Green power: Surge expected in plans for wind and solar electricity generation

Steep falls in the cost of renewable electricity generation are driving a surge in new projects, with no signs of a slowdown in sight.

New Zealand now has 19 wind farms, with two more under construction, generating 6 per cent of the country's electricity consumption, or 690 megawatts (MW) of power. For comparison, the South Island's giant Clyde Dam has a capacity of about 430MW.

Solar power is also on the rise. As of the end of April, New Zealand had 154 MW of installed solar capacity, 32 MW of which was installed over the past 12 months.

More renewable power projects are bound to follow. "We are currently dealing with an unprecedented number of inquiries - about 10 times the rate that we have experienced - for new renewable power plants," says Richard Hobbs, Transpower's general manager strategy and customer.

Hobbs says a key reason for that increase has been rapidly declining technology costs.

"Over the last 10 years the cost of building new wind power generation has dropped by 75 per cent," he says.

"The cost of building new solar has fallen by 90 per cent.

"The cost of building batteries has fallen by 75 per cent in the last six years.

"So now in New Zealand you can build new, large scale renewables for around $50 to $70 per megawatt hour."

Hobbs says that means it is now cheaper to build renewable capacity than it is to operate existing baseload gas-powered plants.

"So even when you factor in that the [capital expenditure] has already been sunk on those gas plants, just the marginal cost to operate gas is more expensive than new renewables," he says.

"One would expect to see new renewables built even in the event where demand remained flat, just because you would expect to see lower-cost new renewables coming in to displace more expensive fossil fuel generation."

The newest wind farm, Tilt Renewables' $277 million Waipipi project between Waverley and Pātea in Taranaki, came out of test mode in March and 31 turbines are now generating electricity.

The project, which began construction in October 2019, is on a 980ha coastal site and is designed to produce 455 Gigawatt hours (GWh) of electricity a year.

The new Waipipi wind farm in Taranaki began commercial operation this year. Photo / NZME

Meanwhile, Meridian Energy expects to start building its $385m Harapaki wind farm in Hawke's Bay in the second half of this year. Harapaki will be New Zealand's second-largest wind farm - after Trustpower's Tararua site - with 41 turbines
generating enough to power more than 70,000 average households.

And Mercury's Turitea wind farm, near Palmerston North, is under construction. The project, expected to generate 470 GWh a year, is expected to be the country's third largest.

Hobbs says the falling cost of building renewables comes down to the economics of today, but they continue to improve. "It will be very interesting to see what they look like in 10 or 20 years' time, when the cost of batteries, solar, wind power have fallen further."

Transpower - which owns and operates the national grid, connecting generation plants with power users - has to envisage what supply and demand will look like several years out, because of the time it takes to build transmission assets.

On that score, Transpower is also keeping a close eye on "distributed" generation - when power is generated at, or close to, the user - and the systems that will be required to accommodate that.

Hobbs says distributed energy could conceivably alleviate future issues on the main power grid.

General manager, grid development, John Clarke says Transpower's job is to ensure that the grid can act as an "enabler". "It's not just about what has to happen on the grid, or pulling power from a big power station," he says.

Transpower, just like the Reserve Bank, opts for a " pathway of least regret" approach in doing its planning.

"We also see a future where people find it economic to put a battery or a solar panel in their home, and that distributed energy offers its advantages as well," Clarke says.

As he puts it, Transpower is not all about building bigger and bigger pylons.

"A lot of the grid is sized to deal with gridlock, in the same way as Auckland's motorways are.

"So you are adding extra lanes just to cope with a demand problem that is only for a short period of time.

"If we can avoid those extra lanes by getting people to store their solar power during the day in a battery to meet some of their needs, then that distributed generation is quite a viable part of the future and something that we are keen to embrace," Clarke says.

"We are not building transmission lines willy nilly."

Hobbs says Transpower is one of the more bullish forecasters when it comes to distributed generation. "We think it will play a big role in the future."

Transpower has also made it known that it is interested in big batteries. And these days, batteries can be very big indeed: the Hornsdale Power Reserve in South Australia, for example, provides 150 MW of power,

Much of what Transpower does is crystal ball gazing - trying to imagine what supply and demand might look like decades into the future.

Whatever that future holds, New Zealand's electricity system is already about 85 per cent renewable.

If the Tiwai Point aluminium smelter closes, Transpower expects that proportion to hit 96 per cent renewable, and then continue towards becoming 100 per cent renewable from then on.

On the demand side, Transpower predicts that growing use of electric vehicles and the decarbonisation of New Zealand's industrial facilities will result in overall power demand growing by about 55 per cent to 2050, with peak demand growth of about 28 per cent.

Meeting that demand will require about 25 new, grid-scale, renewable generation and battery developments by 2035 and significant investment to expand and increase the capacity and flexibility of the transmission system.

Transpower expects to see electrification of the road transport system, with a projected 1.5 million electric vehicles on the roads by 2035.

Contractors work on Transpower's lines to boost their capacity to move power north. Photo / Supplied

In the more immediate future, the grid operator faces the challenge of bolstering the system to make sure that power now used by Tiwai can be shifted out of the lower South Island if the plant does shut down.

Rio Tinto had said last July that it would shut the smelter by August 2021, after a strategic review, though it has since extended its life.

Fortunately, when Rio Tinto signalled that it planned to close Tiwai, Transpower had a plan. Designs for the Clutha Upper Waitaki Lines Project (CUWLP) had been drawn up a decade earlier in anticipation of wind power projects coming on stream.

When those projects didn't eventuate, CUWLP went on the back burner, only to be re-activated as Tiwai's possible closure loomed.

