The Government will build its 155MW reserve power plant at Whirinaki in Hawkes Bay, says Energy Minister Pete Hodgson.
The site was chosen because it was the only place the plant could be built before next winter, he said yesterday.
"There would have been advantages to siting this plant in the
South Island if possible, but the higher priority is to have it ready to generate electricity next winter if it is needed," Hodgson said.
"Using the Whirinaki site we expect to have the plant ready to generate by the end of May next year and possibly earlier," he said. The plant would be valuable in ensuring security of supply.
Talks about establishing the plant at Tiwai Point, near Bluff, collapsed after Comalco sought several million dollars for access.
Comalco owns the Tiwai Point aluminium smelter, one of the largest users of electricity.
Meridian Energy spokesman Alan Seay said the state-owned generator was "very disappointed agreement could not be reached after putting virtually all the pieces of the puzzle in place".
The Whirinaki site belongs to Contact Energy, which the Government has contracted to build and run the oil-fired plant.
The $150 million construction cost will be recovered through an industry levy.
The new plant will provide backup generation capacity when hydro lakes are low or if there is a generation breakdown.
The Government favoured a South Island site over Whirinaki because there were fewer transmission constraints and dry-year shortage was most acute in the South Island.
Tiwai also offered good port and storage facilities for diesel fuel. It is understood all consents had been received for Tiwai and negotiations on the site had been concluded.
But Comalco's head office had conditions that scuppered the deal.
"After that the numbers just did not stack up," a source close to the talks said.
Negotiations had ended because there was now no hope of an agreement in time for the three-generator unit to be running by June, when reserve capacity might be needed.
- NZPA, STAFF REPORTER
