Wind Energy in NZ NZWEA - RMLA Seminar Auckland Thursday 9 November 2006 Fraser Clark Chief Executive New Zealand Wind Energy Association

The NZ Wind Energy Association “to promote the uptake of New Zealand’s abundant wind resource as a reliable, sustainable and clean energy source.” 70 members, including: –4 of 5 major retailer/generators –Transpower and several large lines companies –Wind turbine manufacturers –Range of other interested organisations including developers, consultancies, financiers and legal firms. 700% increase in membership revenues and 200% increase in membership since 2004

Existing NZ wind energy capacity NameYear Commissioned RegionNo. of turbinesTurbine capacityProject Capacity (MW) Te Rere Hau2006Manawatu5*500 kW2.5 Southbridge2005Canterbury1100 kW0.1 Te Apiti2004Manawatu551,650 MW90.8 Tararua II2004Manawatu55660 kW36.3 Hau Nui II2004Wairarapa8600 kW4.8 Gebbies Pass2003Canterbury1500 kW0.5 Tararua I1999Manawatu48660 kW31.7 Hau Nui I1996Wairarapa7550 kW3.9 Brooklyn1993Wellington1225 kW0.2 TOTAL * When completed the Te Rere Hau project is expected to consist of 97 turbines generating a total of 48.5 MW

Projects under construction NameCommissioningRegionNo. of turbinesTurbine capacityProject Capacity (MW) White Hills2007Southland292,000 kW58.0 Tararua III2007Manawatu313,000 kW93.0 TOTAL under construction TOTAL at end Average turbine size: Existing: 944 kW (635 kW excluding Te Apiti) For 2007:2,517 kW At end 2007:1,335 kW

Potential wind farms This is just the projects in the consenting phase. Many others have been announced or are under investigation. ProjectDeveloperConsent Lodged RegionProject capacityStatus Te Rere HauNZ WindfarmsManawatuUp to 46 MWFinancing next stages West WindMeridian EnergyJuly 2005WellingtonUp to 210 MWAwaiting Court decision Hawkes BayHBWFMay 2005HastingsUp to 225 MWConsented (after appeal) TitiokuraUnison/Hydro TasmaniaApr 2005HastingsUp to 48 MWConsented (after appeal) Te WakaUnison/Hydro TasmaniaJan 2006HastingsUp to 111 MWConsented and appealed TaumatatotaraVentusWaikatoUp to 20 MWConsented TaharoaTaharoa C/PowerCoastWaikatoUp to 100 MWConsented MotorimuAllco Wind EnergyNov 2006ManawatuUp to 110 MWApplied for consent HayesMeridian EnergyNov 2006Central OtagoUp to 630 MWApplied for consent AwhituGenesisApr 2004Franklin18 MWConsented (after appeal) but deferred TOTAL Up to 1,518 MW

Global developments to end % pa growth in last 5 years Nearly 60,000 MW installed 100,000 + jobs created €11bn per year of investment Source: GWEC Global Wind Energy Outlook 2006

How much is too much? CountryPopulation Density (#/km 2 ) Installed wind capacity (MW) Installed wind capacity (% world total) Land area (‘000 km 2 ) Density (MW/1,000 km 2 ) Denmark1173, Germany23018, Spain7710, UK2441, United States299, , Australia , New Zealand Data as at end Based on data from 2005 IEA Wind Energy Annual Report

Wind Energy in the national electricity market According to the latest MED data: (year to end March ‘06) 168 MW of 8,840 MW total capacity (1.9%) 619 GWh of 41,563 GWh total generation (1.5%) Still some way to go to get to the 20% of national demand that the Government has suggested. NZ consumption has increased by 6,500 GWh p.a. since first windfarm in ’96 (740 MW equivalent)

Policy is the key to wind energy’s development A stable and long-term policy for wind/renewables generation is widely regarded internationally as being the greatest factor in wind energy growth. Government policy gave the industry its start (carbon credits and PRE) but this was short-lived and limited. The proposed carbon tax could have benefited wind energy, but was withdrawn before it was implemented.

