Wind Energy in NZ

NZWEA - RMLA SeminarAuckland

Thursday 9 November 2006

Fraser Clark

Chief Executive

New Zealand Wind Energy Association

The NZ Wind Energy Association

“to promote the uptake of New Zealand’s abundant wind resource as a reliable, sustainable and clean energy source.”

• 70 members, including:– 4 of 5 major retailer/generators– Transpower and several large lines companies– Wind turbine manufacturers– Range of other interested organisations including

developers, consultancies, financiers and legal firms.

• 700% increase in membership revenues and 200% increase in membership since 2004

Existing NZ wind energy capacity

Name YearCommissioned

Region No. of turbines Turbine capacity Project Capacity(MW)

Te Rere Hau 2006 Manawatu 5* 500 kW 2.5

Southbridge 2005 Canterbury 1 100 kW 0.1

Te Apiti 2004 Manawatu 55 1,650 MW 90.8

Tararua II 2004 Manawatu 55 660 kW 36.3

Hau Nui II 2004 Wairarapa 8 600 kW 4.8

Gebbies Pass 2003 Canterbury 1 500 kW 0.5

Tararua I 1999 Manawatu 48 660 kW 31.7

Hau Nui I 1996 Wairarapa 7 550 kW 3.9

Brooklyn 1993 Wellington 1 225 kW 0.2

TOTAL - - 181 - 170.8

* When completed the Te Rere Hau project is expected to consist of 97 turbines generating a total of 48.5 MW

Projects under construction

Name Commissioning Region No. of turbines Turbine capacity Project Capacity(MW)

White Hills 2007 Southland 29 2,000 kW 58.0

Tararua III 2007 Manawatu 31 3,000 kW 93.0

TOTAL under construction 60 151.0

TOTAL at end 2007 - - 241 - 321.8

Average turbine size:

Existing: 944 kW (635 kW excluding Te Apiti)

For 2007: 2,517 kW

At end 2007: 1,335 kW

Potential wind farms

• This is just the projects in the consenting phase.Many others have been announced or are under investigation.

Project Developer ConsentLodged

Region Project capacity Status

Te Rere Hau NZ Windfarms Manawatu Up to 46 MW Financing next stages

West Wind Meridian Energy July 2005 Wellington Up to 210 MW Awaiting Court decision

Hawkes Bay HBWF May 2005 Hastings Up to 225 MW Consented (after appeal)

Titiokura Unison/Hydro Tasmania Apr 2005 Hastings Up to 48 MW Consented (after appeal)

Te Waka Unison/Hydro Tasmania Jan 2006 Hastings Up to 111 MW Consented and appealed

Taumatatotara Ventus Waikato Up to 20 MW Consented

Taharoa Taharoa C/PowerCoast Waikato Up to 100 MW Consented

Motorimu Allco Wind Energy Nov 2006 Manawatu Up to 110 MW Applied for consent

Hayes Meridian Energy Nov 2006 Central Otago Up to 630 MW Applied for consent

Awhitu Genesis Apr 2004 Franklin 18 MW Consented (after appeal) but deferred

TOTAL Up to 1,518 MW

Global developments to end 2005

• 20-35% pa growth in last 5 years• Nearly 60,000 MW installed• 100,000 + jobs created• €11bn per year of investment

Source: GWEC Global Wind Energy Outlook 2006

How much is too much?

Country PopulationDensity(#/km2)

Installed wind capacity

(MW)

Installed wind capacity

(% world total)

Land area (‘000 km2)

Density (MW/1,000 km2)

Denmark 117 3,128 5.3 43.1 72.6

Germany 230 18,428 31.2 356.9 51.6

Spain 77 10,028 17.0 504.8 19.9

UK 244 1,337 2.3 244.9 5.5

United States 29 9,149 15.5 9,629.0 1.0

Australia 3 708 1.2 7,682.0 0.1

New Zealand 15 168 0.3 268.7 0.6

Data as at end 2005. Based on data from 2005 IEA Wind Energy Annual Report

Wind Energy in the national electricity market

According to the latest MED data:(year to end March ‘06)

168 MW of 8,840 MW total capacity (1.9%)

619 GWh of 41,563 GWh total generation (1.5%)

• Still some way to go to get to the 20% of national demand that the Government has suggested.

• NZ consumption has increased by 6,500 GWh p.a. since first windfarm in ’96 (740 MW equivalent)

Policy is the key to wind energy’s development

• A stable and long-term policy for wind/renewables generation is widely regarded internationally as being the greatest factor in wind energy growth.

• Government policy gave the industry its start (carbon credits and PRE) but this was short-lived and limited.

• The proposed carbon tax could have benefited wind energy, but was withdrawn before it was implemented.

