Photo: LDR
New Zealand could become a renewable energy super power capable of powering all manner of energy intensive export-earning enterprises.
“The amount of investment, which is going on at pace, is an exciting opportunity, and as a nation, it’s just a matter of whether we can seize that or not,” Contact Energy chief executive Mike Fuge said.
“We are 90- to 95 percent renewable, heading to 98 percent with almost all of the firming provided from renewable sources.”
He said the collapse of the gas supply was the past, as New Zealand continued to build large scale renewable energy, which could provide the firming, or back-up energy reserve of last resort.
Major Electricity Users’ Group (MEUG) chairman John Harbord said there was still a dry-year risk regardless of how much renewable energy was generated.
“If you’re in a dry-year period, you’ve got to have more than one fall-back option,” Harbord said.
He said the back-up option could be geothermal or other non-renewable thermal firming like gas and coal.
“Because if you don’t have something that you can rely on when the weather is just not co-operating, the impact on our households and our business could be catastrophic.”
Fuge acknowledged there may be a need for a little bit of non-renewable thermal firming (carbon-based electricity backup power), he said it was almost irrelevant whether it came from coal or gas.
He said New Zealand’s renewable-energy-sourced firming was some of the cheapest firmed-electrons in the OECD.
However, Harbord said it was a different story when looking at key New Zealand-specific export sectors.
“So if you take wood processing for instance, if you just look just at that industry, New Zealand has the highest wholesale electricity prices in the world,” Harbord said, though New Zealand pricing did compare favourably overall.
What industry needs
Fuge said the mix of renewable power, including geothermal, could deliver the low-cost firming option large industrial companies need for long-term investment decisions.
“Look quite uniquely, and this is the thing about New Zealand, we already have a baseload of 25 percent geothermal, which is fantastic. Other countries don’t have that opportunity. They have to burn coal. They have to have nuclear power, and on top of that we have 65 percent hydro, which can flex up and down to firm renewable wind and solar. And on top of that you have industrial demand flex.”
“And that’s the opportunity that I’m urging people to seize. “I think it’s a fantastic opportunity for the country.”
Renewable energy to double electricity generation
Fuge said there were many industries that could be supported by the pipeline of renewable energy projects, which was forecast to grow to 84 terawatt hours (TWh), or double New Zealand’s current generation of renewable energy.
The country currently produced a total of about 42 TWh of energy, with residential consumption accounting for about 20 TWh.
“The identified opportunity in conventional renewable energy totals nearly 50 TWh, so wind, solar, geothermal, that excludes hydro, offshore wind, and supercritical geothermal, so we could export double our current electricity generation to the world,” Fuge said.
The opportunities
“We can convert and attract new food processing. We can convert our existing dairy processing, as Fonterra are already doing. We can support primary industry processing. We could attract data centres here as well, but it’s not one or other or another, it’s all of the above,” Fuge said, adding there were discussions about the possibilities going on around the country.
“We’re always interested in conversations which stimulate the youth and new renewable energy and the jobs it creates for ordinary Kiwis.
“It’s a matter of getting the right partners who have that long-term commitment to New Zealand, such as Rio Tinto, which last week signed a letter of agreement to take up to 50 megawatts (MW) or about 300 gigawatt hours (GWh) from Contact’s recently consented Southland Wind Farm, which will generate more that 1,200 GWh, or enough to power 150,000 households.”
Fuge said New Zealand was an attractive place for an energy-hungry business, given its proximity to Australia and other attributes.
“We have very low sovereign risk. Our political environment is very stable, particularly relative to the rest of the world right now. All of those things add up to us being attractive to a whole range of industries.”
However, Harbord said the focus should be on keeping the industries we have, while being realistic about attracting new ones.
“So it’s really critical that we actually have the circumstances in New Zealand that we retain the businesses that we already have, because once they’ve gone, they’ve gone,” he said.
“But we also need to be realistic that there are often global markets where how much renewable electricity you have and your emissions profile just are not particularly relevant.”
Price shocks in the past?
Fuge said the country had been through a “bit of a bouncy transition” with high prices and power shortages over winter months.
“We obviously had the price spikes in August 2024 but we’re through that now, and it’s a matter of getting people to look to the future.”
However, Harbord said MEUG members were concerned prices had not returned to pre-price spike levels, which had remained high over the past seven to eight years, without much explanation.
He said the increasing profits of generating companies were behind a loss of confidence in the market settings.
“A lot of consumer groups and independent retailers that we talk to have lost a lot of confidence in the market actually delivering affordable electricity,” Harbord said.
“If (prices) are not fair and reasonable, then we’ve got to be prepared to do something about it.
“Because as long as consumers think they’re not getting a good deal, then you’re always going to have the risk of some form of, say, political intervention. It’s pretty radical and doesn’t have good impacts necessarily.”
What will happen to pricing?
Fuge said it was unclear whether the increase in renewable energy generation would result in cheaper residential prices.
“We are a relatively large country with a small population, so the fixed costs of the energy system will get defrayed across a much larger base. That’s benefit number one.
“Number two, they get the jobs. Number three, they get a much more stable energy supply.
“So, will prices come down? I don’t know. Will the costs be defrayed across a much larger base. Absolutely, so that should put downward pressure.
“Will it more be a more abundant supply of energy for ordinary Kiwi households? Yes, it will, because there will always be an excess of energy produced from these projects.
“I think it’s fantastic opportunity for the country, and we should grab it.”
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