The power of wind

On whatever side your energy opinions fall – fossil fuel or renewable power – the whole world has gone crazy on the latter. New Zealand should seize its competitive advantage in this respect, says FRASER CLARK, chief of the NZ Wind Energy Association.

Countries all over the globe are making commitments to renewable energy. In January, the European Commission proposed new legislation that would see 20 percent (up from 8.5 percent) of all energy come from renewable sources by 2020. This means than a third of all EU electricity will need to be renewably sourced for this target to be achieved.

In the US, at least 20 States have implemented Renewable Portfolio Standards, with legislation setting renewable electricity targets well above existing levels. National targets are also now being considered.

In Australia, the new Labour Government included a new, significantly higher renewable energy target as part of its successful election platform. Even China is seeking to double renewable energy’s share of total electricity supply, an initiative requiring huge growth, given that demand continues to increase rapidly.

While commitment to climate change is undoubtedly one driver behind such policies, equal importance is being placed on security of supply and limiting energy price escalation.

In most cases, the countries above rely on coal, oil and gas for their electricity. And, as their own resources dwindle, most now import significant quantities of these fuels, exposing them to considerable international supply and price volatility, similar to our situation here in NZ with petrol. Moving to the use of indigenous, renewable resources reduces such risks and offers certainty of price, especially as wind generation displaces expensive and inefficient fossil fuel generation in the dispatch merit order.

As a mature, well-proven technology that is able to provide significant amounts of electricity, wind power is increasingly becoming an energy source of choice. In 2007, around 40 percent of all new electricity generation installed in Europe was wind. In the USA, that figure was 30 percent – more than 20GW of power – lifting the total to more than 94GW, or about twice the capacity at the end of 2004.

In New Zealand, one common response to any discussion regarding this massive growth overseas is to note that we already have a high level of renewable generation. The implication is that we don’t need to take such strong action ourselves.

Such an approach ignores the fact that the same supply risks and price uncertainties attached to fossil fuels overseas will also be faced here. The run-down of the Maui gas field has already pushed electricity prices up, and a further tightening in gas supply is forecast for around 2010-2015. Continuing to increase the amount of thermal generation in our electricity mix – as some propose – will only expose us further, too. The 65-70 percent of renewable generation that we enjoy today is simply a higher benchmark than those found in other countries; that doesn’t make it something about which we can afford to be complacent.

A vast majority of countries are now providing support mechanisms – such as fixed feed-in tariffs, green certificates, or quotas – to encourage renewable uptake. These are typically designed to recognise that wind energy is often competing on unequal terms with other forms of generation that may not face a carbon charge or that are subsidised in some other fashion. In some countries they can also reflect the challenges faced in implementing wind power in areas without a great wind resource. International prices for wind generation are generally in the range of $90 to $180 per MW.

New Zealand is unusual in that wind power receives no such support and competes directly with all other forms of electricity generation. The proposed Emissions Trading Scheme will see carbon emitters face the full cost of their operation, and so should enhance wind’s competitiveness. It won’t, however, affect the cost of wind energy itself. It is a common misconception that all wind farms receive carbon credits. However, these have not been made available since 2004 and will also not be available under the ETS.

Accordingly, wind energy projects will only be built if they are able to generate electricity at market prices, while also providing the required rate of return. With our excellent wind resource, we are typically able to generate wind power at a lower cost than is possible overseas, at around $70 to $100 per MW. As the world moves increasingly down the  renewable path, this lower cost of generation, along with our geothermal capacity, should see us retain the relatively low electricity prices that  comprise one of our competitive advantages.

Importantly, too, wind energy also offers additional supply security. The high electricity prices seen recently in the North Island due to coincident constraints in thermal, hydro, transmission and wind capacity clearly demonstrate the need for diversity in our sources of electricity. No one type of electricity can provide New Zealand with total electricity security. Greater use of wind, as one of a range of sources of generation, can help to spread the risks associated with reduced output from other means.

As new wind farms around the country – such as West Wind in Wellington, and proposed projects in Central Otago and the Waikato – come on line, they will increase generation capacity when the wind is not blowing at existing wind farms in the Manawatu. They will also help to relieve the high demands placed on hydro generation and so reduce the risk of dry-year supply shortages; the wind will always be blowing at sufficient strength for power generation somewhere in New Zealand.

Also in its favour is the fact that wind energy is completely compatible with the primary production and processing industries that drive our economy. The physical footprint of wind farms is typically only 1-3 percent of the land area utilised, with the remainder – around the turbines – remaining in productive agricultural use. And, of course, wind energy does not create the greenhouse gas emissions that threaten our productive base.

New Zealand needs a robust electricity system that makes use of diverse sources. Wind energy has an important role to play in this respect and can do so in a manner that is internationally cost-competitive, contributes to security of supply, and helps us to meet our international commitments on emissions.