Friday 22nd March 2019
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Lines company Top Energy says a $300 million expansion of its geothermal development at Ngawha will fundamentally change the shape of its business and enable it to slash electricity costs for the region’s 64,000 residents.
The firm is on track to commission a 32-megawatt generator at its site near Kaikohe in October 2020 – eight months earlier than planned. Recent drilling has confirmed the potential of the field and, subject to further monitoring, the firm expects to proceed with another 32 MW unit on the same field after 2023.
Chief executive Russell Shaw says the investment – about $320 million across the two plants – will fundamentally change the shape of the business and the way it provides power for the Far North.
From 2020, the company will draw power from the national grid only about 5 percent of the time; by 2026 it will have a near permanent surplus and the generation activities will account for more than two-thirds of a business worth more than $1 billion.
Shaw says the company is not building assets for the sake of it and wants to be able to provide a dividend to customers on that investment as soon as possible. The final shape of that increased discount will depend on how quickly debt from the generation projects is paid down, but from 2030 it could be that “the lines are free or close to free,” he said.
“This is the game-changer,” he told BusinessDesk.
“We will go from being one of the highest cost regions for lines to one of the lowest. It moves us from one end of the spectrum to the other.”
Lines companies – most of them community or council-owned - are looking hard for ways to use new technologies like solar, batteries and smart monitoring to defer capital spending and lower the cost of their services to customers. Lines typically account for about a quarter of a household power bill and most trust-owned network companies return profits to consumers through annual discounts and grants.
Top Energy has it harder than many. It has more than 4,000 kilometres of lines throughout the broken country of the Far North and only 31,000 homes and businesses connected to them.
Kerikeri is the biggest centre and the company has only 150 commercial customers and just two industrial consumers – meat processor Affco in Moerewa and wood processor Juken New Zealand in Kaitaia.
The region has fewer than 9 people per square-kilometre and that drops further when the 16,000 living in Kerikeri, Kaikohe and Kaitaia are excluded.
Top estimates about a third of its network is uneconomic, and while Kerikeri is booming, many other communities in the region endure 20 percent-plus unemployment.
A year ago the firm’s shareholding trust added a new objective for the company. As well as operating a safe, reliable network and a financially and environmentally sustainable business, Top Energy’s goal is to minimise the total delivered cost of electricity to its customers.
Shaw says that fundamental shift – enabled by the generation investment – changes the company’s approach.
“How do we meet the supply for the Far North from within the Far North?”
The region has two big advantages. As well as the geothermal resource, Top Energy vies with Network Tasman for the country’s highest rate of solar installations.
More than 730 homes and businesses have solar panels and they are already meeting more than 10 percent of the day-time summer load.
That number will grow, but to date panels have predominately been installed on the region’s wealthy eastern seaboard. Shaw is determined to ensure that the cashflow from the generation business can lower power costs for the thousands of Top Energy customers living in rental homes, or who will never be able to afford solar themselves.
He says the company will take advantage of the small size of its network - really a regional micro-grid - to provide an optimal outcome for all customers.
The company has already said some isolated communities will in future be better supplied with their own micro-grid built around solar and batteries and some other generation.
But he said a very low – or nil – network charge should make it easier for more people to use solar and to trade surplus power with neighbours or to export it back to the local grid.
And Top can adjust its exports from the geothermal plants to complement the region’s rooftop supplies. That may reduce the need the utility-scale batteries some networks are investing in to carry out the same role.
Shaw is also considering building a solar array at Ngawha to offset the decline in production that occurs from the geothermal plants – effectively big heat exchangers – during hot summer days.
Top Energy built its first pilot plant at Ngawha in 1998 and now has 25 MW of capacity there, exporting power about 3 percent of the time. Peak demand on the network is 75 MW.
Six wells have been drilled for the new plant – Top had hoped to get away with four – and 36ha of civil works are well advanced. The workforce will peak at about 150 in July or August.
The company is doing well from recent high wholesale power prices and has pre-sold 80 percent of the output from the next plant.
“Lines businesses are quite often criticised for not taking a long enough view,” Shaw said.
“The decisions of our board and trust here are 25-35 year ones; they are not talking about the next five years.”
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