Transpower is putting a $500 million to $600 million price tag on upgrading the national grid to get electricity from the Manapouri hydro station in Fiordland, up north.
Manapouri was built to provide electricity for the aluminium smelters at Tiwai Point.
But with New Zealand Aluminium Smelters’ (NZAS) operations likely to be wound up August 2021, the country’s energy systems will need to be rebalanced. NZAS accounts for a significant 13% of electricity demand.
Transpower, which owns and operates the transmission network connecting areas of generation with towns and cities, is assessing whether it can get upgrades off the ground more quickly than planned.
On June 30 it committed to continuing work with the remainder of the Clutha Upper Waitaki Lines Project at an estimated cost of $97 million.
This will enable excess generation from Manapouri to be utilised within the South Island and will see most of it transferred across the Cook Strait via the High Voltage Direct Cable (HVDC) and used in the North Island.
Work on this project will start in spring. It’s is expected to be completed by the winter of 2023.
Transpower’s general manager of grid development, John Clarke, said the company would also work with the electricity industry on “other improvements needed to realise the full economic benefits to New Zealand from the surplus electricity”.
Upgrading the HVDC is expected to cost $150 million to $200 million. Meanwhile upgrading capacity on the central North Island’s system, including the Wairakei Ring, is expected to cost $400 million to $500 million.
The CEO of Trustpower (the gentailer), David Prentice, was confidence the sector could adapt to the closure of the smelter and rebalance New Zealand’s electricity system over a relatively short period.
“Longer term electrification of the economy remains a positive driver for growth,” he said.
“Trustpower considers it is well placed to respond to the decision to close the smelter, with its geographically dispersed generation schemes and customer bases. In the South Island Trustpower’s schemes have the capacity to store water for extended periods until demand increases.”
Contact Energy CEO, Mike 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. 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,” he said.
“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.”
Fuge said Contact was pushing pause on a “shovel-ready” geothermal power station, as it needs to factor in the impact of Covid-19 and the potential exit of NZAS to get a clearer picture of demand.
Genesis Energy said: “As a predominantly North Island generator, Genesis expects the immediate effects to be felt more by the larger South Island generators.
“We see benefit for the New Zealand electricity market through the removal of a significant source of uncertainty. In the medium to long term, this presents a potential opportunity to accelerate electrification of industrial processes, especially in the South Island.
“As for all generators, we will need to further assess what the closure means for our generation portfolio long term.”
Mercury Energy said it was “relatively well placed to respond to the decision to close the smelter, with all of its renewable generation assets in the North Island close to load centres and largely free of major transmission constraints as a consequence of reduced South Island electricity demand”.
“Mercury is confident that the sector will adapt to the closure of the smelter, invest in new transmission and develop new electricity demand to rebalance New Zealand’s electricity system.”
And finally, Meridian Energy, which provides NZAS with electricity, said: “Meridian is reviewing this decision and will engage with Rio Tinto to assist the smelter owners in an orderly exit from New Zealand.”