Heffernan's renewable vision

It’s a long way from the rugby fields of Canterbury to the steam fields of the Volcanic Plateau, but Doug Heffernan has been in the chief’s seat at Mighty River Power since its inception. He talks to Hugh de Lacy about the company’s future renewable generation.

Mighty River Power chief executive Doug Hefernan (pictured) entered the energy industry after completing a PhD in electrical engineering at the University of Canterbury, where he was better known for having succeeded the redoubtable Fergie McCormick as fullback for the Canterbury rugby team, playing 20 games for the province between 1975 and 1979.

Heffernan has been at the helm of the generator since it was set up 10 years ago, having previously been chief executive of Power NZ from 1991 to 1997. Although the generator has huge investments in geothermal and hydro (the name MRP reflects the Waikato River), the future focus and generation expansion plans for the immediate future will be on other types of renewable generation, he says.

This is despite – or because of - thermal generation making up 18 percent of the state-owned company’s electricity output in the past year. The drought that forced MRP to crank up its Southdown gas-fired co-generation plant at the start of last summer, and to keep it running flat out well into winter, distorted the company’s typical generating profile and reinforced the decision to concentrate on expanding its renewable capacity, Heffernan says.

It is only 18 months since Southdown, near Auckland, was upgraded from 120 to 175 megawatts, and it was intended only as a peak-load back-up plant, but the drought meant that MRP’s core capacity, the eight dams on the Waikato River, had to be supplemented by thermal generation to keep Auckland’s lights on.

Geothermal is the ideal supplement to hydro because of its 24/7 base-load capacity, and MRP is accordingly pressing ahead with its 132 megawatt Nga Awa Purua plant, due to come on-stream in 2010, hard on the heels of the formal commissioning in November of the 100 megawatt Kawerau plant. In the past year geo-thermal generation amounted to 19 percent of MRP’s total output of about 1420 megawatts, and the company hopes to nearly double its geo-thermal capacity to more than 400 megawatts by 2012.

While geothermal base-load has top priority, MRP is also looking hard at windfarming, with an application lodged with the Environment Ministry to fast-track the resource consenting of its Turitea project in the Manawatu, while research is well under way into a second farm at Long Gully in the hills west of Wellington. In fact, so eager is MRP to add wind to its generation capacity it recently spent $7.1 million buying a 19.95 percent cornerstone shareholding  in Christchurch-based Windflow Technology, the inventor and developer of the two-bladed wind urbine.

“We see [Windflow’s] technology as offering a niche application in the New Zealand market,” Heffernan told Energy NZ. “New Zealand does have very strong wind-speeds and, through our looking at potential wind development sites, we’ve acquired a number of sites closer to distribution networks that we think might be quite well-suited to Windflow turbines.”

One of the things about Windflow turbines is that they are a smaller construction, he adds, so the costs of getting a small windfarm developed are more attractive than with mega-turbines sourced off-shore.

MRP is looking to install a dozen of the two-bladed turbines at the Long Gully site being developed by Windflow. But there are other sites being looked at too, including in the South Island, and, “We’re a fair way down the track with some of them,” Heffernan says.

“The critical thing in any wind development project is having good information about the resource in a particular location. That leads to better selection of the type of turbine you want to use. We’ve invested a lot of time and effort in wind monitoring: it’s a minimum of a year before we can make any decisions about a particular site.”

Another form of base-load generation is bio-mass, and about two percent of MRP’s output currently comes from landfills operated by local authorities at Greenmount and Rosedale in Auckland, and at Silverstream in Upper Hutt. But Heffernan said the company is not looking to expand this capacity in the foreseeable future.

“When we were established in 1998-99 we inherited these three sites that use the methane from municipal rubbish dumps, and we operate them as joint ventures,” he says. However, this sort of structure represents 1990s thinking by local authorities that wanted to reduce their emissions of  “a particularly nasty greenhouse gas,” he adds. Because such plants are so small and localised, Heffernan believes ownership is more appropriate to the local authorities that own the landfills, rather than to a big generator like MRP.

“What you see now is typically a landfill operator who ultimately controls the gas as part of its management. They have invested in bio-gas plants themselves on new developments, so they’re probably a more natural owner.”

The company has also largely written off any further increase in its hydro output, aside from incremental increases from the Waikato River system brought about by advancing technology.

“The reason is the way the Waikato was developed going way back to the first plant commissioned in 1929, when they really mapped out how to capture all the fall in the river from the bottom of the Huka Falls to Cambridge, and built hydro dams in such a way that the head of one storage lake is the toe of another. The only gains we can get there are when we replace old equipment with more modern gear, and there you’re looking at efficiency gains of just one or two percent,” says Heffernan.

“I’m sure each of the individual generators have thought about new hydro developments, but their potential is very limited in the North Island, and most of the hydro that’s left even in the South Island is relatively expensive, certainly compared to the likes of wind.”

While MRP’s current drive is for base-load increases from geothermal, supplemented by wind, Heffernan’s mind is by no means closed to new thermal generation. The generator was openly critical of the Labour-led Government’s 10-year moratorium on new gas or coal-fired generation as ‘unnecessary’ in its submissions on the Climate Change (Emissions Trading and Renewable Preference) Bill in the select committee stages before its passage earlier this year.

“We don’t see a need for a ban given that the Emissions Trading Scheme puts a penalty on thermal fuel – and that’s a uniform view across the whole industry. Irrespective of that, it’s not influencing our decisions on preferred development options because we see much more attractive ones that are non-thermal,” Heffernan says.

The attractiveness of those options has seen MRP making the biggest capital investment in new generation of any of the big four generators. During 2007 and 2008, MRP spent $452 million, compared to Meridian’s $368 million, Contact’s $363 million and Genesis’ $329 million.