Transmission Pricing Methods Halt New Zealand Wind Energy Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--New Zealand's TrustPower Limited (NZX:TPW) (Mount Maunganui, New Zealand) is delaying planned wind energy projects on the country's South Island as a result of the Electricity Authority's transmission pricing methodology. State-owned Transpower New Zealand Limited (Wellington, New Zealand) is enforcing the pricing in its role as the national grid owner and system operator.

As part of Transpower's national grid, a high-voltage direct-current system (HVDC) exists to transmit power between New Zealand's North Island and South Island. The system has been upgraded in recent years, with the addition of the high-efficiency Cook Strait electricity cable. The transmission pricing methodology dictates that the government's investment in the Cook Strait cable is to be passed on to generation customers transmitting power from the South Island, which includes Trustpower.

While the South Island, with its larger mass, is often referred to as mainland New Zealand, only about one-quarter of the country's population resides there. Therefore, while smaller projects remain viable, larger projects that are based on plans to sell electricity to the North Island Grid have been stalled in hopes that the transmission pricing methodology may be amended by the end of 2010.

Trustpower received planning approval for a 200-megawatt (MW), $320 million windfarm at Mahinerangi, near Dunedin on the South Island. Subsequent to the HVDC upgrade, the planned output was reduced to 36 MW, utilizing only 12 Vestas V90 wind turbines. Project construction commenced in September 2010 and is expected to be completed in May 2011. Downer EDI Limited (ASX:DOW) (Sydney, Australia) has been contracted to complete the civil works, while Transfield Services (New Zealand) Limited (Auckland, New Zealand) is constructing the electrical components.

Another planned Trustpower project, the 240-MW Kaiwera Downs Windfarm near Mataura, has also been delayed. The windfarm will likely consist of 30 wind turbines, each with capacities of 3 MW, although this may be amended to 83 2-MW turbines, subject to pricing and availability. If the transmission pricing methodology is amended by the end of 2010, Trustpower will aim to obtain financial approval by the third quarter of 2011. Requests for Quotation and Bid Documents will tentatively be released beginning two months after approval, with construction kickoff scheduled for the middle of 2012. A preferred turbine supplier has not yet been selected. Trustpower will aim to have the project completed by early 2013.

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