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NZ Aluminium Smelters says lower cost power could prompt it to keep its doors open, but the window of opportunity is closing quickly; Government won't provide subsidy

NZ Aluminium Smelters says lower cost power could prompt it to keep its doors open, but the window of opportunity is closing quickly; Government won't provide subsidy

The owners of New Zealand Aluminium Smelters (NZAS) haven’t completely closed the door on Tiwai Point, despite announcing they’ve given Meridian Energy notice to terminate their power contract.

NZAS’s chief executive and general manager, Stew Hamilton, said there is still a “small window” for an entity to put a better power deal on the table.

“We’ve been in discussions with stakeholders for many months. From the outcome of those discussions we’ve concluded that we don’t think there’s a deal that can be done that will deliver competitively-priced power to the smelter, which is necessary for it to be sustainable,” Hamilton told RNZ.

“We do believe that nothing’s been left on the table. But if we’ve been mistaken, then the window’s still available for a deal to be put on the table. But the window for that is closing fast now that we’ve terminated our electricity contract with Meridian.”

NZSA’s contract with Meridian will be terminated in August 2021, when the wind-down of operations at the smelter is expected to be complete.

“The window is closing pretty fast in terms of being a reasonably large complex operation,” Hamilton said, denying that Rio Tinto was simply flexing its muscles before New Zealand's general election. 

He said he wasn’t after another government subsidy, further to the National-led Government in 2013 contributing $30 million towards the smelter to keep it going.

Rather, the company wanted a more competitive power price.

$11 million per year saving from transmission pricing change not enough 

Hamilton said an Electricity Authority transmission pricing review, which concluded in June after a decade, came “too little, too late”.

He said changes would see NZAS shave $11 million off the $50 million to $70 million it pays in transmission costs per year. This would only kick in from 2023.

Put in context, the smetler made an underlying loss of $46 million in 2019. 

Meridian said the new “benefits-based” approach decided on by the Electricity Authority would reduce its transmission costs by $27 million a year.

As well as energy costs, NZAS’s owners, Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%), said in a statement on Thursday morning that a “challenging outlook for the aluminium industry" was also behind its decision to start planning a wind-down of operations and eventual closure of NZAS.

Aluminium prices have trended down slightly in the past decade, dropping off more in the past two years (select the aluminium chart below):

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Govt takes hard line

Energy and Resources Minister Megan Woods stuck to the position she took in October 2019, when Rio Tinto announced it would do a strategic review of NZAS, saying the Government wouldn’t give the company a handout.

“Since the smelter opened, taxpayers have been subsidising Rio Tinto to keep it open, either directly or indirectly through cheaper power, and Emissions Trading Scheme allocations of over $48 million per year,” Woods said.

“Rio Tinto globally has been battling decreasing aluminium prices and is facing similar issues in other countries…

“I also want to make clear that the Government expects Rio Tinto to will meet their obligations for clean-up of the site (an estimated $256 million) and do the right thing on the dross.”

Woods in October said she wouldn’t get involved in the Electricity Authority’s transmission pricing review.  

With a closure of NZAS possibly looming, 1000 direct and 1600 indirect jobs in Southland are on the line.

Woods said: “As we have done in Taranaki, we will support a just transition to more job opportunities. We know the strengths of Southland and we want to build on them in areas such as agriculture, aquaculture and manufacturing. There is also an opportunity to support other energy intensive projects like green hydrogen and data centres."

Power companies say they did their best 

Meridian chief executive, Neal Barclay said: “We have worked hard to provide solutions that we believe were of lasting value to the Smelter and acceptable to our shareholders. Ultimately Rio Tinto has arrived at a different conclusion and has decided to terminate their contract with us.

“As a company we have always known an exit is a possibility and we have planned for it. An exit does provide our country with a unique opportunity to accelerate decarbonisation, making way for new growth opportunities across numerous sectors."

Contact Energy chief executive, Mike Fuge, said Rio Tinto’s intention to close NZAS by giving 14 months’ notice on their electricity contract with Meridian Energy was “very disappointing”.

