Revenue ($m)	548	957	951	1,011
Retail EBITDAF ($m)	67	50	56	17
Retail EBITDAF Margin ($m)	12.2%	5.2%	5.9%	1.7%	6.3%

These tables highlight a very large power (sic) imbalance between the 'wholesale' side of the business and the 'retail' side of the business. To some extent this is expected. That is because the capital cost of getting into power generation is much greater than getting into retailing. Investors deserve a fair return on their capital. And I am fairly sure that if I redid that table looking at the 'return on assets' that very large power imbalance between the retail and wholesale sides of the business would shrink.

However, there is also an incentive for the gentailers to keep that retail margin low, because no gentailer wants an explosion of retail competition in the market. If a gentailer can shift more of their profits into the wholesale side of the business that will keep the lid on any potential retail start ups that might have ideas above their own station!

Wholesale power rates are determined by the 'big four' gentailers. Because the spot power price is determined by the highest marginal cost of power offered to fulfill demand, that means there is an industry wide incentive to keep the power supply scarce. The power supplier who makes up that last gap in supply -and so sets the wholesale power price for all market players- may not be creaming it. But all those power suppliers with renewable power stations built at a low (by today's standards) historic cost certainly are. And there is certainly no incentive for any of the four gentailers, who are sitting on large profits from their portfolio of historically developed assets, to 'change the system'.

It is into this environment that Onslow comes into the picture. An Onslow pumped hydro-system would take some of the cream profit from those gentailers operating historic low cost assets in times of short power supply. However, the bill for making the power system 'fairer' for consumers -by building Onslow- is substantial, with a figure of $4 billion being bandied about. The other factor that must not be forgotten is that despite the extensive privatisation of the power sector of the last decade, the biggest shareholder benefiting from the power pricing system that we have today is still the government itself (through their controlling stakes on Meridian, Mercury and Genesis). Thus to some extent, if the government were indeed to proceed with Onslow, it would be a foot-shot into their own financial revenue coffers of the future.

Rounding out the argument for keeping the current system as it is: No government capital has been required to be injected into the power system in the quest of building new power stations since the Clyde dam was commissioned in the 1980s. Although consumers don't like paying big money for power, imagine the howls of protest if the government had to put up taxes (remember the top income tax rate was 66% in the early 1980s) to pay for new power stations to secure the nations power supply.

SNOOPY