home » Markets » New Zealand power - To a bolder shade of green

New Zealand power - To a bolder shade of green

With a power sector that relies on renewables for around three-quarters of its demand, New Zealand’s green credentials appear solid. High usage of hydropower and rapidly developing geothermal and wind energy facilities, particularly in the demand centres of the north, all contribute to the country’s drive to reduce its carbon emissions and balance its supply and demand nationwide.

Total power demand in New Zealand advanced to 39,818GWh in 2010, with the North Island using around 61.9% of power generated – Auckland accounting for 27.8%. The 38.1% balance is required by the South Island market, where Otago and Southland account for a fifth of the national figure.

The latest available figure represents a 3% increase compared with the previous year and a level more akin to a typical year after low demand from the key Tiwai Point aluminium smelter in Southland in 2009. While 2001-05 saw annual growth rates of 2%, more recent years have seen a reduced rate of 1% until 2010.

Figure 1 – New Zealand power consumption by sector, 2010.

A large share of this demand growth comes from the industrial sector (see Figure 1). Its 40,000 consumers account for 14,717GWh or 37.8% of NZ power consumption.

The country’s basic metals industry is the largest industrial user with a 17.3% share of the national total, followed by the wood, pulp, paper and printing industry (8.4%) and food processing (5.6%). In terms of average power consumption, NZ’s basic non-ferrous metals industry used 63.584GWh in 2010. The pulp, paper and converted paper sector required 7.393GWh while the basic ferrous industry consumed 2.997GWh. Other sizeable volumes were used by petroleum and coal product manufacturing (1.935GWh) and coal mining (1.279GWh). In the food processing industry, diary products (1.718GWh) and meat and meat products (1.527GWh) were key power users.

The commercial segment, including transport, represents around 23.4% of consumption and continued the slow decline seen in 2008-09. Residential users, which account for about 34%, and the primary sector (4.7%) made modest gains.

Figure 02 – Power consumption by industry sector.

In terms of individual industrial sources, NZ Steel’s Tiwai Point aluminium smelter is the largest single user of power. Owned by Rio Tinto Aluminium (79.36%) and the Sumitomo Chemical Company (20.64%) via New Zealand Aluminium Smelters Ltd (NZAS), the smelter uses up to 610MW of power, mostly supplied by the hydro-based Manapouri Power Station in Southland. NZAS has a contract for difference agreement with Meridian Energy for the continuous supply of 572MW between 2013-30. The financial contract with strike price escalated annually is based on the three-year average LME aluminium commodity price, the three-year average Benmore spot price and a proxy for inflation.

Furthermore, New Zealand Steel takes its full-capacity 1100MW power requirement for its Glenbrook Steel Mill off the national grid. This in contrast with CHH Pulp and Paper, which generates around 1200TJ of its power on-site. Its Kinleith and Tasman sites derive nearly half of their electricity from cogeneration plant. Other direct supply consumers with considerable power requirements include: Methanex NZ, Norske Skog Tasman, Southpark Corp, KiwiRail (Ontrack), Pan Pac Forest Products, Whareroa Cogeneration and Winstone Pulp International.

Power generation overview

In 2010, 43,401GWh of power was generated in New Zealand by its five main generators, which account for around 91% of output, with the balance provided by a number of small-independent generators and on-site co-generators. Table 1 summarises the key facts of the country’s main power generators.

Table 1 – Main power generating companies, New Zealand
Company Capacity (MW) Generation (GWh)
Generation share (%) Market share (%) Ownership
Contact Energy





Genesis Power





Meridian Energy





Mighty River Power





Trust Power





Source: Ministry of Development Energy data 2010

New Zealand’s electricity is sold by its power generators to retailers and large industrial users in a wholesale spot market, governed by the Electricity Industry (Enforcement) Regulations and the Electricity Industry Participation Code. Following a broad electricity market performance review undertaken in 2009, the former Electricity Commission was replaced by the Electricity Authority as the new regulator since 1 November 2011. In addition, a number of roles performed by the Electricity Commission were transferred to other bodies. Grid expenditure plans by Transpower now require the approval by the Commerce Commission while the Energy Efficiency and Conservation Authority (EECA) is solely responsible for electricity end-use efficiency programmes. The sector is governed by the Electricity Industry (Enforcement) Regulations and the Electricity Industry Participation Code.

