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Ministry for the Environment - Manatū Mō Te Taiao

PO Box 10362 │Environment House, 23 Kate Sheppard Place, Thorndon, Wellington 6143, www.mfe.govt.nz
 

Otago Energy Costs and Affordability                                                Editorial - 2006

We’re been pretty fortunate this winter not to have had electricity shortages, brown outs or even blackouts as experienced by Canterbury and Auckland. The fact is, that we are heavily reliant on our ageing Hydro Schemes which have been so reliable over the years. Up to 65% of our electricity is generated by water and all it would take is one dry year to demonstrate beyond doubt how reliant we are on the fickleness of weather patterns.

There is a lot of debate about the planned wind farms. These will surely become a significant source of energy providing up to 15 – 20% of the nations electricity, but again reliant on the weather.

Recent articles suggest that electricity from New hydro schemes will cost about 6 cents per unit to generate, wind is a similar cost and gas too if available at a realistic price. Electricity generated from new coal-fired facility will cost up to 10 cents per unit.

Currently we’re paying in the order of 19 cents for the delivered article from the ageing generators. We are told that this pricing is due to line losses, infrastructure costs and providing a “reasonable” profit for the company’s involved. The end result is that the consumer is paying through the nose for our very convenient energy.

 

In Otago and Southland a large proportion of the energy used to generate heat. It so happens that in Otago and Southland there are very large reserves of coal. Coal is a now a real alternative for small industry and domestic heating, it has always been used by large industry.

It can be demonstrated that for a 25 KW heat requirement, a standard home, the cost of coal is significantly less than other heating options.

This is not surprising in that the transport component of coal is low as coal is a local commodity whereas gas, diesel & wood pellets require extensive processing, which takes place at a considerable distance from here. Electricity too is transported (line charges) and the transmission losses can be very high.

Another reason that coal is “value for money’ is the relatively high efficiency of modern boilers.

 

Another perspective is that coal is used to generate electricity in a 1,000 MW power station at Huntly rather inefficiently. Up to 400 tonne of coal is burnt an hour to produce steam which in turn powers a steam turbine to generate electricity to go into the national grid. Since all the Hydro stations are running flat out with the water available to them it is the coal fired generation capacity, which bridges the gap. The Huntly facility was once powered by inexpensive gas, that now has run out and the increase in demand has meant that coal has been imported.

Doesn’t it make more sense to use local resources and ease the demand on the “grid”?

 

One of the results of expensive energy is that people generally don’t heat their homes adequately and consequently suffer ill health in the long run, not to mention being uncomfortably cold.

Visitors from Europe and North America cannot believe that we live in such cold homes. They would put up with a cold home.

 

Ministry of Energy guidelines state that a healthy home should be 20degC in the living area and 16degC in the bedrooms, and it takes about 25 kilowatts of energy to achieve that in a standard home. Heating to that level costs about $6500 per year for diesel, $6000 for LPG, $4500 for wood pellets, $4000 for a heat pump, $8000 for a standard electric heater, and about $600 for coal collected from the mine.

When you compare the costs, coal is a whole order of magnitude cheaper than other forms of heating.

 

Comparitive Energy Costs - from editorial 2006					Dunedin City
	Cost per Kw	Efficiency	Real Kw cost	home heating	water heating	annual total
	cents		cents
Local Coal @ $96 per tonne delivered	1.8	78%	2.3	$830	$91	$921
Local Coal @ $64 per tonne ex mine	1.2	78%	1.5	$553	$61	$614
Electricity: domestic TrustPower delvered	19.1	100%	19.1	$7,027	$772	$7,800
Electricity: heat pump, +10degC outside	19.1	300%	6.4	$2,342	$772	$3,115
Electricity: heat pump, 0degC outside	19.1	200%	9.6	$3,514	$772	$4,286
Electricity: heat pump, -10degC outside	19.1	180%	10.6	$3,904	$772	$4,676
wood pellets@ $475 per tonne	9.0	78%	11.6	$4,251	$467	$4,718
LPG @ $1.51 per kg	11.8	80%	14.7	$5,414	$595	$6,009
Diesel @ $1.40 delivered	13.1	80%	16.4	$6,004	$660	$6,665
Based on Ministry for the Environment Warm Home technical Report - Phase 2: Living areas at 20degC and bedrooms at 16degC. This equates to a required heat input of 25Kw for a standard home.

 

Many canny folk are now installing coal fired central heating units in their homes. Small business too, can benefit as a lot of money is spent heating offices, workshops and accommodation units. Many schools, hospitals and industry use coal as a reliable and cost effective heat source.

Modern boilers are much cleaner burning with sophisticated electronics, and some are designed to suit home heating. The standard McKenzie Boiler for example, has a small footprint, 25KW output, complies with the Clean Air Act, is relatively easy to install and coal can be delivered directly into the hopper in city areas.

 

When home heating is considered it pays to do some homework and cost the alternatives for 5-10 years.

Consider energy consumption, insulation health issues and comfort.