He said all commercial parties involved with NZAS, including Contact, had delivered significant cost reductions for electricity.

What happens if 13% of NZ's electricity is freed up?

With NZAS accounting for 13% of the country’s electricity demand, a closure could reduce the urgency for investment in new electricity generation.

Indeed, Fuge said Contact would defer investment in its ‘shovel-ready’ Tauhara geothermal power station - one of New Zealand’s “cheapest and most attractive option for new, renewable, baseload electricity generation”.

“Tauhara remains a fantastic project, however it is prudent to press pause for now. We need to factor in the impact of COVID-19 and the potential exit of NZAS and get a clearer picture of demand,” he said.

He said Contact would consider closing the Taranaki Combined Cycle thermal power station at Stratford.

But on the upside, Fuge expected Transpower to accelerate the build-out of the transmission grid.

The challenge is that Manapouri hydroelectric power station - New Zealand’s single largest power station built specifically to supply Tiwai Point - is far from where the country’s highest energy demands are.

Fuge said customers should expect to see an increase in transmission costs as the proportion of transmission costs currently paid by NZAS will be spread across all customers.

“The reality is that NZAS has subsidised transmission costs to consumers for years,” he said.

“Not only will those costs now fall to other customers, there will also be additional costs for the significant transmission investment from Transpower now needed to shift surplus energy from the lower South Island north to where it is needed. In the meantime, the surplus water currently being used to generate renewable energy in Southland will in large part end up flowing down the Clutha River.”

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128 Comments

story change,realised they have gone too far and that we are all looking forward to getting our power station back.

It will take real skill to counter the shock. The usual Labour approach of borrow and spend won't help anything much.

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National is borrow and spend. Labour is tax and spend. Get your lines right.

Yes landthanide. But the is a skill difference betwwen the parties and unfortunately both are stuck with our woke but disorganied civil service.

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Are you talking about National's ability to run record migration while under-investing in public services and infrastructure? If National would've spent some taxpayer money on future-proofing our economy with real industries instead of pumping up real estate prices and stimulating hospitality and tourism sector growth, we wouldn't be in this mess today.
Strange that despite being a centre-right voter, I am pinning all my hopes on an economic recovery on the Labour-Green voters. They do spend a lot of time pandering to the woke left but also have been the ones bringing a bit of strategic thinking back into government policy.

Yeah, I just love National's short-term thinking when they should down the Hillside workshops in Dunedin and bought cheap crappy trains from China instead, ignoring that the income tax returns generated by spending the money in NZ closed the gap with the chinese trains and kept skilled jobs here.

That is pretty much a perfect summation of the Key governments do nothing decade!

NZ civil services are far from being perfect but look around, is Australia, UK, USA, Europe etc better in any meaningful way ? Lot of people were croaking that Australia managed COVID better but facts dont support such whinging . I think ideology gets in the way of objectivity.
I am not civil servant, no affiliation with any political party and have voted for both blue and red.

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I'm sick of the country being held hostage by a company that doesn't give a damn about New Zealand. Their constant whinging is due to their own bad decisions. They just need to act like a business rather than asking for a handout once a year.

Instead the electricity can be repurposed into operations relevant to New Zealand. At the same time there are going to be a lot of people hurt by the closure and it's time to help them out as they are victims of an international company that's using their livelihood as a bargaining chip.

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There is real hypocrisy at play here. How much did the film industry get from the government as a subsidy?
So the government is going to sacrifice the jobs of over 600 blue-collar workers and the Southland economy, yet keep on giving to arty-farty Wellington-based 'feel-good' film projects. This is precisely why Trump was elected: the privileged elite being well-provided for while workers are abandoned.

This is why whichever Government would need to do something major to help, rather than let everyone be crapped on.

