Taupo's reputation as a centre for energy generation takes another step forward today when Contact Energy opens its new Te Mihi Uenukukopako Power Station.

Located on Oruanui Rd near Taupo, the 166MW station - large enough to power 160,000 homes - cost $623 million to build. It began operating in October last year and it was connected to the national grid in November 2013 at full load. Te Mihi has two steam turbines and a vast network of pipes connects it to the Wairakei steamfield.

Contact says the new power station has been designed to be flexible, making the best use of geothermal steam and maximising the amount of electricity it can produce, which in turn minimises the cost to produce each megawatt of electricity.

Geothermal steam and water is brought to the surface through a series of production wells and the steam is separated from the water and piped to the power station. There it spins a turbine which generates electricity, which is fed into the national grid at 220,000 volts. The separated geothermal water is reinjected underground.

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The station took nearly three years to build and employed up to 500 people at its peak, many of them Taupo locals. In addition, around 20 New Zealand contracting companies worked on the project, with an estimated $60 million invested locally through the subcontractors.

The station now employs some 20 workers and contractors to oversee the ongoing operation and maintenance.

Contact Energy chief executive Dennis Barnes said Te Mihi ushered in a new era of efficiency and environmental responsibility in using the Wairakei geothermal resource.

"We are pleased to welcome Te Mihi into Contact's geothermal family. This flexible, fully integrated power station ensures that we can continue to efficiently meet the energy needs of New Zealanders today and into the future."

It will be formally opened today by Deputy Prime Minister Bill English.

The new Te Mihi Power Station brings Contact's geothermal power stations in the Taupo district to six in total, although the 56-year-old Wairakei Power Station on the banks of the Waikato River is due to be fully retired by 2026.