Flexible Operations to Improve New Zealand's Contact Energy Performance

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to Grant King, the chairman of Contact Energy (NZE:CEN) (Wellington, New Zealand), the company is expected to witness increased financial yields during the second half of this fiscal year due to higher hydroelectric power generation, flexible operations at power plants, and lower take-or-pay agreements. The value of the financial benefits could go up to almost $314 million. For the financial year ending June 30, 2010, the company reported earnings after tax of $113.12 million, which was a drop of 6% from the same period last year. Contact Energy is one of New Zealand's leading energy generators and provides liquefied petroleum gas (LPG), electricity and gas to more than 600,000 households. The company's facilities and power plants meet nearly 25% of the country's energy requirement.

From January 2011, the company proposes to reduce its take-or-pay agreements 25%. Under a take-or-pay agreement, a buyer has to pay the agreed price for a product or service, even if there is no requirement or demand for the product or service. As per the agreement, during 2009-10, although hydropower generation was strong, the company had to pay for gas that was not required. King indicated that between the second half of 2010 and June 2011, the company will benefit tremendously as its $188.5 million Stratford peaking plant and $128.2 million Ahuroa gas storage facility will begin commercial operations. Contact Energy's Ahuroa project is New Zealand's first underground gas storage facility. The storage unit will act as a reservoir and store gas during low-demand periods and use it during peak demand.

The 200-MW Stratford peaking gas power project can begin operations within 10 minutes of startup and will balance power supply when generation from renewable energy sources like geothermal-, hydro- and wind-power generation is low. Peaking power plants also provide immediate power supply in vagrant weather conditions.

The project, which is in Taranaki, includes two LMS-100 fast-track gas turbines. The peaking plant is situated at the site of the older Stratford power plant, adjacent to the Taranaki combined-cycle power plant (CCPP). The peaking plant and the CCPP will together generate 580 MW of power. This combined power generation will take care of 9% of New Zealand's electricity requirement. These plants also will help to meet additional demand during peak seasons.

Globally, peaking plants are emerging as a sustainable option for quick-start power generation. This technology, which was used in gas-fired plants, is also gaining popularity in the hydropower sector. These projects can work in tandem with base-load power plants that have to operate continuously.

In May this year, Contact Energy completed construction of the 23-MW first phase of Tauhara geothermal power project. A decision on the 250-MW second phase is expected shortly. The Tauhara geothermal project is located near Taupo in the Wairakei region. The region has several heated mud pools and geysers, and is the best choice for geothermal energy generation. The first geothermal power plant in the Wairakei region was commissioned in 1958. On commencing full operations, the Tauhara project is expected to provide electricity to 50,000 households.

The company is also developing the Waitahora wind power project near Puketoi in Southern Hawke's bay region. Contact Energy, which is awaiting hearing at the environmental court, proposes to install 58 turbines and provide power to 70,000 homes.

Renewable energy contributes about 73% to the nation's primary energy supply, with geothermal, hydropower, and wind energy providing 15%, 55% and 3% of the supply, respectively. For a population of 4.5 million, the country's installed capacity is about 10,000 MW. By 2025, New Zealand is targeting the generation of 90% of its power demand from renewable energy sources. During this period, wind power contribution is forecast to increase from 3% to 20%. The country is also phasing out its coal-fired power plants and developing sustainable energy projects to meet the growing demand.

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