TOTAL INSTALLED CAPACITY

 

Year	2001	2002	2003	2004	2005	2006	2007	2008	2009
MW	36	36	36	168	168	171	322	325	497

A tremendous untapped resource

Wind energy now supplies just over 3% of New Zealand’s annual electricity demand. With New Zealand’s excellent and largely untapped wind resource, this share has the potential to grow to 20% within 20 years.

In terms of total potential, a study completed for the Electricity Commission (New Zealand’s electricity market regulator) indicated that the country’s economic wind resource is sufficient to meet annual demand several times over. The study identified areas with an annual wind speed greater than about 8.5 metres/second, which have the potential to generate over 50,000 GWh per year. An even larger resource was identified in the next band of wind speed, from 7.5 m/s to 8.5m/s.

Hydro generation supplies about 55% of New Zealand’s electricity, thermal generation supplies about 30%. Growing electricity demand and plans for phasing out 500 MW of coal-fired thermal generation are creating opportunities for new wind farm development.

RECORD CAPACITY GROWTH IN 2009

2009 saw record growth in installed wind capacity, which increased from 325 MW at the beginning of 2009 to 496.6 MW at the end of the year. Meridian Energy’s 142 MW Project West Wind, near the capital city of Wellington, delivered first power in April. West Wind, the second stage of NZ Wind Farm’s Te Rere Hau (30 MW) and the much smaller Horseshoe Bend (2.25 MW) were all fully commissioned by the end of the year.

 

Market Share (%)	2008	2009
Turbine supplier
Vestas	95	62
Siemens	0	29
Windflow Technology	2	7
Other	3	2
Operator
Trust Power	49	32
Meridian	46	59
NZ Windfarms	2	7
Other	3	2

 

Although 2009 saw substantial growth in wind energy capacity, for much of the year economic and policy uncertainty created doubt about industry growth beyond the completion of the three new projects mentioned above. Progress on achieving consent for proposed projects was mixed. Furthermore, a combination of high turbine prices and the relatively low value of the New Zealand Dollar compared to the Euro and US Dollar deterred investment in consented projects.

Towards the end of 2009 a window of opportunity opened for New Zealand developers as the value of the NZ Dollar increased while turbine prices and availability appeared to ease. Meridian’s October announcement that it was beginning construction at Te Uku, in the upper North Island, provided a welcome indication that well-planned wind farm projects can be competitive with other forms of new generation. Also, TrustPower is now tendering for turbines for the first 30MW stage of its 200 MW Mahinerangi wind farm in the Lower South Island.

 

Policy environment for wind power

New Zealand is unique in that there are currently no incentives for investment in renewable energy. Early wind farm development was supported through the allocation of emission units under the Ministry for the Environment’s Projects to Reduce Emissions (PRE) Scheme, which was introduced in 2003. New wind farms, including Te Uku and West Wind, have proceeded without support, showing that well-planned and executed projects can compete economically with other forms of new generation.

The New Zealand government has a target of meeting 90% of the country’s electricity needs by renewable energy by 2025, up from the current 70%. The introduction of an Emissions Trading Scheme in 2008, combined with efforts to streamline the consent process, is designed to provide sufficient incentives to achieve this target.

THE RESOURCE MANAGEMENT ACTIn 2009 the Government implemented Phase One of its reforms to the Resource Management Act (RMA), the legislation under which the environmental effects of wind farms and all other forms of development are assessed and permission, or consent, is granted. The Act seeks to promote the sustainable management of natural and physical resources.

The reforms to the RMA set out to streamline and simplify the consent process and resulted in the establishment of the Environmental Protection Agency, which is expected to receive and process applications for projects of national significance (including wind farms over 100 MW when requested by the applicant) and provide support to Boards of Inquiry considering the proposals. How well the EPA works in practice remains to be seen. The Government is expected to progress Phase Two of its reforms this year.

THE EMISSIONS TRADING SCHEMEIn late 2008, New Zealand’s Labour government introduced an Emissions Trading Scheme, which was amended in 2009 by the new government, led by the center-right National Party. The scheme puts a price on greenhouse gas emissions, including those from electricity generation.

The 2009 amendments reduce the price signal for investors. Power generators will now receive 50% free allocations, and the amendments include a 25 NZ$ (17.2 US$) price cap on the cost of emissions units for the remaining 50%, effectively capping the carbon price at NZ$ 12.50. Both the free allocations and the price cap are currently legislated to end at the end of December 2012, but a review of the legislation is scheduled for 2011.

Also in 2009, the New Zealand government undertook a major review of the electricity sector and introduced legislation that, if passed in Parliament, will result in major changes to regulatory arrangements, including dissolving the Electricity Commission (the electricity market regulator).

Obstacles for wind energy development

Concerns over the visual impact of wind farms are increasingly threatening development in New Zealand. A recent decision by the NZ Environment Court to decline consent for a proposed 630 MW wind farm in the lower South Island (Project Hayes) risks setting a precedent for the assessment of wind farms under the Resource Management Act. The decision suggested that the visual effects of renewable energy should be measured on a purely economic basis and that all possible alternative electricity generation projects to the proposed wind farm should have been explored in more depth. The applicant, Meridian Energy, has appealed the decision to the High Court.

2010 – a year of opportunity2010 will be a significant year for the industry, even though there will be only a small growth in installed capacity. With the Government pursuing RMA and electricity sector reforms, combined with the entry of the electricity sector into the moderated Emissions Trading Scheme, there is the opportunity to ensure that the regulatory and policy environment enables all the options for new generation to compete on an equal footing.

With all of New Zealand’s major electricity generators, as well as domestic and international wind energy developers, exploring options for wind generation, there is little doubt wind energy’s role in New Zealand’s electricity system will grow in the coming years.