While NZ policy blows hot and (currently) cold, wind energy worldwide is booming NZ one of few (if not only) developed nations without a wind/renewables incentive such as: - “feed in tariff” (i.e. fixes price) - fixed renewables quota (i.e. sets minimum quantity) - development subsidy - tax credit (i.e. USA) Even developing (i.e. non-Kyoto) countries have incentives, including India & China Policy provides project certainty for financing and can help to open up markets to a wider range of parties (i.e. independent power producers).

The Production Tax Credit (PTC) in the USA is applied inconsistently by the Federal Government, creating “boom & bust” style development: Many States now implementing their own renewables policies to create a stable investment environment Impacts of inconsistent policy * * * * Year without PTC

The NZ Energy Strategy (NZES) and National Energy Efficiency & Conservation Strategy (NEECS) are under review, with drafts expected in late November. Policy for wind energy is sounding promising: “It will be necessary to show a preference for new generation to be renewable, at least until such time as clean technologies, such as carbon capture and sequestration, are proven to be both practical and economic. Therefore, the Strategy will consider various incentive options to support the development of additional cost-competitive renewable energy sources. The Strategy will also address deployment hurdles for low- and zero-carbon energy alternatives by providing more planning certainty, and by creating a more dynamic environment for energy innovation.” – Energy Minister David Parker National Party now also recognising climate change and renewable energy in policy statements. What next for New Zealand policy?

Potential issue #2 – Grid Integration Grid systems the world over have typically been built for large, centralised and thermally-fired power stations Wind turbines require a fundamentally different approach (to thermals) in both connection rules and dispatch processes Without a robust core grid and good inter-regional connectivity, wind energy’s potential will not be fully developed.

Grid integration issues NZ has some specific transmission issues: “long and stringy” (rather than a “network”) islanded, rather than inter-connected. dispatching wind with hydro can reduce variability (but will affect the way reserves are managed) The Electricity Commission’s Wind Generation Integration Project (WGIP) reports in December. Transpower have been involved. Increased Government emphasis on and support for, comprehensive and strategic grid investment plans is also required.

RMA Issues Remain Public issues are typically noise and visual amenity Issues typically raised by those who stand to be most significantly impacted (i.e. nearby residents). Opposition arguements can be highly emotional and often unsubstantiated or based on biased reports. Vocal and visible minority opposition could affect wind energy’s excellent public perception.

Have project costs increased? Wind turbine costs have increased in past 12 months: –Global demand for turbines has increased –New turbine manufacturing and R&D capacity installed –Huge global demand for components such as gearboxes and bearings (not just wind but mining and whole energy sector) –Publicly listed turbine manufacturers seeking rates of return demanded by investors –Risks to manufacturers in warranties, etc. Expected to continue for next months at least Component pricing (gearboxes, etc.) and global demand will also be affecting new thermal generation

What about the exchange rate? Exchange rate affects ALL forms of new generation, not just wind. Influences wind energy’s price relative to existing generation, rather than to other forms of new generation. With wind there is no fuel price variability

Alternatives also have issues NZ’s future energy supply will come from a range of sources, but many will have issues of their own: Natural gas/LNG - price (not just LNG but also local) will move towards international price. - potential availability and price stability issues - investment in LNG infrastructure could add $12/MWh to electricity price. - thermal efficiency can be viewed similarly to wind’s capacity factor. Clean coal - still 10 years from commercialisation (and potential risks remain) - net efficiency loss means cost impact for produced electricity Wave and tidal - huge potential but still some way from commercial development. Nuclear - infrastructure, waste disposal, energy independence, scale, etc. All of these options will also have RMA issues of their own… Efficiency gains will reduce but not remove energy demand

What next for wind energy in NZ? Gazing into my crystal ball… Westwind receives approval from Environment Court with announcement to proceed in early 2007 Some form of incentive for renewables included in proposed NZES/NEECS but developments delayed until policy becomes legislation (mid-2007?). Movement towards ‘best practice’ for windfarm developments to smooth the consenting process. Global awareness of and action on climate change continues, increasing awareness of wind energy

The Sales Pitch NZWEA welcomes new members: Corporate:$3,500 + GST Associate: $ GST Membership application available on-line. NZ Wind Energy Conference March 13 – Te Papa, Wellington