Ensuring country-wide security of supply

With New Zealand demand focused on the North Island and power generation firmly located on the South Island, the country’s power sector has historically had to bridge the Cook Strait between both islands. However, in recent times, progress has been made in redressing this imbalance as an increasing number of projects have been commissioned in the north.

Figure 3 – New Zealand's power generation fuel mix.

Today, while the North still accounts for the majority of national power demand, nearly 62% of national power consumption in 2010, thanks to major demand centres such as Auckland and Wellington, it no longer relies heavily on the south to supply the bulk of its power. Extensive and preferential development of its power generation capacity has seen the area surpass southern capacity additions, tipping the power supply balance in its favour. In 2010, the north accounted for 6160MW against the south’s 3507MW. Although the southern dominance still prevails in its hydropower resources (3434MW, against 1818MW), New Zealand’s 2246MW of gas-fired and 731MW of geothermal capacity are exclusively situated in the north. In addition, the area’s 477MW wind power capacity also outweighs the south’s 61MW.

New Zealand has an enviable renewable power track record. Thermal power generation plays a relatively limited role in providing the country with electricity (see Figure 3). Gas makes up 21.2% and coal a further 4.5% of the nation’s energy inputs into its power sector. In contrast, renewable generation accounts for nearly three quarters of the total with hydropower in a dominant role.

Hydropower rules

Over half of its electricity is generated by hydropower facilities, which in 2010 delivered 56.4% of total generation. In addition, geothermal plants supplied 12.8%, wind 3.7% and bioenergy 1.3% of power.

New Zealand's current hydropower capacity stands over 5200MW.

Hydropower has been part of the country’s power make-up for over a century and continues to provide most of its needs in that area. However, since the first scheme, Waipori, was commissioned in 1903, the sector has grown to an installed capacity of over 5GW. Most of the country’s output of 24,470GWh is generated by plants on the South Island (17,779GWh), in schemes with capacity of over 100MW. The country’s total hydroelectric capacity currently stands at 5252MW. Key installations include Waitaki, Clutha and Manapouri on South Island and Tongariro and Waikato on North Island. While the sector has seen no major development since the 2002 completion of the second Manapouri tailrace tunnel, further development of the Waitaki and Clutha rivers is under consideration.

Geothermal building up steam

The country’s exploited geothermal resources are located on its North Island and in 2010 their output reached 5551GWh. New Zealanders saw the opening of the first geothermal power station at Wairakei in November 1958 and today, with a capacity of 180MW, it remains the country’s largest geothermal power station. Further large-scale development did not happen until 1989 when the Ohaaki plant was built but due geothermal steam limitations it has never realised its 104MW capacity.

Recent years have seen geothermal capacity increase significantly through the addition of new plants such as the 140MW Nga Awa Purua GTPP.

However, recent years have seen further expansion of the sector, including the 140MW Nga Awa Purua and the 24MW Tauhara plants last year, bringing the sector’s total capacity to around 720MW by the end of 2010. Looking forward, much of the country’s geothermal capacity remains untapped with the New Zealand Geothermal Association estimating installation capacity at around 3600MW. However, plans are afoot to replace Wairakei with the new 166MW, NZD623m Te Mihi plant on the same steamfield by 2016, retiring the world’s oldest still functioning geothermal unit. Contact Energy also received construction consent for its Tauhara 2 development near Taupo while Mighty River Power was granted resource consents for the Ngatamariki Geothermal Power Station.

Wind power’s rapid development

Wind power has rapidly developed from a low base, growing more than 27% annually since 2006 to account for 1618GWh or 4% of total generation in 2010. By 2008, over 320MW was installed, of which 151MW came onstream during 2007. Most output is derived from wind parks on the North Island, which generated 1431GWh last year. The largest facility is TrustPower’s Tararua wind farm with a capacity of 161MW after the third stage was commissioned in 2007. The largest single producer of wind-based power is Meridian, which fully commissioned its 28-turbine, 64MW Te Uku wind farm, near Raglan, in April 2011.

It is expected that the sector will continue to develop rapidly with at least 2500MW of capacity under proposal or awaiting consent. Contact Energy received construction consent for its 504MW Hauauru ma raki wind farm in the Waikato region and its 156MW Waitahora wind farm in Hawke’s Bay. Genesis Energy’s board committed to proceeding with a resource consent application for its Castle Hill wind farm in northern Wairarapa where it expects a potential output of up to 600MW. The company reports good progress on the required engineering, commercial, environmental and consultation work for the application which it plans to lodge this year. Meanwhile, Meridian expects to start construction on its 420MW Macarthur wind farm in due course. The NZD500m investment is due for completion in 2013.

