GNE - Genesis Energy

[xafalcon]

xaf, show me one project in the last 30 years that has come in on time and on budget, CRL, Marsden Point, Clyde, Sky City, the BNZ building in Wellington, N Z Steel, CH CH rebuild, Waterview Tunnel, Mangere Bridge , Dunedin Hospital, Wellington Museum, the Puhoi to Warkworth motorway to name a few, the Lake Onslow pipe dream will cost $30 Billion minimum, the only way any builder on shore or off shore will build a contract of this nature would be on a cost plus ( charge up ) contract, the very very low productivity of N Z workers is something else.
Just today the CEO of Wellington Water resigned as she forgot to submit a $51 million costing item to her employer.

It just goes on and on.

You said the estimated cost was $30B. This is incorrect, the last estimated cost was $16B

Cost overrun is a separate issue, and you suggested this was additive to your $30B, which was misleading

Cost overrun can be eliminated with a fixed price contract. This is basic procurement. The penalty is a higher initial quoted price as the supplier/contractor must factor in future price movements. The effect is a lower IRR so fewer projects will proceed to construction, but those that do will come in on-budget (and generally at lower total cost than when the purchaser agrees to cover cost escalations)

The idea that the purchaser should cover future price movements was introduced to stop supplier/contractor including fat allowances which killed projects through low financial returns. Now the suppliers/contractors are gaming the system by providing unrealistically low quotes (which get projects approved) and passing any and all cost escalations back to the purchaser. The risk should sit with the supplier/contractor as they know their market much much better than the purchaser

Incumbency breeds contempt. NZ should invite the Chinese to tender a few projects (materials and imported labour), under their belt & Road program. Sharp Chinese pricing will quickly bring the NZ suppliers/contractors back into line. The Chinese quotes don't need to be accepted to have a beneficial effect, but accepting one or two would show its not a bluff

I have 25 years procurement experience. I used this disruptive technique many times, bringing in a new vendor to shake up the incumbent. Easily 25% cost reduction every time, and improved service to boot

[kiora]

You said the estimated cost was $30B. This is incorrect, the last estimated cost was $16B

Cost overrun is a separate issue, and you suggested this was additive to your $30B, which was misleading

Cost overrun can be eliminated with a fixed price contract. This is basic procurement. The penalty is a higher initial quoted price as the supplier/contractor must factor in future price movements. The effect is a lower IRR so fewer projects will proceed to construction, but those that do will come in on-budget (and generally at lower total cost than when the purchaser agrees to cover cost escalations)

The idea that the purchaser should cover future price movements was introduced to stop supplier/contractor including fat allowances which killed projects through low financial returns. Now the suppliers/contractors are gaming the system by providing unrealistically low quotes (which get projects approved) and passing any and all cost escalations back to the purchaser. The risk should sit with the supplier/contractor as they know their market much much better than the purchaser

Incumbency breeds contempt. NZ should invite the Chinese to tender a few projects (materials and imported labour), under their belt & Road program. Sharp Chinese pricing will quickly bring the NZ suppliers/contractors back into line. The Chinese quotes don't need to be accepted to have a beneficial effect, but accepting one or two would show its not a bluff

I have 25 years procurement experience. I used this disruptive technique many times, bringing in a new vendor to shake up the incumbent. Easily 25% cost reduction every time, and improved service to boot

The electricity market is working as expected?
Electricity price is high because of its scarcity?
A major issue at the moment is the water level in the hydro's particularly the south island hydro?

What IF
The hydro storage is not used so much for base load but held back to such levels, where it is not spilled,but is fully utilised during times of scarcity?
Then the existing hydro storage could be better utilised as the battery without building chemical batteries ,pumped hydro or nuclear power?
Then the new solar & wind power could be used to cover the electricity required for base load?

Does that make sense???

Does the existing market allow for this scenario?

[xafalcon]

The electricity market is working as expected?
Electricity price is high because of its scarcity?
A major issue at the moment is the water level in the hydro's particularly the south island hydro?

What IF
The hydro storage is not used so much for base load but held back to such levels, where it is not spilled,but is fully utilised during times of scarcity?
Then the existing hydro storage could be better utilised as the battery without building chemical batteries ,pumped hydro or nuclear power?
Then the new solar & wind power could be used to cover the electricity required for base load?

Does that make sense???

Does the existing market allow for this scenario?

