1. 20% by 2030 The future of wind energy in New Zealand Eric Pyle, Chief Executive

2. Vision: Wind Energy 20% by 2030 > Fits with the existing electricity system > Accepts the constraints of our available resources > Viability – best investments first > Achievable – NZ has excellent sites > Economic benefits

3. The industry has come a long way in a short time… > 1993: 0.225MW2007: 3MW > A 13 fold increase in power in 14 years.

4. Globally the industry has grown rapidly > It is now a mainstream industry

5. Electricity Supply and Demand > From 43,000 to 52,000 GWh annual in 2030, 8GW peak (7GW now) > Based on 1.0% demand growth p.a. – with faster growth, we get to 20% wind sooner > Much of the annual demand growth will be met by more wind energy > 90% renewable means a substantial increase in renewable generation

6. Make up of the Electricity System Generation Capacity (GW) 20122030 Hydro5.25.4 Geothermal0.71.2 Wind0.63.4 Gas1.42.3 Coal1.00.25 Other??

7. What the Forecast Means - 2030 > Hydro: +200MW, +5% > Limited capacity reduces % share, more variable (peak) supply > Gas: +900MW, +65% > More peak / demand response to maximise value, (e.g. Contact Energy’s recent investment in peakers) > Geothermal: +500MW, +70% > Expansion until low cost options run out > Coal: -750MW, -75% > Huntly: 2 units mothballed by 2015. > Wind: +2,800MW, +450% > Wind is the cheapest form of new generation

8. Wind to 20% - it is available and is reliable > The fuel is free and abundant. > Predictable short and long term (24 hours, 20 years) > Cost effective technology now and getting even better

9. Integrated supply and Market

10. > Some types of generation can be varied to take advantage of higher peak prices Earning from Energy GenerationMarket average $Peak price $ Hydro  Geothermal  Wind  Gas CCGT  Gas Peaker  Coal 

11. Generation – a Business Decision > Investment based on future returns and portfolio > Peak generation earns more $/MWh > We still need non-peak generation – long term price needs to pay for this > Operation – must cover operating costs > O&M costs predictable for wind long term > Fossil fuel costs uncertain (eg.20 yrs time) – but very certain for renewables - ZERO

12. Viability of Investments - now Deloitte – past projects to 2010

13. Wind costs still reducing > Relatively young technology > 12% cost reduction in next 5 years (Bloomberg) > 14% reduction for every doubling of world capacity to date – turbine cost reductions, efficiency improvements > O&M costs falling

14. Best Dressed Future Investment LRMC – 2016 $/MWh Deloitte + Bloomberg

15. The sector’s view - consents July 2011 Under construction Consented Applied / in consent process

16. Achievable – Expansion Path > We have consents > One ‘West Wind’ per year.

17. What Type of Wind Farms? > Mixture of sizes, depending on fit with generation portfolio > Some large wind farms > Many Te Uku – West Wind size > Smaller projects too > Mixture of developers > Major Gentailers > Smaller developers > Owner operators – industry > New entrants

18. Where Wind Farms may locate – the windy places

19. Modest investment > Cost of 140 MW wind/yr = $300m > Capex (new build) for main generators over last 3-5 years: > Meridian: $200m/yr > Contact:$300m/yr > MRP:$300m/yr > Total:$800 +m/yr > $300m/yr for wind is not inconceivable

20. Challenges > Understanding by public, Govt, Councils > Perception that wind is unreliable and expensive > Limited recognition of the economic benefits > Consenting > Improve speed and consistency > Integration of windfarms > Grid - needs to cater for future generation map > More sophisticated electricity market > Generator portfolio > Developing an industry > Supply chains > Servicing and training > Supply chains

21. Economic Benefits > Benefits for every New Zealander – up to $390/person each year > 1400 permanent jobs (3.5GW) mainly in regional/rural areas > Exportable skills and technologies > Keeping the cost of electricity down > Steadying effect on electricity prices

22. Summary 2030 > Electricity generation outlook includes 20% wind > Wind distributed around country > Small and large wind farms / operators > Affordable and achievable > Best investments for generators > Economic benefits for NZ