Cheaper electricity on the way
Top Energy says a $300 million expansion of its geothermal development at Nga¯wha¯ will fundamentally change the shape of its business, and enable it to slash electricity costs for the region’s 64,000 residents.
The firm is on track to commission a 32-megawatt generator at Ngawha in October 2020, eight months earlier than planned, recent drilling having confirmed the potential of the field and, subject to further monitoring, enabling the construction of another 32MW unit on the same field after 2023.
Chief executive Russell Shaw said the investment, about $320 million across the two plants, would fundamentally change the shape of the business and the way it provided power for the Far North.
From next year the company would draw power from the national grid only about five per cent of the time. By 2026 it would have a near permanent surplus, with generation activities accounting for more than two-thirds of a business worth more than $1 billion.
Mr Shaw said the company was not building assets for the sake of it, however, and wanted to be able to provide a dividend to customers on that investment as soon as possible. The final shape of that increased discount would depend on how quickly debt from the generation projects was paid down, but from 2030 it could be that the lines would be free, or close to free.”
“This is the game-changer,” Mr Shaw told BusinessDesk.
“We will go from being one of the highest-cost regions for lines to one of the lowest. It moves us from one end of the spectrum to the other.”
Lines companies, most of them community or council owned, were looking hard for ways to use new technologies like solar, batteries and smart monitoring to defer capital spending and lower the cost of their services to customers. Lines typically accounted for about a quarter of a household power bill, and most trustowned network companies returned profits to consumers through annual discounts and grants.
Top Energy had it harder than many, with more than 4000km of lines throughout the broken country of the Far North and only 31,000 homes and businesses connected to them.
The biggest centre, Kerikeri, had only 150 commercial customers, while the district had just two industrial customers, AFFCo in Moerewa and Juken New Zealand in Kaitaia.
The district had fewer than nine people per square kilometre, a figure that fell further when the 16,000 living in Kerikeri, Kaikohe and Kaitaia were excluded.
Top Energy estimated that about a third of its network was uneconomic, and while Kerikeri was booming, many other communities endured 20 per centplus unemployment.
Mr Shaw said a year ago the firm’s shareholding trust had added a new objective for the company.
As well as operating a safe, reliable network, and a financially and environmentally sustainable business, its goals now included minimising the total delivered cost of electricity to its customers.
That fundamental shift, enabled by the generation investment, changed the company’s approach to how do we meet the supply for the Far North from within the Far North? Top Energy chief executive Russell Shaw — decisions and investments are being made for the long term.
The district had two big advantages in its geothermal resource, and its vying with Network Tasman for the country’s highest rate of solar installations.
More than 730 homes and businesses had solar panels, which were already meeting more than 10 per cent of the day-time summer load.
That number would grow, but to date panels had predominantly been installed on the wealthy eastern seaboard. Mr Shaw said he was determined to ensure that the cashflow from the generation business lowered power costs for the thousands of Top Energy customers in rental homes, or who would never be able to afford solar.
The company would take advantage of the small size of its network, “really a regional micro-grid,” to provide an optimal outcome for all customers.
It had already said that some isolated communities would be better supplied with their own micro-grids, built around solar and batteries, and some other generation, but he expected a very low, or nil, network charge to make it easier for more people to use solar and to trade surplus power with neighbours or export it back to the local grid.
Top Energy could also adjust its exports from the geothermal plants to complement the region’s rooftop supplies, possibly reducing the need for the utility-scale batteries some networks were investing in for the same role.
Mr Shaw was also considering building a solar array at Nga¯wha¯ to offset the decline in production from the geothermal plants, which were effectively big heat exchangers, on hot summer days.
Top Energy built its first pilot plant at Nga¯wha¯ in 1998, and now had 25MW of capacity there, exporting power about three per cent of the time. Peak demand on the network was 75MW.
Six wells had been drilled for the new plant — the company had hoped to need only four — and 36ha of civil works were well advanced. The workforce would peak at about 150 in July or August.
Meanwhile the company was doing well from recent high wholesale power prices, and had pre-sold 80 per cent of the output from the next plant.
“Lines businesses are quite often criticised for not taking a long enough view,” Mr Shaw said.
“The decisions of our board and trust here are 25 to 35-year ones. They are not talking about the next five years.”