The electricity generators are following the market rules

No well run business would build more capacity when the largest customer threatens to close their business. Rio Tinto uses about 15% of all electricity generated in NZ. If this was released into the market, there is abundant electricity for everyone now that the transmission lines have been upgraded. If the lines hadn't have been upgraded, I have no doubt that RT would still be playing games

The government should have stepped in a decade ago, rather than giving RT a tax payer handout and allowing a decade to be lost to ongoing gamesmanship (that the government resoundingly lost, over and over)

Not all hydro has storage lakes, some capacity is "run of the river", so is entirely dependent on current hydrology conditions

All storage lakes have minimum and maximum levels (above sea level). Historically and currently they have been operated to preserve water and minimise spill - a tricky balancing act that is never perfect

Wind is always the first to dispatch, solar will be the same. But both have issues with intermittency and unpredictability. Both are at their annual minimum in winter (wind has minimums in winter and summer). So these levers are already pulled

Meanwhile, demand grows at 4%pa compounding. But firming generation is not growing, and will be decreasing when the rankines are retired and NZ gas supply continues to decline. So when the wind doesn't blow, there will be less capacity to simply keep the lights on

The current situation has seen the rankines pumping 700MW (750MW capacity) and gas pumping 850MW (1250MW capacity) and diesel generating 100MW (capacity 160MW). And RT has been scaled back considerably (can only do this 4 times in the 20 year contract period, so 3 months into the contract and one has already been used). So the generators are almost at peak now, and struggle to meet reduced demand even with RT being heavily scaled back

NZ doesn't have high quality sun levels like Australia. Solar is marginal in NZ. Wind is much better as NZ is in the roaring 40's. But massive storage is needed, or wind and solar will need to be significantly over-built across the entire country to get geographical separation. This is a recipe for high future electricity costs, and doesn't entirely overcome the growing winter issues

A huge investment in storage needs to be made to avoid an entirely predictable problem in the near future. Businesses will not embrace electrification technology if there are questions over future supply - coal boilers are predictable, you buy coal, burn it, and get process heat to run your business. But how do you process milk 24/7 if electricity supply to your electric boiler isn't guaranteed? This will hold back electrification, and cost NZ ghg emissions penalties for years

But the blue team can't think further ahead than 3 years. And that is a major problem for a political party on the right. NZ really needs to "think big", once again

[Snoopy]

The electricity market is working as expected?
Electricity price is high because of its scarcity?
A major issue at the moment is the water level in the hydro's particularly the south island hydro?

What IF
The hydro storage is not used so much for base load but held back to such levels, where it is not spilled,but is fully utilised during times of scarcity?
Then the existing hydro storage could be better utilised as the battery without building chemical batteries ,pumped hydro or nuclear power?
Then the new solar & wind power could be used to cover the electricity required for base load?

Does that make sense???

Does the existing market allow for this scenario?

Superficially what you say makes sense kiora. However the problem is the storage capacity of our lakes is not as great as most people assume it is. Here is some information on the Waikato river system (headed by Lake Taupo) and the power being generated from it

https://www.taupodc.govt.nz/reposito...%20Mercury.pdf

"17. While the storage within Lake Taupo may seem large, the mean outflow through Taupo Gates of 156.2 m³/s (January 1980 to June 2018, Mercury Hydrometric Database) equates to 4,926 million m³ in one year, which is 5.8 times more than available storage. This in turn equates to a turning over of the storage volume of Lake Taupo approximately six times annually."

Remember these are average figures. Taupo would be run over the summer to make sure that maximum storage was available for winter, when wholesale power prices would traditionally be expected to rise. So potentially if you started the winter with Taupo 'full', that lake level might equate to as little as just over a month of winter energy demand. Not nearly enough capacity to see out a 'dry winter'.

SNOOPY

[kiora]

Superficially what you say makes sense kiora. However the problem is the storage capacity of our lakes is not as great as most people assume it is. Here is some information on the Waikato river system (headed by Lake Taupo) and the power being generated from it

https://www.taupodc.govt.nz/reposito...%20Mercury.pdf

"17. While the storage within Lake Taupo may seem large, the mean outflow through Taupo Gates of 156.2 m³/s (January 1980 to June 2018, Mercury Hydrometric Database) equates to 4,926 million m³ in one year, which is 5.8 times more than available storage. This in turn equates to a turning over of the storage volume of Lake Taupo approximately six times annually."

Remember these are average figures. Taupo would be run over the summer to make sure that maximum storage was available for winter, when wholesale power prices would traditionally be expected to rise. So potentially if you started the winter with Taupo 'full', that lake level might equate to as little as just over a month of winter energy demand. Not nearly enough capacity to see out a 'dry winter'.

SNOOPY

Thanks Snoops
What if the other "NZ hydro storage" was full going into winter?

[Snoopy]

Thanks Snoops
What if the other "NZ hydro storage" was full going into winter?

As far as the Clutha River goes, which is where Contact Energy derive their hydro energy, the water flow is from Lake Hawea, to Lake Dunstan (supplying the Clyde dam) and then downstream of that to the Roxbrough dam.

From the Contact Energy thread:

Third: Clutha is a run of River scheme as the storage available at Clyde and Roxburgh is less than can be held for a single day. The median natural inflow at Clyde is 515 cumecs plus any water released from Hawea. If there are median inflows, and minimum water being released from Hawea, and only releasing sufficient water from Clyde to meet the 286 cumecs from Roxburgh, and Lake Dustan level was in the lower 1/4 of its 1 m operating range prior to starting, Clyde would be spilling water within 18 to 22 hours. This is the main definition of Run-of -River: Water reaching the top dam must be passed through within 24 hours.

