November 24, 2013
New Zealand

Politics take puff out of wind farm building

By Grant Bradley | The New Zealand Herald | November 25, 2013 | www.nzherald.co.nz

The decade-long surge in big wind farm building in New Zealand is nearing an end with no new projects in the pipeline as the sector booms around the world.

Industry leaders here are worried political uncertainty in the electricity market will stall further long-term development.

Wind farms account for more than 4 per cent of installed generation in New Zealand and the completion of the last big project, Meridian Energy’s Mill Creek scheme near Wellington scheduled for next year, will boost this close to 5 per cent.

The partly privatised company accounts for about 61 per cent of the country’s wind farms. Its chief financial officer Paul Chambers said although the economics of wind power were improving, there were no plans for more projects.

Flat electricity demand, due to reduced consumption by big industrial users and households, meant new generation wasn’t needed in the near future but planning for renewable energy projects was hard hit by political and regulatory uncertainty.

Chambers said while details of the Labour-Greens plans for the electricity market were sketchy, they could favour new thermal generation which had a shorter lead time.

“The thing about wind and renewables generally is that if you have a system that disincentivises technologies that have long lead times and large upfront costs …

“I think it would be quite difficult to spend large sums investigating wind sites and drilling geothermal wells when you [might not] have a chance to build it because some guy might sneak under the wire with a gas plant,” he said.

“Generally uncertainty in any market and any framework causes difficulty for an industry that has to plan over long horizons.”

Chambers said there was better growth potential in Australia where Meridian owns and operates the Mt Millar wind farm in South Australia and last week generated its first power at Mt Mercer, Victoria.

However, the change of government across the Tasman could affect the market where power retailers are required to buy credits for taking power from renewable sources, but this was under review.

“If they keep a semblance of their current target they will need a lot of wind – it is by far the most economic renewable in Australia,” Chambers said.

In this country, good quality wind sites ranked with brownfields geothermal (those with proven resources) as the most cost effective generation source.

Wind Energy Association chief executive Eric Pyle said there were no signs of other companies building wind farms.

“In New Zealand there is an air of uncertainty in terms of demand and climate change uncertainty and electricity sector policy uncertainty,” he said.

“We would like to see the electricity sector evolve in a predictable way. Disagreements on a national level between political parties on something like electricity creates a lot of uncertainty for investors.”

Around the world wind energy was booming, with an increase in installed capacity of 19 per cent last year, said Pyle.

The wind sector had a turnover of about $100 billion last year with the fastest growth in China.

Turbines were becoming more efficient – due partly to bigger blades – and wind farms now provided more than 3 per cent of the world’s generation capacity.