In January this year, Rio said it had made a deal with Meridian Energy to keep the smelter running until December, 2024. While it is generally accepted that Tiwai will then close, the future of the plant still remains open to question, particularly if aluminium prices continue to increase.

Regardless, the $100m CUWLP project is expected to be finished in 2022 - plenty of time to accommodate the smelter's closure, if and when that happens.

Hobbs says Transpower has been through its supply and demand forecasts, especially with regard to New Zealand's carbon emission targets.

Inevitably, this country is going to need to electrify its transport and processing sectors.

He sees Transpower as being key to a net zero carbon future by ensuring that the country can make the change to a more electrified and more renewable economy. There will be more demand for electrification and more supply from renewable power plants.

"We believe that we are going to need to connect a lot more renewable power stations through this time and we are going to need to be able to connect a lot more new technologies as technology continues to improve," he says.

That means Transpower is looking at some core grid upgrades that will enable those changes to happen.

"On the one hand, there is this story about Tiwai and what do you do about all this surplus electricity if there is not significant load growth in the South Island to soak a lot of it up," Hobbs says.

"On the other hand, you are looking at a world in which you are still going to have to invest in the grid in order to enable all this new renewable generation.

"So if Tiwai exits, then you have to get this south-to-north shift in energy.

"But if Tiwai does stay, what it means is that you have now got all this additional demand and we need to develop even more renewable power.

"It's almost as though, whichever way you look at it, we are going to have to do quite a bit to the grid.

"The story so far has been focused on what Transpower needs to do to adjust to Tiwai's exit.

"But this other story is just the same - that we also are going to have to do work on the grid in this 'other' [renewables] world."

That's where "least-regrets" planning comes in. Following that least-regrets approach, says Hobbs, there is some investment that will be needed whether Tiwai stays or goes.

"Regardless of what happens, we believe that in order to enable this highly renewable and electrified future, there is a lot of work that will need to happen in either scenario."

'All roads lead to wind'

As New Zealand aims for its target of becoming carbon-neutral by 2050, interest in wind energy generation is hotting up.

In fact, all roads lead to wind, argues Granville Gaskell, who heads the New Zealand Wind Energy Association.

He says rising interest in wind energy is coming from demand growth spurred by climate change and decarbonisation of the energy sector.

"The growth that we are seeing for electricity demand is both new demand from the electrification of transport and of industrial heating processes, plus it's also the impact of fossil fuelled plants being decommissioned," he says.

"It's just the sheer quantum of the electrification opportunity."

Gaskell says the economic argument for wind is compelling. The Ministry of Business, Innovation and Employment's "Wind Generation Stack" report, out last year, said 2500MW of new wind generation is required between 2020 and 2030, 1500MW between 2030 and 2040, 2000MW in the following decade, and the same again in 2050-2060.

"To put this in context, there is currently only 690MW of wind generation in New Zealand – and the majority of this total has taken the previous 20 years to develop and construct," said the report.

"So clearly, the possible forecast growth required to be accommodated in the updated Wind Generation Stack represents a significant increase of development activity (and one that is sustained for 40 years) compared to that which has occurred over the previous two decades."

Gaskell said wind was well-suited to New Zealand's electricity demand.

Unlike some countries - such as Australia, where demand is strongest in summer, and towards the middle of the day for air conditioning - New Zealand's greatest demand is in the winter, peaking in the mornings and the evenings.

It is during those high-demand periods that electricity is the most expensive to produce.

Out of New Zealand's renewables - wind, hydro and solar - wind has a flat generation profile throughout the year.

Geothermal is used to provide "baseload " power - supply that does not vary and continues without interruption - but even geothermal power emits carbon.

With wind, the emissions that result from manufacturing the turbine are covered in the the first three to six months' operation, and it's carbon-zero from there on, Gaskell says.

Wind continues to produce during the peak winter demand periods when there is less output from solar.

"With new Zealand being roaring 40s, we also have an abundance of it," says Gaskell.

Technology development and the growing scale of production have resulted in costs plummeting.

At one time, turbines had to be installed on the highest ridges in the windiest of conditions.

But today, turbines are manufactured for all sorts of conditions and sites.

He cites the coastal Waipipi project in Taranaki as a case in point. "You no longer have to have turbines built on ridge lines for them to be economic."

Gaskell says climate change will be a big driver of future demand.

"We have to make it happen because New Zealand is not going to reach its net zero goal without decarbonising its energy sector and wind is the technology for that. All roads lead to wind."

Gaskell estimates that wind generation has recently attracted $1.3 billion in investment.

The Climate Change Commission forecasts that wind will meet 24 per cent of total electricity demand by 2035. A key challenge in achieving such a large growth forecast will be ensuring policies across the energy sector, climate change and environmental areas align to support new build activity.

The commission, in its report to Parliament this week, said more renewable generation, like wind and solar, would need to be built to further reduce emissions from the electricity system, and that fossil-fuelled generation would need to be phased out.

The commission anticipated a steep increase in demand for electricity as the number of electric vehicles rises and industrial demand electrifies.

The electricity industry will need to rapidly build more renewable generation, it said.

The commission noted that big changes in demand or supply, like the Tiwai Point aluminium smelter closing, can create uncertainty in the market and result in generators delaying investment in new renewable generation, transmission and distribution infrastructure.

The report warns that this has worsened under the latest emissions data from 2019, which showed New Zealand's emissions continuing to rise.

Petrol car imports would need to be wound down by 2032 and nearly all vehicles entering the country's fleet would need to be electric by 2035. By that year, 60 per cent of New Zealand's energy would need to come from renewable sources.