Monday 2nd September 2019
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A group of the country’s biggest industrial electricity users are combining to see if they can accelerate development of new renewable generation capacity.
Fonterra, New Zealand Steel, Refining NZ, Oji Fibre Solutions and Pan Pac Forest Products are working with the Major Electricity Users’ Group to test whether a long-term power purchase contract for part of their combined load can incentivise new investment at a material scale.
MEUG chair John Harbord said that, while some renewables projects have recently been committed, they are not sufficient to “fundamentally change” the emissions profile of the country’s generation system. It is currently about 85 percent renewable.
The group’s members want to see if they can encourage developers – either existing players or new entrants – to kick-off projects with the capacity to cut emissions by up to 500,000 tonnes a year.
“MEUG’s members want to provide leadership in a meaningful way that actually leads to emission reductions and helps with our carbon challenge,” Harbord told BusinessDesk.
New Zealand generators have dozens of consented wind and geothermal projects, but many are nearing expiry or need to be amended to cater for the latest technologies – particularly larger and more efficient wind turbines.
Generators are also favouring smaller, modular developments to reduce their risk in case demand growth – from greater electrification of transport and industry – doesn’t take off as projected.
Tilt Renewables is kicking off a $276 million, 133-megawatt wind farm near Waverley on the back of a 20-year power purchase agreement with Genesis Energy. Contact Energy has mooted a 60 MW development on its Tauhara geothermal field – about a quarter of the capacity it can deploy there – while Mercury NZ’s planned 119 MW Turitea wind development is about half the capacity it has consented there.
MEUG’s member firms account for about 28 percent of the country’s electricity demand, with the Tiwai Point aluminium smelter responsible for about half of that. Many are also relatively high emitters and stand to benefit if they can help decrease the emissions in the power they are buying by funding faster development of wind, solar, geothermal or hydro options.
Harbord said the participating firms have large balance sheets and their backing for a project may also open up other funding lines for developers. A long-term supply contract – perhaps 10 years – would also help de-risk a development and may as a consequence deliver a lower energy price to the participants.
“But the issue for us is reducing emissions,” he said.
Harbord said the group is interested only in renewable generation but is agnostic as to its type. Nor does it have a preference for new entrant suppliers over existing generators.
Most of the country’s potential generation projects are owned by existing generators. Tilt, which was split out of Trustpower in late 2016, has consented wind options in Otago and Southland and has started thinking about how to replace the small, 20-year-old turbines at its Tararua wind farm near Palmerston North.
But several iwi groups have previously investigated wind and geothermal developments on their land, although the consents for many projects have since lapsed.
Private developer Ventus Energy previously advanced a small consented Taumatatotara wind project in Waitomo District, and is currently seeking consent for a 125 MW wind farm near Paeroa.
Contact Energy last year said it expects to revisit wind generation in coming years. In 2013 it walked away from the 504 MW Hauauru ma raki wind farm it got consent for near Raglan, citing the lack of demand. It let the consents for its 156 MW Waitahora wind development near Dannevirke lapse three years later.
Harbord said the MEUG project may provide an opportunity for parties interested in revisiting earlier consented projects.
Should investigations this year prove promising, he said participating firms may be able to set up a commercial venture for a deal as early as February or March. MEUG’s involvement would end at that point.
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