The government?? I thought this was between Meridian and Rio Tinto, and it seems it wasn't paying its way anyway. I would rather the film industry than this dinosaur, whose parent company is happy to blow up a 40,000 yr old Aboriginal place of significance and leave warehouses full of slag all over Southland. I have little doubt it will be us left to clean up their mess.
The John Key govt had already said that was it as far as public money going into this, the present is simply making good on it.

ahhh

threatening not from China though but from a brother country.

hilarious.

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Yes, hilarious that you can blithely accept that China threatens other countries and that 'for once' it's not them doing it.

They are fast becoming the laughing stock of the world. They are now threatening countries who offer asylum to people from Hong Kong. Imagine being such a dump of a country that people are lining up to flee but you won't let them leave because it makes you look even worse. China will soon be nothing more that a second rate North Korea 2.0 with big walls TO KEEP THE PEOPLE IN..... Hahahahaha sad.

So you do admit that China is on Threat mode to most countries.

In democracy we discuss and argue / freedom of speech unlike......

Please at this stage no one feels good about China and people like yourself with your comment only adds fuel to fire but is good so you should carry on as will only increase anti feeling, which is already on the rise.

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You're potentially breaching Articles 22 and 23 of the new Hong Kong national security law by stating China threatens other nations:

"by xingmowang | 9th Jul 20, 11:45am
ahhh
threatening not from China though but from a brother country.
hilarious."

You should delete this comment or else risk re-education if you ever wish to return to Hong Kong or China. CCP is watching.

Rio Tinto are not govt owned or partly owned so unlike China you cannot accuse the country of this, only the company.

If it can’t work without govt assistance at market prices, let if fail. That’s capitalism.
Also, I briefly looked in investing in shares of South Port but stopped the analysis and moved on when I realised the percentage of revenues the smelter represented as a customer of the port. That’s not a great situation for the investor, relying on one customer that much.

They got 30-40 million of the Government in 2013, how much more should poor taxpayers subsidise a business with a 40 billion turnover?

They also get subsidised $48M per year for the emissions trading scheme.

50m/1000 = $50k per job right?

Actually NO. 48mil in ETS subsidies is money not collected.. not money given, BIG difference. The 30mil handed over by the Nats equates to about 11,500 per direct or indirect job, given there's about 2600 jobs affected, over the last 7yrs which means about $1,700/job/yr. Some perspective would be useful

Yes National happily gave them our tax payer money ...

Then took it back at rate of $70 mill a year in "transmission" costs. I guess blue aliens are sexier than Southlanders. Where are feelz in hanging out with a smelter director when you can hang out with a film director.

The present government is contributing $100m to pull pine trees out, and another $200m to plant them, all in the name of make work, so what's another $50m if it saves 2600 jobs?

No way Labour will go there willy, might be accused of "pandering to evil corporates", most definitely by the majority of contributors on this site. You do have a valid point though.

$50m this year, $50m again in 3-4 years, $60m a bit later. Pretty soon you are talking real munny.

haha Pragmatist, it's chumpchange compared to what was paid out in the wage subsidy, I think even Destiny Church got paid for their fulltime workers (I thought they all volunteered for God's work) Give them 50mill now dripfed over the next 3yrs. We'll get it back in taxes anyway.. (2600 x 80Kavg x 25% =52mill in the first year)

Wage subsidy isn't really comparable.. its trying to keep our economy afloat through a one-off event. Subsidies to Tiwai are not a one-off unavoidable event.

True that Pragmatist but at least a subsidy to NZAS is recoverable in the following tax year. I compared the wage subsidy by value, not by virtue

And the wage subsidy isn't recoverable? GST on (almost) every subsequent transaction and PAYE.

Yes GST will clawback some. PAYE nothing..it was a nontaxable subsidy.. believe me I checked before I took it (I'm self employed)

If you look back at the history of this project, originally Comalco was going to build and own the Manapouri power station as well, the NZ government stepped in and built it for them, in other words took the risk out. Comalco have had good years and bad years. Perhaps its time the people of NZ owned the smelter as well, the alternative is a new DC link and another cable under Cook strait, to generate a lot of hot air in Wellington.