Other renewables

Of the other renewable sources for power generation – bioenergy, solar and marine energy – only bioenergy has significant installed capacity. This is produced predominantly from woody biomass at a number of cogeneration plants at wood processing plants and from biogas produced from digesting waste and wastewater treatment plants and landfills.

The Minister of Conservation approved the installation of 200 marine tidal turbines in the Kaipara harbour.

In March 2011, NZ ventured into tidal energy as the Minister of Conservation approved the installation of 200 marine tidal turbines in the Kaipara harbour, one of the largest harbours in the world and located at the most northern tip of the North Island. Crest Energy plans to develop the 200MW project along a 10-km stretch of the main channel. In 2008, Northland Regional Council granted resource consents for only 100 submerged turbines but after an Environment Court appeal, this number was extended to 200. “We estimate the plans when fully implemented will generate sufficient power for an area from Albany to Cape Reinga,” said the company. “Estimated total costs for the project over the first 10 years are about NZD600m, offset by modest but growing revenues from year four.”

Thermal expansion

For its baseload, back-up and peak supply, NZ turns to thermal generation, mostly installed on the North Island. Around 3000MW of installed capacity is fossil fuel-based with four main types of thermal generation: steam turbine plants, gas turbine units, combined cycle gas turbine facilities and cogeneration or combined heat and power plants. Gas-fired plants on the North Island generated around 9205GWh in 2010 with a much smaller share delivered by coal-based production – 1933GWh.

Stratford gas-fired power station is one of the latest additions to New Zealand's thermal power stations.

However, the thermal power sector is not at a standstill and investment continues. The latest additions include the new gas turbine plant at Stratford, next to the existing Taranaki combined cycle power station, completed last year by Contact Energy. It is the first in NZ to use stored natural gas and consists of two 100MW units.

Going forward, Contact Energy received consent for the 400MW Otahuhu C CCGT and an additional 500MW expansion on the Stratford site.


Although power demand is forecast to growth in 2012, power generators have mixed expectations for the year. “FY12 will be focused on delivery, in terms of utilising the newly commissioned assets to raise base earnings even if wet hydrology continues, profitably growing retail demand and ensuring Te Mihi is delivered on time and within budget,” said Contact Energy in its latest annual report. On the other hand, Meridian Energy expects to enter FY2012 with high hydro storage and continued flat demand, which is likely to suppress wholesale prices in the near term. Its sale of the Tekapo power stations is forecast to reduce generation volumes by around 1000GWh annually and reduce generation revenues for the company. However, in the medium- to long-term, the picture is looking far more promising with growth expected to return and wholesale prices to rise. In addition, its long-term agreement with NZAS will provide the company with commercial certainty.

In the run-up to 2030, consumer energy demand is expected to grow at 0.9% with the country’s energy intensity noting a 22% improvement, according to the Ministry of Economic Development. While a forecast pick-up in the economy could see some movement in industrial energy demand, but growth is envisaged to be at a lower level than historically observed – averaging at 1.2% per annum, close to its historical rate of 1.1%.

In view of this higher demand, wholesale electricity prices may need to rise 29% by 2030 to support investment in generation, continuing the trend noted in recent years. As for the type of generation technologies used in the expansion of power infrastructure, a number of factors, including emissions pricing, gas supply, steel prices and exchange rates, will be key factors in determining how the mix will develop. For example, emissions pricing could make the building of coal-fired power stations a risk-laden venture and as a result, the Ministry does not expect additional coal-fired capacity being built and the existing Huntly station is earmarked for phase-out. Renewable energy holds the trump card in this respect and consequently, by 2030, around 900MW of geothermal, 1500MW of hydro and 750MW of wind power are expected to come online by 2030. In the decade that follows, further investment is foreseen. “Between 2030 and 2040 there is another 1800MW of wind built since the model used assumes geothermal resource is exhausted and further hydro developments will be significantly more costly, ” says the Ministry of Economic Development. But whatever the generation mix, New Zealand will face the challenge of building on its green credentials and in line with global requirements for sustainable development and action on climate change, make its power sector a bolder shade of green.

Share and Enjoy:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Blogplay
  • LinkedIn
  • StumbleUpon
  • Twitter

No Responses

Leave a Reply

Make sure you enter the * required information where indicated.

You must be logged in to post a comment.