Electricity crunch: Tiwai Point to ramp down electricity usage to ease tight national power supply

The Tiwai Point aluminum smelter will further reduce its electricity usage to help with generation demands. Photo / Graham Dainty

Meridian Energy has called on New Zealand Aluminium Smelters (NZAS) to further reduce its electricity usage at Tiwai Point amid tightening gas supply and low lake levels.

It’s the second time in the space of a week that Meridian has invoked its additional demand rights under a new 20-year agreement with the Southland smelter owner.

From early August, NZAS – which runs the Tiwai Point aluminum smelter – will reduce its electricity usage by a total of 185 megawatts (MW), replacing the 100MW ramp-down Meridian requested on July 16.

Tightening gas supply, low lake levels, and calm conditions have combined to drive wholesale power prices sharply higher this winter.

NZAS chief executive Chris Blenkiron said Tiwai would now commence a wind-down to meet the revised request.

“With lake storage near their lowest levels historically, we will commence ramp-down to enable 185MW to flow into the system, to help ease tight supply,” Blenkiron said.

Blenkiron said the winding-back of its operations was complex.

“I want to recognise the significant work ahead for the team at Tiwai who will now be asked to commence stopping and restarting one third of our operation until April next year,” he said.

“The team at Tiwai understand the importance of playing our part as part of the wider electricity system to ease the stress the system is now under, from tight hydro and gas supplies.”

Wholesale power prices on Wednesday hit $430 per megawatt hour at Ōtāhuhu compared with $283 at the end of July.

While high wholesale prices generally don’t flow through directly to retail customers because of the way power companies hedge their exposures internally, they can affect industrial users.

Blenkiron said the demand response call from Meridian represents a significant moment for the smelter’s new energy supply agreements.

Under the agreements, Meridian can request Tiwai ramp down energy usage to meet generation demands.

“Initiating the demand response aspects of our new energy supply agreement so early on validates the hard work that went into negotiating the agreements over the last 12 months. It has given the system some of the long-called-for flexibility New Zealand needs to respond to the energy challenges we face,” Blenkiron said.