Yes, the government could take it over and appoint Jenny Shipley chairperson of the board and Judith Collins director of China liaison.

What about additions such as Toddy Muller as Human Resources Manager, he will be available shortly. Simon Bridges as Public Relations Manager. Todd Barclay and Hamish Walker as Client Investment Managers.
Now there is a great team going forward or sideways or backwards.

I hear David Clark has managerial experience and has some free time..

I gather he and Nick Smith are going to open a consultancy together. Reverse-Midas Consulting.

Thank you Pragmatist, I was going to slot him in as Manging Director as all his underlings would take on additional alternative roles like sitting on the boards of chinese companies to bolster their incomes. David would be there to monitor their involvement unless he is involved in a cycling tournament, then all bets are off.

"took the risk out". Muldoon reneged on the 99 year deal five years into it. The old you build the smelter then we change the rules gambit.

no repurpose the electricity for a new industry down there, they have a LOT of fresh water and maybe its time the government looks at helping meridian get into hydrogen production, after all they are the major shareholder so they would benefit in the long run
https://www.nzhydrogen.org/nz-hydrogen-projects

What exactly do we need hydrogen for?

Its a good way to waste energy by converting it from one form into another.

You put it into fuel cells,to generate electricity to power motors. It's how hydrogen powered vehicles work.

That's right - use 3 times as much electricity and dollars to generate some [checks notes] electricity.

Possibly the highest value use for any Hydrogen production would be to use it, in conjunction with CO2, to produce Methanol. Using it for transportation is, as you say, pretty inefficient.

At multiples of the cost that natural gas producing countries make methanol. Hydrogen production is a bad idea at the moment.

I'm not so sure about that. The dollar cost of Natural gas is one thing. the energy costs, and the ETS costs plus the returned PAYE would have to be factored in. I reckon a true cost comparison with ALL the cost factored would be interesting

Auckland and the NI needs this hydro baseline power, Greenies wont allow any future hydro dams to be built, renewables power doesnt have reliability or capacity load reqd, so Transpower needs to spend money on building the transmission lines to carry this power further north.
but what the govt are going to do to replace the lost income from the affected families is yet to be seen.... there they will be struggling.

quote - "Auckland and the North Island NEEDS this hydro baseline power"

Says it all

As I understand it, the biggest problem with transmitting electric power over long distances is the loss of power which becomes greater the longer the distance. On that basis it would be more cost effective to relocate major users to Christchurch rather than attempt to send the power to Auckland.

Its far easier and more efficeint to ship electricity to the area where the raw product it's being used to transform is, than it is to ship Milk from the Waikato to southland for drying, or NZ steels ironsand to the South Island, Pulp and paper in the Central north island..

If it makes sense and has a significant economic advantage, then the industries will move themselves.

Many will now use blackmail tactics - Threat : Support or we shut down and many become unemployed.

In general going future :

Their should be no bailout for non performing companies or industries that are trying to take advantage of panademic and have started or were already working.

Support should only be extended to companies/industriesregions that were doing good for themselves and only unable to operate because of travel/border restriction - shut or hibrrnated for no fault of themselves.

Because of its purity, most, if not all of Tiwai output goes into the aircraft industry. Boeing got a USD $50 billion bailout. RIO (NZ) got an NZD $30 million bailout. Perhaps Boeing and Airbus should buy the smelter. They potentially have a vested interest. What is the lifespan of a smelter. Tiwai is now, 45 years old. It has probably had it without major maintenance costs.

Just let the smelter buy the dam and keep the jobs. Southland export jobs being sacrificed for Transpowers price gouging. $600 million to get the power to the north, and 2500 skilled jobs, is a high price to pay for a Transpower dividend and a few government jobs for the boys.

