New Zealand's biggest electricity generators are embarking on an investment drive that could boost the country's wind generation capacity by more than 70 per cent in coming years and lift geothermal power capacity by as much as 10 per cent.
The potential spending, more than $1 billion, is being driven by a desire to reduce emissions and an expectation that in 2022, Contact Energy will close the country's second-largest gas-fired power station — the 23-year-old Taranaki Combined Cycle plant.
Mercury NZ is planning a 119 megawatt wind farm at Turitea, southeast of Palmerston North. Near Waverley in south Taranaki, Tilt Renewables plans a 133MW wind farm that would be the biggest since Meridian Energy completed the West Wind project on Wellington's Makara coast in 2009 — and the biggest generation investment of any type since Contact commissioned its Te Mihi geothermal plant in 2014.
And in Hawke's Bay, Meridian is hoping to add an amended version of its Maungaharuru wind project to the pipeline of developments now kicking off. That could add another 160MW of capacity if the company can get approval for the bigger rotors and towers needed for 4MW turbines.
Guy Waipara, the firm's general manager of generation and natural resources, says this level of industry-wide investment has not been seen for more than a decade.
Since then, technology has improved and costs have come down. Firms have also moved away from scale in favour of projects that are optimally sized for transmission capacity, and have less impact on the environment and on power prices in the region where they are being built.
He says it is positive that all the major generators are competing to develop new capacity: Genesis Energy is funding Tilt's Waipipi development near Waverley and Contact is also preparing to build more capacity at its Tauhara geothermal field near Taupo.
"That's really important because it keeps everybody super-keen to deliver the best project for their company and that then delivers the best outcome for New Zealand," he says.
"We do know how to do this stuff."
But it's been a long time between drinks. And the new projects aren't being built because the country is electrifying transport and industry — the big prize for energy policy and a necessity if New Zealand is to meet its 2050 net-zero carbon target.
Last month, Contact chief executive Dennis Barnes noted that annual electricity usage has been flat since 2008. The company is keen to develop new capacity to help industry cut fossil fuel use, but its planned development at Tauhara is as much about replacing its older, large-scale gas-fired capacity that will become less competitive as carbon and gas prices rise.
Genesis chief executive Marc England says the firm's 20-year power purchase deal with Tilt is part of a long-term strategy to reduce year-round, base-load generation from its 400MW gas-fired Huntly plant.
Waipipi will offset about 250,000 tonnes of carbon and help make the power system more renewable, but it is not being driven by increasing demand for renewable energy across the wider economy.
"Nothing has changed in the last couple of years to encourage people to buy EVs or for industries to start to electrify," England says.
"There's been no policy or regulation, or no government influence to enable that, and unless there is, we're not going to see demand growth."
Rational investment decisions, he notes, are based on evidence, not hope.
This month, the Government was again talking up the country's "abundant" consented wind and geothermal options. But in the absence of demand growth — and with the current transmission pricing regime still disadvantaging South Island projects after a decade of debate — little has been built.
And those remaining options are fast expiring, or being made irrelevant by newer, larger wind turbines that can operate at less windy, so-called tier-2 sites. Most of the country's remaining consented wind projects — potentially more than 1800MW of capacity — will lapse within five years.
Increasing energy efficiency has been one of the things that helped keep demand flat for almost a decade. The closure of paper and steelmaking capacity has reduced demand, while homes and business have also added close to 100MW of solar during the past six years, chipping away at the demand for power from the major generators.
About 22MW of solar panels were added in the year to the end of July and that rate will continue to increase.
Vector this month announced a 1MW floating solar project at the Rosedale wastewater treatment plant on Auckland's North Shore, in partnership with Watercare Services. And NZ Refining says a 26MW solar array it is planning will meet about 10 per cent of the electricity needs of its Marsden Point refinery and can be built within two years.
While Tilt and other smaller independent developers are in the market, Andrew Harvey-Green, a senior analyst at Forsyth Barr, says it is still the big three or four generators that will do the "heavy lifting" when it comes to renewables investment.
Timing that investment isn't getting any easier, given the lead-times involved. But he believes there is greater discipline among generators to get a return on capital on anything they build, and to avoid the over-building seen in the early 2000s.
Meeting demand growth should not be an issue. One per cent demand growth works out at about 400 gigawatt-hours a year, which is roughly the output of a 100-120MW wind farm, Harvey-Green says. "It's actually not that hard to achieve."
Waipara sees evidence of "green shoots" of demand, but says picking the longer-term pace of growth is tough.
