Mercury will press on with the second stage of its $450 million wind farm in Manawatū regardless of decisions about the future of the Tiwai aluminium smelter.
Possible closure of the smelter is being considered, which could release an increased supply of electricity into the market, reducing prices.
But Mercury chief executive Fraser Whineray said the energy company was confident that would not have a material effect on the economics of the wind farm.
Whineray said on Tuesday Mercury would move to develop the 27-turbine, $208m southern section of the Turitea wind farm immediately following the 33-turbine, $256m first stage that is already under way.
The total project, worth more than $450m, would create the biggest wind farm in New Zealand.
Mercury had amended its contracts with Vestas to complete a 222MW wind farm that would create enough energy to power 375,000 electric vehicles.
Whineray said the company was pleased to be able to act so quickly following the passing of the Zero Carbon Bill.
“Being able to complete the Turitea wind farm at its full scale contributes further to New Zealand’s sustainable, low emissions future.”
It was clear there would be a need for significant amounts of renewable electricity to support the path to a low carbon future.
Whineray said the decision to develop the whole wind farm took a long-term view of a changing electricity market.
Although wholesale electricity prices were high at the moment, the uncertain future for the Tiwai Point aluminium smelter and possible release of surplus generation capacity within a few years could eventually force prices down.
He said Mercury had decided not to wait for Rio Tinto’s decision, expected in March, on the smelter’s future.
If it closed, that would release additional electricity generation capacity to supply new markets, potentially lowering prices.
Whineray said it would take time for those effects to be realised.
“We have to assume the smelter will go,” he said.
Even if the decision was for it to stay, that would only be a temporary situation and cycles of uncertainty would repeat.
Whineray said pressure was building in the electricity industry that was likely to drive prices up for domestic users.
“It’s imperative new capacity is brought to bear to bring prices down,” he said.
“We believe the case is compelling for the completion of this leading North Island wind farm site, situated close to the national grid, supporting New Zealand demand into the future.”
Whineray said there would be savings from moving directly from one stage to the next of the wind farm on the Tararua ranges.
The transmission line had already been designed with capacity for the second group of turbines, now scheduled for commission in late 2021, a year after the first.
Community engagement and ecological work demanded by resource consent conditions were already well under way, which would enable a smooth roll out to the second stage.
The Vestas turbines would be the same, but with software updates that would slightly increase their yield from the southern site, which had slightly lower wind speeds.