Long-term Gas Supply Disruption: Impacts on New Zealand's Electricity Generation System

Abstract

Natural gas presently provides nearly one quarter of New Zealandʼs primary energy and, since the production started at the Maui gas field over twenty years ago, the quantity of gas used in electricity generation has more than doubled, with about one quarter of electricity demand now generated from natural gas. Gas has proven to be a competitive and versatile thermal fuel in the industrial, commercial and residential markets and is a necessary and reliable complement to renewable resources in electricity generation. Underpinning the attractiveness of gas is efficient and cost-effective combustion and generation technology and a highly reliable system of supply. Gas is supplied from the production and processing facilities in Taranaki to the principal gasfired power stations through a high-pressure transmission system. Whilst this system has operated to a high level of reliability since the 1970ʼs, it does not have built into its design1 the reliability criteria, such as N-1, applied in electricity transmission networks whereby the loss of a linkage within the system will not cause a failure elsewhere. The reliability of the gas transmission system can be ascribed to its engineering and operational competence rather than the availability of back-up supplies through the design of the network layout. The few failures in gas supplies which have occurred have generally been of short duration and caused by damage to the transmission pipelines, such as washout by flooding or impact by digging machinery operating adjacent to the buried pipeline. Unlike the electricity transmission network, there is some storage capacity within the gas system as the gas is transmitted at high pressure (up to 86 bar) and consumers can be supplied for some time as the gas decompresses in the pipeline downstream of the damage. During the washout of the Hawkes Bay pipeline in 2004, there was sufficient compressed gas, or linepack, in the pipeline to supply the residential gas market for the week the pipeline was out of operation. However, larger industrial consumers could not receive gas during this period. Government and the gas industry is aware of this potential vulnerability to gas supplies and, through the Gas Industry Company, is replacing existing industry arrangements for dealing with critical contingencies with regulations under the Gas Act. The resulting Gas Governance (Critical Contingency Management) Regulations 2008 include, inter alia, the appointment of a critical contingency operator, the preparation of critical contingency management plans, and curtailment arrangements to reduce gas supply to consumers. They are intended to permit the more efficient management of situations when gas supply is affected by short-term production outage or physical problems with the transmission system which the market proves unable to manage although they do not specify a maximum period for which the contingency arrangements will be applied. One of CAENZʼs principal areas of activity is developing a more thorough understanding of the resilience of New Zealand infrastructure to natural hazards and the inter-dependencies between any vulnerabilities and the wider economy. The natural gas supply system is a significant part of this infrastructure and little publicized work has been undertaken to investigate the impact of sustained failures within the supply system on gas availability and the consequent impact on gas consumers, in particular the electricity generators which have a wider impact on electricity consumers. This lack of investigation is due in part to the high level of reliability of gas supplies. Whilst gas supplies may be crucial to many commercial and industrial consumers, relatively few have back-up measures in place to replace gas if it were not available. In some cases this is because the consumersʼ operations require the particular properties of natural gas but in most cases it is due to the costs of making provision for back-up fuels which is deemed unnecessary given the high reliability of natural gas supply. However, this is not to say that situations cannot occur which result in a sustained shortfall of gas supplies. It is the intention of this investigation to provide a better understanding of the impact of breakdowns in the gas supply system on the availability of gas to consumers and the consequent impact on their operations. Specific attention is given to the impact of gas availability on electricity generation and the interplay between gas and electricity demand when gas is in short supply.