"There's all sorts of projections and they will all be wrong."
But with wind generation now cheaper than gas-fired plant, there is little risk of over-building. If investment gets ahead of demand growth, that will tend to bring forward the retirement of ageing gas plant, he says.
But there seems little risk of that.
The Major Electricity Users' Group (MEUG) has kicked off a project with a handful of its biggest members to see if they can accelerate renewable energy development by seeking a joint power supply contract.
They think a term contract — perhaps for 10 years — might be enough to underwrite a development and encourage a new or existing player to move ahead with a consented project or revisit one that has lapsed.
Such a term commitment may help finance a project, particularly for an independent developer such as Tilt or Kaimai Wind, which is trying to advance a 125MW wind project near Paeroa.
Waipara says the sort of power purchase agreements being proposed by MEUG, and used by Genesis and Tilt, are common in the US and Australia and do tend to bring projects to market.
"I would still expect, or hope, that the right economic projects would come through."
But MEUG's proposal is not new demand. And how real are the remaining development options anyway?
Contact has consent for 250MW of base-load generation from its Tauhara geothermal field, and further options as consents for parts of the ageing Wairakei geothermal roll off from 2026.
The transmission line being built for Mercury's 119MW Turitea wind farm near Palmerston North will also serve the second, 97MW stage of the project. Longer-term, it could form part of the transmission link for a further 318MW of wind generation Mercury has consent for in Wairarapa, although that consent lapses in 2022 if work isn't under way.
In 2013, Genesis was granted consent for an 860MW wind project across 20,000 hectares north of Masterton. But it has no consented transmission and the consents will lapse in 2023 unless extensions are granted.
England says Tilt's Waipipi project — consented in 2017 — effectively overtook the generation options Genesis had developed.
Advancing the Taranaki project also suited the two companies — Tilt doesn't have its own retail base to underwrite a development, while Genesis also doesn't want to invest capital in generation like wind, which can't be turned on and off to accommodate demand.
England says the firm is interested in working more with Tilt — and potentially with other parties interested in a power purchase agreement.
But in the absence of new demand, the company doesn't need to ramp up work on its existing options, or turn them off.
"They are still options."
And it's also unclear whether the Government's declared enthusiasm for renewables will be matched on the ground, or in the communities near new power stations.
Energy and Resources Minister Megan Woods — publicly a big fan of renewables — was quick to dispel concerns that people would find wind farms "looming" over them everywhere if an export-scale hydrogen industry, powered by renewables, were ever to develop here.
Meridian's Waipara says the company is about to find out how supportive communities and councils in Hawke's Bay are for the "relatively minor" variations it is seeking to its wind project there.
But the 130MW Central Wind project the company received consents for in 2010 will need a bigger re-work. The project near Waiouru got a five-year extension in 2015 but has largely been overtaken by improving turbine technology.
"We can't really execute the project with the consents we have," Waipara says.
The industry, the Productivity Commission and the Interim Climate Change Committee have all urged the Government to adopt much stronger policy directives to speed up the consenting of renewables and the transmission that may be needed if more industrial processing is to be converted to electricity.
The Government last week said it wants to protect the country's major hydro schemes in a revamp of the country's freshwater regime.
It is planning major reform of the Resource Management Act, but is also still to respond to the Electricity Price Review — aspects of which are expected to affect transmission pricing.
Infrastructure NZ chief executive Paul Blair says that at a high level, the electricity sector's planning frameworks are better than many.
But he cites the 20MW Waitaha hydro project on the West Coast — blocked by the Government last month — as an example of the "tenuous and uncertain" nature of the country's broader consenting frameworks.
He says a better system would have identified the significance of the Waitaha River early on — before local lines company Westpower spent millions of dollars developing the proposal — to test whether development was viable to start with.
Instead, a project that had strong local support, would have expanded the country's renewable energy and improved the resilience of West Coast power supply was blocked by a "line call" in Wellington.
Waipara says stronger national direction is needed so local decision-makers understand the importance of renewables and what they require.
He notes that both flexible hydro, and flexible gas-fired plants, are needed to accommodate far higher levels of wind generation in New Zealand, at lower cost than other countries can manage.
Current transmission pricing — which disadvantages South Island projects by making them carry the cost of the high-voltage link across Cook Strait — also makes no sense and needs to change.
Waipara believes it will change "because it's the right answer". He's also optimistic that policymakers will recognise the value of an electricity market structure that so far has delivered the right level of investment, in the right places and in an increasingly "green" way.
"The market we've got — we should cherish it," he says.
"It's done exactly the right things."