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Following just under two years of construction and commissioning, Meridian Energy’s 142.6MW Project West Wind is now fully operational, and the wind farm is already proving its worth in the electricity system. The 2009 year also saw NZ Windfarms’ Te Rere Hau expand to 65 operating turbines, from the five installed in 2006. The construction of two small-scale projects highlights the possibilities for small-scale wind generation. While high turbine prices have hampered larger projects, Pioneer Generation and Energy3 have opted for importing lower cost, second hand turbines for the 2.25MW Horseshoe Bend wind farm in Central Otago and the 0.75MW Weld Cone project in Marlborough. Internationally, installed wind energy capacity grows steadily year on year. Here, in New Zealand, the small size of the market has meant growth has not been as consistent. Even so, there has been a 295 percent increase in new wind capacity since 2006. Even with such strong growth, 2009 has been challenging for our wind energy industry, as it has been for most sectors of the economy. West Wind and Te Rere Hau were initiated in more favourable economic times. It was not until the end of year that construction of another major wind farm, Meridian Energy’s Te Uku near Raglan in the Waikato, was announced. Activity at Te Uku is a welcome sign that there are opportunities for wind energy regardless of economic conditions. Construction of the 64.4MW wind farm began in October 2009. First power is expected to be generated in 2011. Progress on consenting new projects was mixed during 2009. There was considerable consenting activity, but as a result of challenges in the consent process this activity has yet to result in a significant growth in consented capacity. Consent for TrustPower’s 240MW Kaiwera Downs was confirmed in February 2009, but other projects with a combined capacity of over 1400MW continue to work through the resource consent process and Environment Court. Two projects, Unisons’ Te Waka (102MW) and Meridian Energy’s Project Hayes (630 MW), were declined in the Environment Court. The hearings for the two projects ‘called-in’ by the Environment Minister to Boards of Inquiry are progressing slowly, with both hearings now adjourned until 2010. Tension between energy and environmentThe Project Hayes decision is particularly disappointing for the industry as it serves to emphasise – rather than help resolve – the tension between our energy use, sources of energy and concern about the environment. The Project Hayes decision seems to raise the bar for assessing renewable energy – and potentially all large infrastructure projects. It suggests that all possible alternative electricity generation projects to the proposed wind farm – including competitors’ projects that the applicant will have no information on – should have been explored in more depth. Such an exercise would be impractical in the extreme. Resolving the tension between the environment and energy will require commitment. The economic growth New Zealanders desire comes hand in hand with increased energy use. It is well recognised that wind energy provides one of the best options for low-cost new electricity generation combined with minimal environmental impacts. Both the government and public value the development of renewable energy, with the 90 percent renewable energy target and strong public support for renewable energy. The Project Hayes decision leads us down the path of attempting to measure the benefits of renewable energy against landscape on a purely economic basis. Following this path too far will push New Zealand towards greater thermal generation – ultimately leading to increased electricity prices and harm to the environment. Over the coming year Resource Management Acts reforms, the National Policy Statement for Renewable Electricity Generation and the wind energy industry’s initiative to establish good practice guidelines may help to provide more certainty, transparency and direction as to how the tension between energy and the environment can be balanced. The industry will be watching with interest the progress of both the ‘Phase Two’ RMA reforms and the first projects to enter the newly established Environmental Protection Agency’s processes. While the EPA has been established to smooth the process for consenting large projects, there is plenty of uncertainty in how the new processes will work, and whether they will be used in the manner and as frequently as the Government intends. Economics – challenging but doableFor wind energy capacity to continue growing beyond Te Uku, proposed wind farms will first need to achieve consent so they can be pursued as and when economic conditions allow. With wind turbine prices easing, New Zealand developers can currently source turbines at favourable conditions. But how long this opportunity will last is questionable as a global upswing in economic conditions, combined with many governments incentivising renewable energy development as a spur to economic development, will lead to increasing demand. The emerging perception that wind energy is uneconomic is based on a simplistic evaluation of the long run marginal cost of different energy sources, often using inaccurate data or assumptions. Just one example of this is the scenarios published in the Ministry of Economic Development ‘Energy Outlook to 2030’, which suggested little or no growth in wind energy over the next 10 years. Yet only few days after the outlook was published, Meridian Energy announced it would begin construction at Te Uku. For wind energy, development costs vary widely as they are very site specific. Beyond capital costs, a range of factors influence the viability of a given project including yield (which is in turn related to wind speeds and careful turbine selection), proximity to transmission or demand, and fit with the developer’s generation portfolio. Investors in wind energy develop a detailed understanding of the subtle influences of these factors before proceeding with a project. For Meridian Energy, Te Uku, along with its other wind farms, will reduce the company’s risks associated with hydro generation and enhance its ability to manage the water stored in its hydro lakes. The project is to be embedded in the local electricity network, and so the costs and electricity losses associated with transmission are minimised. In addition the use of a reliable wind turbine, the design of which has been refined with longer blades to increase generation, will reduce costs and increase returns. 2010, a year of opportunityWhile there won’t be much growth in wind energy capacity in the coming year, 2010 will still be a significant year for the industry. With the Government pursuing RMA and electricity sector reforms, combined with the entry of the energy sector into the moderated Emissions Trading Scheme, there is the opportunity to ensure that the regulatory and policy environment enables all the options for new generation to compete on an equal footing. The outcome of the Copenhagen Climate Change conference, combined with the moderated Emissions Trading Scheme will signal the future for greenhouse gas emissions. The electricity market reforms should help to clarify the role of the different technologies and the importance of flexibility in the system. RMA reforms and the NPS should enable a smoother consenting process. An enabling framework will allow investors the ability to choose the technology, energy sources and sites that best fit with the current and future needs of the electricity system and the country. Minimising the risks associated with the supply and price of fuel will be essential if we are to maximise it economic and productivity growth in coming years. Around the world, countries are turning to renewable energy, and wind energy in particular, because it provides fuel supply and price certainty well into the future. With all our major electricity generators, along with locally owned and international wind energy developers, exploring options for wind generation here, New Zealand will be no different.
Energy NZ Vol.4 No.1 Energy Perspectives 2010 |
At the beginning of 2009, New Zealand’s wind energy capacity was 325 megawatts. By the end of the year it had increased by 171MW to nearly 500MW. By Fraser Clark, chief executive, New Zealand Wind Energy Association.