Contact Energy has signed a contract with a landowner for what may be a large wind farm in the lower South Island.
The electricity company announced on Tuesday that it intended to begin developing wind farms for the first time, and was planning a pipeline of “large-scale” developments over the next six years.
Chief executive Mike Fuge told Stuff Contact has secured its first site, which is in the lower South Island, though he has not revealed the exact location.
Because of the need to obtain resource consents, wind farms usually take at least a few years from conception to reality.
There are currently relatively few wind farms in the South Island, with the largest being Meridian Energy’s 29-turbine 58 megawatt site at White Hill, south-east of Mossburn in Southland, according to the Wind Energy Association.
Prior to February, when Rio Tinto confirmed it would keep the Tiwai Point aluminium smelter open until at least the end of 2024, much of the debate in the electricity generation and distribution industry was on finding ways to divert more lower South Island generation further north.
But Contact deputy chief executive James Kilty said it saw significant potential for demand growth in the lower South Island over time.
“This includes both domestic decarbonisation-led growth from process heat and transport, and new demand from overseas commercial and industrial users seeking cleaner energy sources,” he said.
Contact didn’t want to build all its wind farms in one region as that would increase the cost of covering for wind variability, he said.
“All the wind in the lower North Island is more or less correlated and ramps up and down together.”
The amount of new wind generating capacity that would be required by the industry over the next 15 years would be “very significant”, he said.
Fuge said the economics of wind generation had improved over the past five to 10 years with advances in technology and larger turbines which had a maximum theoretical output of 3.5 to 4MW.
Contact was hoping to produce power from its wind projects at a cost of no more than 6 to 6.5 cents per kilowatt hour, he said.
“I’d hope to be getting on that technology curve, and getting ahead of it.”
The cost needed to be lower than from geothermal generation, for example, because it was intermittent, he said.
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