ATS Short Circuit May/June 2013

Short Circuit may / june 2 0 1 3

Advice to members

HYDRO SITUATION

Tracey Gordon, ATS Energy Account Manager

If for any reason you need to turn the mains off for a period of time please let ATS Energy know and we can advise your retailer.

If you have any topics that you would like to see covered in this forum please let me know either by calling me on 03 307 5107 or e-mailing me at tracey.gordon@ats.co.nz.

SHORT CIRCUIT | mAY / JUNE 2013

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Another reminder about not turning off the mains for any electricity supplies that you are no longer using. If you have a smart meter, your energy company will not be able to obtain reads to give you an accurate account. This includes supplies not used over winter.

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Meridian is currently contacting ATS members with this offer. If you have any questions on what they are offering, or what other options you may have, call me on 0800 BUY ATS (289 287) to discuss.

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Meridian has recently bought in a new three year contract offer and those that are looking at new contracts or coming off old contracts will be offered these.

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Some in the market believe that an oversupply resulting from the smelter’s closure would drive down the profitability of other generators, even if partially offset by plant closures. For an in-depth look at what is happening in the market look out for the ATS News in June.

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Meridian provides price certainty for 572 MW of the smelter’s load under the deal. The site can use up to 625 MW.

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The supply agreement between Rio Tinto and Meridian is the biggest in the New Zealand electricity industry. The smelter’s load usually accounts for about 15 per cent of the country’s total demand. The contract was settled in October 2007 after almost three years of negotiations, and came into force from 1 January this year.

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There seems to be the thought a smelter closure could cause the price of power to drop—but would it really?

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There has been a lot of hype in the media over the past few months with the release of the Mighty River Power shares, and of course the breakdown in talks between Meridian and Rio Tinto.

This has led to speculation around the impact of the smelter’s potential closure on electricity prices. Generators’ valuations, and the effect of the smelter’s future on the share float have also been questioned.

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The Waitaki system, which includes the Tekapo, Pukaki and Ohau lakes, held 1,670 GWh of storage, 19 per cent lower than normal for this time of year.

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Tracey Gordon

Autumn is well upon us with the cooler weather returning and finally some rain. North Island storage is 57 per cent below average for this time of year. South Island lakes held 2,136 GWh, 23 per cent below average for this time of year.

National storage totalled 2,272 GWh, now 27 per cent below average for mid-April.

STORAGE (% OF MAXIMUM)

Information taken from NZX Energy DISCLAIMER: The purpose of this information is to outline historic data and is intended for general reference only

Wind offers energy alternative

By Richard Rennie

It can’t be seen, but is often cursed by farmers and city commuters alike for its insidious effect on people and businesses, snaking invisibly through our lives affecting moods, activities and routines.

The wind brings all that, but with it a wealth of energy resource that has New Zealand known as the “Saudi Arabia” of wind, thanks to its consistency, strength and abundance across the length of the country.

That may be little comfort during calving in the face of a howling southerly, but it does mean as a country we now have 4.5% of our electricity supplied sustainably through wind generation.

Wind generation is to play a critical part in the New Zealand government’s goal to have 90% of electricity generation coming from renewable resources by 2025. Hydro inevitably provides the bulk of today’s 70% renewable resources, and wind contributes around 4.5%.

Prospects are for that to at least double in the coming 15 years, going from 622MW supplied now to 1410MW by 2030. But the CEO of the New Zealand Wind Energy Association (NZWEA) Eric Pyle believes even that figure may be understated.

His organisation’s analysis suggests wind may be even more important by then, possibly generating as much as 20% of NZ’s electricity demand or 3500MW. With rapidly improving technology and design, the cost of wind generation is falling rapidly, while competing energy sources like gas and which have typically rivalled wind for cost are steady or increasing in cost of extraction.

At present wind generation is estimated to cost $80/MWH, and industry experts anticipate it may fall to as low as $60/MWH by the middle of this decade. The next most cost effective sources of renewable power are geothermal and medium sized hydro schemes which sit between $80–$100/MWH. Eric Pyle agrees the public’s appetite for new hydro development is considerably less than fifty years ago during the pioneering hydro age, while geothermal faces significant upfront costs to get projects established.

The continuing decline in wind generation costs comes about through improvements in blade design, gearbox reliability improvements and better control systems for dispensing electricity to the national grid.

At present there are 17 wind farms operating in New Zealand, with a total of 456 turbines and a further 26 turbines under construction.

The largest and most well known is the Tararua scheme near Palmerston North, with 134 turbines. Canterbury presently hosts the two smallest sites, both with a single turbine.

One is a prototype for local firm Windflow Technology and is on Gebbies Pass, while the other is a Danish machine re-commissioned at Southbridge in 2003 and supplying electricity to power 30 homes through the local Orion network.

Proposed wind farms provide an indication of the importance energy companies are placing on the free resource. A further 19 projects are moving through the consent process and if all supplied at maximum proposed capacity, a further 2800MW would be available, taking New Zealand close to that point of 20% of supply.

However Eric Pyle acknowledges investment decisions into new generation capacity in New Zealand are presently sitting under a cloud of uncertainty, thanks to ongoing issues around the Tiwai Point aluminium smelter and Meridian’s supply to that.

Accounting for 15% of the country’s electricity consumption, any drop in smelter capacity will inevitably affect total electricity availability.

However the variety of the wind schemes in operation, and proposed, are indicative of the resource’s flexibility for generation. While large scale existing and proposed schemes like Castle Hill provide “bulk” power to the national grid, smaller community focused schemes are also being developed.

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Mill Creek in Wellington is one now under construction. The 26 turbine scheme has its origins in a group of landowners seeking an option to keep their farms viable without having to subdivide or develop their land and lose it natural character. The owners have worked with experienced wind project developer Meridian to achieve this.

Eric Pyle likens wind farming to “another crop” which can yield solid returns to a land owner.

The amount received will vary depending upon the type of payment and output of wind a project generates.

Three categories of payment range from accepting a lump sum up for the development, a fixed annual payment per turbine and a variable payment based on turbine output. Typically payment will be in the range of 1-2% of the wind farm’s gross revenue or from $1,500-$6,000 a year for each MWH installed. So far any on farm installations have been on sheep and beef operations.

Smaller single installations are becoming popular, and aided by local Canterbury firm Windflow Technology. With the ability to build 60 turbines a year, and capacity to increase to 200, the company’s turbines are developed for high wind situations. A recent agreement signed with electrical giant General Dynamics SATCOM Technologies sees the company due to produce turbines suited to lower wind levels typical of North America.

With the country now eyeing ever shrinking hydro lakes to the south, Eric Pyle says wind power offers a valuable level of diversity to NZ’s power supply.

“It does not always rain, but you can be sure there will always be wind somewhere at any time around the country.”

SHORT CIRCUIT | mAY / JUNE 2013