NZ Super Fund's wind energy project too big, too expensive - Forsyth Barr

If feasible, an initial planned one-gigawatt development would represent more than 11 per cent of New Zealand's electricity demand capacity. Photo / NZME

Investment analysts are casting doubt over the New Zealand Super Fund's major offshore wind energy project.

The fund, together with Danish investment firm Copenhagen Infrastructure Partners (CIP), announced last week it would jointly investigate the feasibility of the project in the South Taranaki Bight, which has an estimated cost of $5 billion.

If feasible, an initial planned one-gigawatt development would represent over 11 per cent of New Zealand's electricity demand capacity and could power more than 650,000 homes, with power potentially delivered by the end of the decade.

But investment house Forsyth Barr said the project was "a stretch at best" and unlikely to get off the ground for two reasons: cost and size.

Its senior analyst Andrew Harvey-Green said the price tag for the project was roughly twice the cost of building an onshore wind farm.

He said in New Zealand, the levelised cost of energy for onshore wind is between $60 per megawatt hour (MWh) and $65 per MWh. But overseas estimates suggest offshore wind costs in New Zealand could be more than $130 per MWh.

"The other issue you have to think about is that offshore wind is not only competing with onshore wind, but also with solar, geothermal and other renewable projects which are typically a lot cheaper to build than offshore wind," he said.

On the size issue, Harvey-Green said adding 1GW of power into the New Zealand system, regardless of source, would create a supply and demand imbalance.

"The second challenge really in my view is that unless you can bring on demand of a similar level to the new supply that's coming on stream, that will in itself make the economics even harder for an offshore wind farm of that scale to get up."

Forsyth Barr said the only scenario where offshore wind could work in New Zealand is if costs fall dramatically relative to alternative generation technologies, and there is new industrial demand brought on at the same time.

It said both were challenging goals.

However, it said the announcement was another indicator of independent developers looking at getting a large foothold in the New Zealand electricity generation market.

It said CIP had 30GW of offshore wind projects under development, construction and operation.

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