While NZ policy blows hot and (currently) cold, wind energy

worldwide is booming• NZ one of few (if not only) developed nations

without a wind/renewables incentive such as:- “feed in tariff” (i.e. fixes price)- fixed renewables quota (i.e. sets minimum quantity)- development subsidy- tax credit (i.e. USA)

• Even developing (i.e. non-Kyoto) countries have incentives, including India & China

• Policy provides project certainty for financing and can help to open up markets to a wider range of parties(i.e. independent power producers).

• The Production Tax Credit (PTC) in the USA is applied inconsistently by the Federal Government, creating “boom & bust” style development:

• Many States now implementing their own renewables policies to create a stable investment environment

Impacts of inconsistent policy

0

500

1000

1500

2000

2500

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MW

1999 2000 2001 2002 2003 2004 2005 2006

Year

** *

* Year without PTC

• The NZ Energy Strategy (NZES) and National Energy Efficiency & Conservation Strategy (NEECS) are under review, with drafts expected in late November.

• Policy for wind energy is sounding promising:“It will be necessary to show a preference for new generation to be renewable, at least until such time as clean technologies, such as carbon capture and sequestration, are proven to be both practical and economic. Therefore, the Strategy will consider various incentive options to support the development of additional cost-competitive renewable energy sources. The Strategy will also address deployment hurdles for low- and zero-carbon energy alternatives by providing more planning certainty, and by creating a more dynamic environment for energy innovation.” – Energy Minister David Parker

• National Party now also recognising climate change and renewable energy in policy statements.

What next for New Zealand policy?

Potential issue #2 – Grid Integration

• Grid systems the world over have typically been built for large, centralised and thermally-fired power stations

• Wind turbines require a fundamentally different approach (to thermals) in both connection rules and dispatch processes

• Without a robust core grid and good inter-regional connectivity, wind energy’s potential will not be fully developed.

Grid integration issues

NZ has some specific transmission issues:• “long and stringy” (rather than a “network”)• islanded, rather than inter-connected.• dispatching wind with hydro can reduce variability

(but will affect the way reserves are managed)

• The Electricity Commission’s Wind Generation Integration Project (WGIP) reports in December. Transpower have been involved.

• Increased Government emphasis on and support for, comprehensive and strategic grid investment plans is also required.

RMA Issues Remain

• Public issues are typically noise and visual amenity

• Issues typically raised by those who stand to be most significantly impacted (i.e. nearby residents).

• Opposition arguements can be highly emotional and often unsubstantiated or based on biased reports.

• Vocal and visible minority opposition could affect wind energy’s excellent public perception.

Have project costs increased?

• Wind turbine costs have increased in past 12 months:– Global demand for turbines has increased– New turbine manufacturing and R&D capacity installed– Huge global demand for components such as gearboxes and

bearings (not just wind but mining and whole energy sector)– Publicly listed turbine manufacturers seeking rates of return

demanded by investors– Risks to manufacturers in warranties, etc.

• Expected to continue for next 12-18 months at least• Component pricing (gearboxes, etc.) and global demand

will also be affecting new thermal generation

What about the exchange rate?

• Exchange rate affects ALL forms of new generation, not just wind.

• Influences wind energy’s price relative to existing generation, rather than to other forms of new generation.

• With wind there is no fuel price variability

Alternatives also have issuesNZ’s future energy supply will come from a range of sources, but

many will have issues of their own:• Natural gas/LNG

- price (not just LNG but also local) will move towards international price.- potential availability and price stability issues- investment in LNG infrastructure could add $12/MWh to electricity price.- thermal efficiency can be viewed similarly to wind’s capacity factor.

• Clean coal- still 10 years from commercialisation (and potential risks remain)- net efficiency loss means cost impact for produced electricity

• Wave and tidal- huge potential but still some way from commercial development.

• Nuclear- infrastructure, waste disposal, energy independence, scale, etc.

• All of these options will also have RMA issues of their own…

• Efficiency gains will reduce but not remove energy demand

What next for wind energy in NZ?

Gazing into my crystal ball…

• Westwind receives approval from Environment Court with announcement to proceed in early 2007

• Some form of incentive for renewables included in proposed NZES/NEECS but developments delayed until policy becomes legislation (mid-2007?).

• Movement towards ‘best practice’ for windfarm developments to smooth the consenting process.

• Global awareness of and action on climate change continues, increasing awareness of wind energy

The Sales Pitch

NZWEA welcomes new members:Corporate: $3,500 + GSTAssociate: $ 950 + GST

Membership application available on-line.

NZ Wind Energy ConferenceMarch 13 – 14 2007Te Papa, Wellington

www.windenergy.org.nz