April/May 2015 News
The electricity market in New Zealand is a complicated beast. You may have read recently in the ODT about Rio Tinto, and the Tiwai Point Smelter, and the uncertainty regarding continuing aluminium production. Because the smelter’s electricity demand is the equivalent of about 13% of New Zealand’s electricity, if they stopped producing aluminium it would have a big impact on the electricity market, and could dampen electricity prices for close to a decade.
The choices Rio Tinto make are out of our hands. We are continually checking the viability of our wind development using a range of different market scenarios to ensure that we have a robust business case. Fortunately we are not just doing it alone, and have a number of experts who provide analysis and advice. So we’re keeping tabs on what is happening with Rio Tinto.
Most of us are simply consumers of electricity, so we’d mostly be in favour of lower prices for electricity. But of course, it is never as simple as a weaker market leading to cheaper prices. The other change that is happening is a change in the shape of the ‘generation profile’ in New Zealand i.e. who is producing the electricity, and what that means for the whole system. If the smelter closes, New Zealand’s thermal electricity generation – the 20-30% of electricity we generate through burning fossil fuels – may well become uneconomic, and we’re more likely to move quickly to a 100% renewable electricity system. Even with the smelter in operation, the incremental addition of small scale renewable generation projects, like Pioneer’s wind farm at Flat Hill in Southland and our proposed development is eating away (and will eat away) at the amount of time thermal generation is used. Overall, this transition to renewables is both dampening the price of electricity but also requiring a more flexible distribution network to manage the variability and distributed nature of supply… which will require some investment. All that may mean that electricity for consumers is not necessarily going to get any cheaper.
So as we continue the work to develop community wind, don’t forget the importance, as the cold months start, of making sure your home is warm, cosy and energy efficient. A warm home is not only a healthy home, but if done well, is also good for the environment and gentle on the wallet.