Form a new public company. Float it to the public Call it Southpower. Buy the dam. Buy the transmission lines off Transpower from Manapouri to Bluff. Spend $100 million to connect to the grid. Buy transmission from Transpower for the South Island. Sell power to Tiwai at $0.06 per kw/h, sell power to South Island customers at $0,11 kw/h then let the NI retailers tender for any remainder.

Richard, what is working for families but a subsidy for employers? If all the various allowances, benefits etc were stripped away most NZ employers would not be able to pay a living wage.

Who is going to stump up for the the $70 million in transmission fee cash cow? And the $600 million to get the power north?

"Since 2004, $1.3 billion has been spent on the upper North Island grid, yet only 39 per cent of the investment has been paid for by the upper North Island."

Since that time, transmission prices have increased by 330 per cent in the South Island, 225 per cent in the lower North Island, and 40 per cent in the upper North Island."
https://www.stuff.co.nz/southland-times/news/93150828/transmission-costs...
https://www.stuff.co.nz/business/opinion-analysis/117895545/tiwai-smelte...

That's what MMT is for. (Sorry! MMP - Modern Monetary Practice, as it's rebranded itself, but that might get confusing in NZ!)

So, will the power charges for households go up or down ?

Overall .. UP. Energy will probably stay roughly the same, transmission prices (the supply charge) will increase, probably quite significantly

Analysts are saying down

If NZAS goes, the transmission deficit has to be made up somehow. It's a big chunk of money disappearing

But if we believe in efficient markets, then the per unit charge will go down. Supply and demand and all that hoopla. I can't see it moving much overall

Pragmatist, all power suppliers are hit with Transmission costs that they pass on to Transpower. It doesn't matter who you get your power from the lines charges (supply charge) are pretty much the same

Did you read my post?

Yeah I did. The only charges subject to "market forces" are the energy charges. The supply charge could be considered a "levy", imposed by a third party. Said third party needs to replace the 70mil or so shortfall so will only do one thing.. increase the Levy. Thus peoples total energy charges will rise. The actual composition ratio ( c/Kwh/lines charges) will change certainly.. but the overall bill will increase

High tech companies are always on the lookout for data centers and that location is ideal. It's cold, has good power supply, remote location away from potential risks.. Let's think outside the square.

A data centre hub in an area with a large number of people trained as electricians and engineers? It could work both for construction and on-going operation. A more reliable business than one based on commodity prices.

Unfortunately I don't think data centres employ many people. That and getting a hi bandwidth fibre connection down there would be pricey. You could use satellite connection but that might be weather and atmospheric dependant so maybe not that reliable, and you'd need one available which there isn't at the moment. Personally I don't see a data centre being viable any time soon. I think Southland may well be in a bind.

Have you been to a data centre? I've been to Oracle one in Sydney and there there are hundreds of staffs there.

You end up with a whole industry built around supporting data centres. Shipping for pallet loads of new or replacement servers. Huge number of staff replacing failed components.

Also I'm not talking about one data centre but a hub of data centres on a large scale, large enough to interest serious organisations. One datacentre would only use a tiny fraction of the Manapouri output.

You have no grounds to claim that a data centre isn't a viable business in today's world. Consider that there are other heavy power using technologies that could also be based where the cheap power is.

In relation to bandwidth if there isn't already a major fibre backbone providing data then a good project would be to construct it. It would be cheaper than upgrading the power infrastructure.

Man I wish people would read the entire post rather than flip out on selected parts. I didn't say a data centre wasn't a viable business.. I said I don't think it would be viable in Southland. It's been said elsewhere that a data centre or hub in Southland would only be viable for lag insensitive traffic. Any data still has to get to Auckland to access the Southern Cross cable, that's why Microsoft is looking at South Auckland and not Invercargill.

I get a considerable lag when I access data in France, and caching deals with distant US datacentres. Yet southland is closer to me than any of those locations. You are only seeing problems and ignoring solutions.

Given that I doubt your French or US contacts are in Southland my argument still stands. The data has to get out of Southland to the rest of the world. Also given (I assume) your French and US datacentres are being used by more of their nationals than NZs what is the incentive or attraction for them to shift the processing or storage to Southland. I'm seeing practicalities or in the case of Southland - impracticalities.

