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Power Riding on Storms; Reaping the Power of Storms

redorbit.com|Marta Steeman|January 15, 2006
Australia / New ZealandEnergy Policy

No devotee of wind power is veteran industry engineer and consultant Brian Leyland. He thinks the limit of wind power is about 700MW before it causes problems for the transmission system. The variability of wind could cause frequency and voltage problems and need for more reserve power and in the end cost the power system and ultimately consumers who pay the price.


Wind-farm projects are thick on the ground. How big could wind become and who might be the winners and losers, asks MARTA STEEMAN.

TrustPower's chief executive, Keith Tempest, reckons there will easily be 1000 megawatts of new wind farms installed in New Zealand within five years.

That is about 350 wind turbines dotted around the country, assuming the developers choose the biggest turbines available these days of 3MW.

Not at all inconceivable, judging by the rush of wind-power projects on the drawing board.

TrustPower, the smallest of the big five power players, is betting its investment dollars that wind will be cheaper and more profitable than gas-fired power stations in the future.

If the companies building power stations do not get it …
... more [truncated due to possible copyright]
Wind-farm projects are thick on the ground. How big could wind become and who might be the winners and losers, asks MARTA STEEMAN.

TrustPower's chief executive, Keith Tempest, reckons there will easily be 1000 megawatts of new wind farms installed in New Zealand within five years.

That is about 350 wind turbines dotted around the country, assuming the developers choose the biggest turbines available these days of 3MW.

Not at all inconceivable, judging by the rush of wind-power projects on the drawing board.

TrustPower, the smallest of the big five power players, is betting its investment dollars that wind will be cheaper and more profitable than gas-fired power stations in the future.

If the companies building power stations do not get it right they can be left with under-used or stranded assets that do not make enough return for the capital invested.

This week Tempest announced that TrustPower wanted to build a 300MW wind farm in Otago at Lake Mahinerangi, south of Dunedin. It will be installed close to TrustPower's largest hydro station -- the 84MW Waipori station -- with the hydro station back-up for when the wind does not blow.

The many wind farms being mooted by established and new players will be making the big thermal generation companies running gas- fired and coal-fired power stations such as Contact Energy and Genesis Power sit up and take notice.

At present, established operating wind farms are still small fry, making up only 170MW of the total national capacity of about 8800MW.

There are big technical and financial implications for the power system and for the players if a lot of wind farms start up in the next few years.

The energy industry is starting to get a handle on this. Late in December the Electricity Commission released a discussion document: Scenarios for the Wind Generation Investigation Project.

The commission has set out three scenarios for wind power in the next 10 years. The aim is to debate what impact wind power, by its nature fluctuating and variable, will have on a power system and transmission system geared to mainly hydro power and thermal power.

The first scenario -- "low" -- depicts only a little wind development from 2006 to 2016. It assumes most new power plants will be gas-and coal-fired. Gas would come from either the importation of liquefied natural gas or a big new New Zealand gas discovery.

The "high" scenario sees 1000MW of new wind power. It assumes that most of the growth in demand for electricity will be met by wind farms, that the only new gas- fired power station will be E3P, now being built at Huntly by Genesis Power. It assumes Contact Energy will not build any more gas-fired power stations, that Contact does not import lng and coal gets the environmental thumbs- down.

The third scenario -- "very high" sees the development of 2000MW of wind farms which forces thermal power stations to cut back and lose market share and revenue. In this scenario only small amounts of New Zealand gas are discovered and emissions costs for thermal power stations improve the economics of wind power against gas- fired plants.

The commission stresses the scenarios are not forecasts of what it thinks will happen but are being used to work out the challenges for the power system. Submissions are sought by February 9.

The high and very high scenarios, if they come to pass, will have implications for leading player Contact Energy.

The big challenge for Contact is to grow its business in New Zealand but if there is not a big gas find and it does not import lng, how will it do that?

Former chief executive Steve Barrett said in September that wind was not as cheap as others were painting it and Contact had struggled with the economics of it.

However, Contact spokesman Pattrick Smellie said Contact's position had changed since then and it was now more interested in wind. He questioned if 2000MW of wind power would be economic. Some wind farms were viable at present wholesale prices, and others would need higher prices to make money. In addition wind faced the "huge" challenges of resource consent.

It has taken Genesis Energy two years to get consent for a small 18MW wind farm in South Auckland at Awhitu because of opposition and sister state power company Meridian Energy faces a further battle in the Environment Court with the residents of Makara, near Wellington, opposed to the 70-turbine West Wind project on their backdoor step.

TrustPower's Tempest has few worries about the viability of wind.

"I think we will see 1000MW of wind, quite quickly ... probably within four years, the best part of 1000MW." TrustPower would build up to 500MW of that.

Wind will be TrustPower's ticket to growth. Electricity from the proposed Mahinerangi wind farm could be sold to its customer base because TrustPower is not a big generator and has to buy power from other players.

He says TrustPower expects to produce electricity from Mahinerangi for about 7 cents a kilowatt hour. That is similar to the cost of producing electricity from gas.

"Wind and gas are now basically head to head on which of those two plants you would build," Tempest says.

Huge production of wind turbines around the world was forcing the turbine price down. "The reality is we could see that wind only costs 6c (a kilowatt hour) in three years time. It's hard to imagine how gas is going to get any cheaper," Tempest says.

He has been asked several times: why wind? He answers that forecasting the cost of fuel or exchange rates is notoriously tricky and importing lng exposes a company to those risks. Water is going to become a more valuable commodity and water rights can be sold. "So water isn't free any more, but wind always will be. No- one will ever, in my view, be able to figure out how to charge you for wind."

And wind was more reliable than rain.

To E2 From E1

"That's why I think over time it's such a worthwhile option," Tempest says.

Meridian boss Keith Turner is banking on wind as well.

He's talking of a huge wind farm in Otago near Rocklands -- up to 1000MW to be built in stages -- near Meridian's Benmore hydro power station which would act as a back-up for the wind farm.

And he hopes to win a challenge in the Environment Court appealing Meridian's consent to build a 70-turbine wind farm, West Wind," near Wellington as well as investigating more than 20 other sites.

Critical to the success of a wind farm are wind speeds, closeness to the transmission system or a local electricity network, the price of turbines internationally which can he helped or hindered by the exchange rate and local support through the consents process.

No devotee of wind power is veteran industry engineer and consultant Brian Leyland. He thinks the limit of wind power is about 700MW before it causes problems for the transmission system. The variability of wind could cause frequency and voltage problems and need for more reserve power and in the end cost the power system and ultimately consumers who pay the price.
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