So the Clyde and Roxburgh dams have no more than 24 hours of storage available. But what about any available top up from Lake Hawea?

More information about the Lake Hawea storage dam here:
https://www.haweacommunity.nz/news-a...tal-statistics

Maximum controlled outflow from the Lake Hāwea Dam: 200 cumecs (cubic metres per second)
From September 1st to January 31st, Contact Energy can only discharge between 10 and 60 cumecs from the dam, subject to river wave consents.

Storage volume at normal maximum level: 2680 million m3. So maximum discharge from Lake Hawea from fill would take:

2,680,000,000 m3 / 60 m3 per second = 12,407 hours = 517 days to empty the Hawea dam.

That sounds useful. But 60m3 per second is not enough the run the Roxburgh dam at even minimum capacity:

Second: The minimum flows are just that, minimum, yet PMthe actual flow through the machines is constantly varying according to dispatch and small variations in frequency. To ensure that the minimum flow is not breached Roxburgh would normally have a minimum offer of 120 MW which is the most efficient load on 3 machines, and gives an outflow of 286 cumecs. The 120 cumec minimum flow is less than can be dispatched on a single machine, but allows for the timing issue of the flow station being 1 1/4 hours flow time downstream while the offer and dispatch process is in half hour increments.

Optimum flow for a single turbine at Roxburgh is 286cumecs/3 = 95cumecs. This is 1.5x the maximum discharge rate from Hawea. So realistically it will probably take 2 hours of discharge from Lake Hawea to get a single turbine running at Roxburgh for 1 hour (I doubt that Hawea woudl be discharging at its maximum rate non-stop from start to finish)

So it looks like Hawea could power a single turbine (320MW/3= 107MW) at Roxburgh (double that figure as the same flow would have to go through Clyde to get to Roxburgh) for 517/2= 259 days. So the maximum stored power availability at Lake Hawea for 259 days is 214MW or:

214MW x (259 x 24)hours = 1.33m MWh

Yet that is only using 1/3 the power delivery capacity of the river. If it were possible to use the capacity of Lake Hawea to power all of Roxburgh, then you could think of the storage capacity of Lake Hawea as covering 259/3 = 86 days. But I think it is more practical to view the situation as saying that approximately 1/3 of the generating capacity of the Clutha river is covered in a dry year.

SNOOPY

[percy]

As far as the Waitaki River goes.
Wrong river.
Should be The Clyde River

[Snoopy]

As far as the Waitaki River goes.
Wrong river.
Should be The Clyde River

Whoops I did get my rivers mixed up.
Actually I meant the Clutha River (which does happen to go through Clyde).
I have altered post 3956 accordingly.

SNOOPY

[Snoopy]

Worth listening to get a better understanding of current dynamics

https://youtu.be/Mh7mIQHbYfo?si=qZMxcUm6hq5GdGNP

Jarden's Grant Swanepoel on the threat of government regulation (from 7 minutes into the interview):
"The root of the problem is a lack of signals. So the Tiwai deal took so long to take place that you couldn't commit to new builds, because you didn't know whether Tiwai would be around or not, because the previous government had set an aspirational goal of a 100% renewable electricity market by 2030, even though they never really walked away from that, they still left it as a threat. It meant the gas industry could not get on with it. It meant the electricity market could not get on with creating a 'capacity solution' that allowed for gas to be around for longer. So a lot of the issues we are facing now are outside the electricity industry's domain and maybe they are being unfairly pinged for it. But it is just where prices are right now."

and from 13 minutes into the interview:
"I think politicians will always jump over the ability to get a good sound byte out of helping consumers with elevated pricing. Retail customers generally don't have their prices changing too materially. Commercial and Industrial (C&I) customers do, particularly those who haven't put a contract in place. So most C&I customers would not be paying $800/MWh, because they would have contracts at $130-$140, whatever the price point is over a medium term period. So I think you are trying to protect those that haven't hedged. To regulate a market you end up breaking price signals that stop companies from committing to building into the future. So you actually open a big can of worms if you want to start playing around with capacity pricing without a capacity market being created. So while I think there is going to be a lot of talk about regulation and how we help the poor C&I customer, and I am sure there are tweaks that could be done to the system, I see it as very unlikely that you will make material changes, without causing long term negative impacts on the ability to build a renewable platform into the future."

SNOOPY

[Marilyn Munroe]

John Kidd of energy analysis consultancy Enerlytica is interviewed where he discusses the current energy crisis.

https://youtu.be/VFzm7XjaGpg?si=EorMDIMhozdBR-n3

He advocates the solution adopted by Europe when Russian natural gas was not used because of the Ukrainian invasion, where floating liquid to gas plants were placed in ports to discharge liquefied natural gas from tankers into onshore gas pipelines. He predicts the price would be half the current NZ gas price.

Boop boop de do
Marilyn