There are a number of issues with your approach. You are trying to set this up to fail just to suit your opinion. You have ignored using the data centre internally even though you have indicated this for France and US. You have left out more contemporary approaches such as edge compute connected to data centres as well. Technology has moved on.

You doubt that I access data in France and US. You may be surprised to learn about the internet.

As posted elsewhere today - the latency to Invercargill from Auckland is 19ms, Sydney is 25ms.

I wonder what it would be from Paris or Washington to Invercargill?
kiwimm did the research - there are limitations over its usefulness to businesses outside of NZ.
Ping times from Bluff to (anything above 50ms makes multi-call applications too slow)
- Auckland 19ms
- Sydney 44ms (note that Sydney is 25ms ping from Auckland so will be a direct competitor)
- Singapore 137ms
- Hong Kong 167ms
- Los Angeles 177ms
Says it all.. your Honour the prosecution rests.

Think outside the square!
It's not that ultra expensive to lay submarine cable from Bluff to Auckland. Google laid 9000km cable from Japan to US at a cost of $300 millions back in 2015.

Haha really??!! To go from Bluff to Auckland you've gotta go up the west coast all the way to Manukau at least, then through the harbor and overland to Auckland CBD. Plus you'd need offshore expertise. If you got change out of 1 billion you'd be doing well

Really 1 billion rupees.. yes
However, check the costing on this cable
https://www.itnews.com.au/news/hawaiki-subsea-cable-comes-online-498746

Yeah... did your costing also account for boring across NZs largest and most populated city, the inevitable RMA consents, the disruption incurred by going across or under SH1 and into Auckland's CBD? Big difference running an undersea cable vs an underground cable.

LOL.. you have no idea!

And you have? If so let's hear it

Why would you bother? There is hardly any population down there, it's not on the way to anywhere, and all it saves is some cooling costs - which is generally cheaper to do with a steady supply of cold sea water at a coastal location where there is a relatively steep coastline and lots of really cold water from a few 10's of meters down is available (colder than summertime temperatures in Invercargill)

About time you joined the debate.. lol

Look dictator, I'll type really slowly so you can keep up. The internal data use wouldn't even pay to keep the lights on. There are obviously far more data users in France and the US where the connection speeds to their "local" centres would be much higher compared to them attempting a connection to a centre in Southland. I'll also go back to my observation regarding Microsoft and it's placement of a proposed datacentre in Auckland rather than say even Christchurch where land and building costs are much cheaper

Their best chance to get a better price would be to idle thle plant and let the market reach a gross oversupply situation. That said, as Contact Energy has stated, if NZAS close there will be higher transmission costs for consumers.

You can't idle an Ali smelter, you either keep it running or you shut it down, The restart costs for an entire smelter would be prohibitive

Sir Tim Shadbolt must be having an apoplectic seizure right about now. The Invercargill City Council has just done a deal and thrown $30 million of ratepayers money in with a developer to build a brand new monster shopping mall. Guess he will be doing a Jim Boult and winging his way up to Wellington

World Wide

(This is a research note from 2008 when Aluminium was at a high and RIO had just bought Alcan)

(a) Energy is the largest single Aluminium smelting input cost - approx 60%
(b) Most aluminium smelters are located near to a low-cost energy source
(c) Most low-cost energy sources are government sanctioned or controlled
(d) that is they are or were dependent on government guarantees / incentives / subsidies
(e) Energy is at a high in its cost cycle
(f) Energy costs are going to rise further as incentive-contracts expire
(g) Alcan is RIO's poison chalice
(h) Based on the above I wouldnt touch RIO with yours
(i) RIO has committed the very sin BHP committed with Magna Copper
(j) BHP's bid for RIO shows they haven't learnt a thing from past mistakes

2020 - The aluminium industry is its own worst enemy. Over the years it has screwed every power supplier down by playing one off against the other. Hey, NZ Government we are paying $0.05 cent kw/h to Canada. Meet that. Eventually it reaches rock bottom around the world and can't go any further. What they are saying is they need a rate of $0.04 kw/h or a 20% cut

Exactly. NZ can not compete with middle eastern energy prices, nor labour costs (pakistani immigrant labour), and those two inputs are what will dictate where the industry can have the lowest costs and so be most competitive. The only way the smelter stays open is if we match the costs of overseas operations.

