Basil Sharp and Sam Malafeh Energy Centre & Department of - PowerPoint PPT Presentation

Basil Sharp and Sam Malafeh Energy Centre & Department of Economics The University of Auckland

Outline  Focus on electricity  Policy  Renewables  Climate change  Property rights  RMA  Economics  Demand, supply  Regional economics  Concluding comments

Policy: Status Quo

Policy: 90% Renewables

Policy: Projected Geothermal

Policy: Climate Change  ETS passed into law 2008 – under review  Proposed change: delay entry of stationary energy sources to July 2010  Transition phase:  Surrender 1 NZU for every 2 units CO 2 -e or pay $25  Can bank but can’t export while price cap in place  Great deal of uncertainty around Copenhagen

Property Rights: RMA  Geothermal energy is a renewable resource  Councils not to consider effects of climate change but are to have regard to benefits derived from use & development of renewables  Councils can set rules limiting GHG emissions  Environment Waikato: distinguishes across geothermal systems – Development Geothermal Systems most relevant to electricity

Property Rights: RMA  Discretionary activity within Development Geothermal Systems  First-in-time basis  Rewards first-movers & innovators  Race to the pump house?  Efficient use?  One system multiple operators (Environment Court)  Unitisation (single tapper) v. multiple tappers?  Incumbent consent holder: access, possible holdout?  Multiple operator agreements

Property Rights: RMA Transferable $ Value of property rights A $ Value of property rights B Excludable Duration Quality

Economics  Secure & durable rights essential for investment  Demand  Growth  Characteristics  Supply into market  Timing of development  Scale  Siting of development  Balancing supply and demand

Demand  Drivers: economic growth, population, efficiency of use – generally slower than economic growth  Expectations: around 1.5-2.5% per year  Characteristics:  Location: population, climate  Peaks mornings & evenings  Seasonal demand  Average around 8 MWh/household/year

Existing and Proposed Developments: Taupo Region Existing MW Date Notes Wairakei 176 1958 To be phased out as Te Mihi comes on stream Ohaaki 50 1989 Poihipi 30 1996 Rotokawa 35 1997 Mokai 112 2000 Sub-Total 403 Proposed Rotokawa 132 Under construction Tauhara Phase 1 23 Under construction Commission 2010 Te Mihi 220 Consented Expected 2012 Tauhara Phase 2 220 Consent application Ngatamariki 80 Unknown Exploration stage Sub-Total 640 Total (approx.) 1,000 Source: Environment Waikato

Power plant costs Plant size Power Plant 20 MW 50 MW Single pressure condensing $2,200/kW $1,900/kW Double pressure condensing $2,450/kW $2,100/kW Organic Rankine Cycle $2,700/kW $2,700/kW Hybrid steam & Organic Rankine $2,600/kW $2,200/kW Binary Source: SKM (2009) Note: Costs are in 2007 NZ dollars

Capital cost, plant size and temperature Plant size Plant Type 20 MW 50 MW o C 230 o C 260 o C 260 o C 300 o C Single flash $5,550/k $5,350/k $4,300/k $3,750/k W W W W Hybrid cycle $5,850/k $5,800/k $4,450/k $4,050/k W W W W Source: SKM (2009) Note: Costs are in 2007 NZ dollars

Balancing supply and demand Bid price Demand $/MWh B J B A MWh

Prices: Wairakei Plant 2000 – April 2009

Regional economics  Regional & local impacts  Capturing benefits:  Local infrastructure and business  Depends on scale, source of materials  Agreements with land owners  Employment opportunities  Typically use multipliers to capture expected employment during construction & operation  Income  Multipliers  Agreements with local community to derive employment, income, education, …, benefits

Concluding Comments  Policy  Geothermal as a renewable:  Reliable & sustainable  Challenges facing wind: intermittent supply, consent (Lamermoor decision)  Climate change: investment option  Resource Management Act  Quality of consents  Managing externalities  Development  Demand growth ~ 1-2% per year  Is scale and timing efficient?