$10m to free up Tiwai smelter’s power
Contact Energy and Meridian Energy have agreed to chip in $10 million to bring forward the date by which South Island power users could tap into electricity generation freed up by the full or partial closure of the Tiwai aluminium smelter.
The funding may increase the prospect of at least of one of the smelter’s four pot lines being shut down by 2022.
Transpower, which owns the national grid, said Contact and Meridian had each agreed to contribute $5m to accelerate the upgrade of the transmission network between Clutha and Upper Waitaki.
Transpower has estimated it would cost $110m and take ‘‘three summers’’ to upgrade the national grid to ensure power from the Manapouri hydro scheme in Fiordland could be made available to other electricity users in the South Island.
The investment would make sense if the aluminium smelter, which Manapouri currently supplies, is scaled down or closed.
Transpower spokeswoman Deborah Gray said Contact and Meridian’s funding meant work on the Clutha-Upper Waitaki project would begin this summer and she confirmed the entire project could be completed in 2022.
Meridian Energy chief executive Neal Barclay said that was a year earlier than would have been possible without the agreement.
The accelerated work programme would ‘‘significantly reduce the risk of renewable electricity not being dispatched, should Rio Tinto choose to close its Tiwai Point aluminium smelter in the future,’’ he said.
Transpower has estimated it would take five to eight years and another $450m to fully ‘‘rebalance’’ the grid so any surplus power from Manapouri could also be efficiently distributed across the whole country.
The majority-owner of the Tiwai smelter, mining giant Rio Tinto, is currently reviewing the future of the smelter and is expected to make a decision on its full or partial closure in February.
Contact chief executive Dennis Barnes told the NZX that it believed a ‘‘disorderly exit of the smelter’’ would be a poor outcome for New Zealand.
‘‘Sudden closure will affect multiple stakeholders, including all generator-retailers. It would also be detrimental to the Southland economy and the pursuit of our decarbonisation goals,’’ he said.
But upgrading transmission lines in the lower South Island to move power elsewhere would be important if the smelter was ‘‘curtailed’’ or closed, he said.
‘‘Whilst we don’t believe the smelter will close imminently, we want to be part of the solution for removing the transmission constraints and avoiding the spill. If the smelter does ultimately leave in the longer term, we all need to make sure we aren’t at ‘ground zero’ in terms of next steps.’’
It would not be fair to characterise Contact’s $5m contribution as a nail in the coffin for the smelter, he said.
‘‘Although we don’t believe the smelter will close in the near future, expediting these works is important either way.’’
Rio Tinto is understood to be lobbying for a reduction in its lines charges, arguing that would be required to keep the smelter evenly partially open.
Energy Minister Megan Woods has asked officials to examine proposals which Rio Tinto put in writing late last month.
Simon Mackenzie, chief executive of Auckland lines company Vector, has questioned the justification for concessions on the basis that – putting transmission charges aside – the smelter only pays about a quarter to a third of the price that residential households pay for the power it consumes.
Mackenzie said on Thursday that while he was not arguing the smelter should close, it was critical Woods heard directly from a ‘‘broad set of stakeholders’’ on Rio Tinto’s appeal.