This news is sparking a good debate around renewable energy, but I'm a bit sceptical about the practicality of developing "green" hydrogen energy in NZ. The Govt is really keen on it, but having looked into some of the logistics last year, I'm not (yet) convinced: https://www.interest.co.nz/business/101495/look-viability-future-government-envisages%C2%A0where-over-supply-renewable-energy

Pumped hydro is NZ's best option for 100% renewable electricity.
https://medium.com/@brendon_harre/pumped-hydro-update-march-2020-9d83399ef6fd

Pumped hydro isn't a source of energy, its a storage option.
Seems we are about to have a huge hydro lake of available storage made available to help keep the lights on in a dry winter.

Pumped Hydro? why would we do that in NZ? We have ample renewable energy sources without resorting to wasting energy pumping water back up a hill where it came from to generate power so we could pump the water back again. Remember NZ has an abundance of free water in hydro systems already plus good geothermal resources and more wind being built. The problem now is, if NZAS closes there won't be any new builds. MCY today said they were pushing "pause" on Tauhara Stage 2 for the foreseeable future. Also "renewable" can't always supply peak load, hence Southdown, Stratford and Huntly

Unlike renewables, hydro can provide peak load, comes on instantly and eliminates the need for fossil fuel plants. With renewables being intermittent, you can use the excess it generates (e.g. solar during the day) to keep the hydro dams topped up.

Uuhh actually hydro doesn't supply peak load and can't for a number of reasons. Hydro is base load and can't be ramped up or down as rapidly as Gas.
Also, sorry to correct you but Hydro is considered the ultimate "renewable"

The voice of informed wisdom Jenee.. the informed bit has been lacking here today, IMHO. As a shareholder in NZR, ZEL and Ballance Agri.. all of whom have or are looking at Hydrogen, it's quite obvious it's not a viable option. It's expensive to produce, there is no foreseeable market in NZ and at this point it's expensive and difficult to export.. short answer it ain't gonna fly.

It would be a interesting to do a financial analysis on Tiwai point. Given government will have to pay 1000 more people to be unemployed + any multiplier affect & lose 600m in export earnings + bring forward transpower’s 110m capex would it have been better, at least for a short period, for the government to plug the electricity contract price gap.

I saw one analysis which priced the subsidies to the smelter at around $70,000 per job, per year.

How are those subsidies calculated and who's paying them?

Here's a tip oldbloke1.. never confuse a blogger's opinions with "analysis".

I don't confuse many of the opinions on here with analysis, or reality, if it comes to that.

Fair point

I think you're right kiwi. They'd be better to "grasp the nettle" now and buy some time until we could wave them off. Lean on Transpower to bring the transmission fee reduction forward, toss NZAS a small (relatively) stipend of maybe 40mil which combined should make NZAS cash neutral for the next 2-3yrs. The remediation costs of NZAS closing are big (~250mil). Can NZ guarantee Rio will spend that ? - who knows. That's the big elephant that needs to be shackled. Rio's record with the Ouvea leaves me sceptical they'll remediate the site to NZs satisfaction

I love how the article plays up the changes in transmission costs without much mention of reductions in power prices.

That's cos the increase in transmission prices will vastly outweigh any reduction in energy prices, which incidentally won't happen until the supply constraints are remedied..at further costs

Obvious answer is to move Auckland to Invercargill.

Trying to work out how water from Lake Manapouri would end up in the Clutha river???

It's a "shovel ready" project mate.. lots of unemployed with lots of shovels, subsidised by the Covid Recovery Fund. Gotta get people into jobs after all

Some MPs down there been digging pretty big holes for themselves.

solardb. Yeah took me a couple of goes to work that out. Think he means surplus Manapouri generation created when the smelter closes will cause excess capacity at Clyde.

Must do . Unless he just mean't the Waiau River.
Thought for a moment it might be remotely possible to build a canal from Lake Te Anau to Lake Wakatipu , but no , Wakatipu is 100 metres higher.
In the course of researching that , I discovered there is such a thing as Lake seiches, and Lake Wakatipu's is one of the most noted in the world.

Maybe Venture Southland can resurrect the silicon mining and smelter that was mooted about 8 years ago. If I recall it was a fishing expedition by some overseas company. Suspect they were looking for funds for a viability study. As soon as Greens and their cohorts got to hear of it up went the protests. Not sure what Shadbolt's position was but probably went something like this. We need to balance the economic benefit with the environmental downside. A neat fence sitting exercise appropriate to most politicians. Haven't manage to rattle up more detail.

We are going to need to increase NZ electricity production by several GW in next 10-20 years to support shift to EV's, given time to build capacity we need to start now. We need a big capacity upgrade for the DC link and extension to Roxgburgh at least so that we can build the multi GW Onslow pumped storage scheme. That will enable the installation of the many GW of PV plants we need, very sunny, cheap and flat (but cold) Mackenzie country being a good location for that.

You forget Scandinavia runs their generators on a different model. There they run 'steady state' meaning at times of low demand they have to "burn" the power produced. Norway uses it's excess power to generate Hydrogen which they then use to generate power to run pumps to shift the water back up hill. Your Pumped Storage idea is a complete folly. NZ has more than sufficient generation capacity , both actual and planned, and will have a surplus if (and when) NZAS shuts down. No generator is looking to build further capacity in the near or medium term. We don't need more power, we need a way to utilise what we have.

Analysts are also talking about the significant increase in power demand as industry de-coals. What's your take on that?

Well the Dairy industry is SLOWLY de-coaling, interestingly it's the hospitals and schools that burn a fair bit. Any migration to electricity for industry will take a long time and a lot of money. Most Heavy industrials are looking to retain their existing boilers and transition them from coal to wood waste which is pretty easy. These users will only look to transition to electricity when the existing boilers fail the inspections.

A not often realised reason for major users to have their own generation capacity is independence from fluctuations and outages associated with grid power. These people might change their energy source but will be reluctant to hook into the grid.

Unfortunately willy that's not quite correct. Their alternate sources are a small fraction of their total usage but it means they can be classified as generators in their own right and have access to all forward pricing signals, hedges, swaps etc. In some cases co-gen boilers and generators do subsidise their power use by utilising a previously wasted resource

The power is free, I told that to M Whineray when he was with ? he moves around .
Power ,Its free from hydro plants built along ago. depression labour
Sure , new words like cost of capital, f offf.
Hydro is ATM for power suppliers .

It's amazing people with your intellect can be accepted into this forum but it is what it is. The power is most certainly NOT free. I won't go into the costs associated because you won't be able to conceptualise the argument

Great! prices to go up now.
1. Constraint on Inter-island HVDC means they can't get the electricity north, so cheap electricity will flood the south island only, where it won't be used. So
2. Someone will scrap a power station or two to keep the price artificially high stable.
3. They have already been proclaiming the losses in transmission revenue. So have a green light to up them as well.

We are shutting up shop, and now there’s a small window. Back to blackmail as usual in the space of a few hours!

Tiwai has always been a pointless dog. We ship over the bauxite, melt it down, then send it away. All profits go overseas. The only benefit to NZ are the jobs associated with the smelter. Meanwhile we get screwed for the value of our renewable energy. At NZD 5c /kwh there are dozens of industries that would provide moee jobs, more downstream industry, and more net benefit to NZ than the smelter. This is a real opportunity to finally rid ourselves of this parasite.

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