As COP26 approaches, Mercury chief executive Vince Hawksworth says New Zealand’s electricity sector is well-placed to meet the challenges that may result from the summit.
COP26, which will take place next week, will bring world leaders together with the aim of accelerating action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.
“Contextually, I would say that we have a fantastic foundation because we are blessed with two things,” Hawksworth told the Herald.
“One is a set of markets that send clear price signals – whether that is the energy market or the carbon markets.
“When you get clear pricing signals, it is much easier to make investments, so that is really important.
“The second thing is that we are blessed with really good renewable resources.”
Aside from the ongoing use of hydro, there were still wind power opportunities, and untapped potential in the country’s geothermal fields.
“NewZealand has got a really good suite of opportunities,” he said.
“So with strong markets that give signals, good resources and a set of regulatory settings that you can rely on, then I think New Zealand is in a great place,” he said.
Under the Paris Agreement, New Zealand pledged to take its emissions 30 per cent below 2005 levels, and 11 per cent below 1990 levels before 2030.
New Zealand has far-reaching plans to decarbonise the economy.
However, Mercury said the market will only be able to produce enough renewable supply to meet future demand if the Government’s policies continue to provide long-term certainty and support capital deployment.
The current framework incentivised the company to build New Zealand’s largest wind farm, Turitea, in the Manawatu.
Once fully commissioned, Turitea will bring on 840GWh of new renewable electricity a year, enough to power 375,000 electric vehicles.
Hawksworth said the goalposts for renewable generation were still moving, as other parts of the economy improved their energy plans.
As a sector, more than 3.8 terrawatt hour of new renewable generation will be built between 2020 and 2025, adding close to 10 per cent of new renewable generation to the grid.
To meet the growth in demand and retire fossil fuels, one new wind farm every nine months is required through to 2050 to achieve net zero carbon emission.
“Decisions that undermine the balance of risk and reward and chill investment in generation risk undermining New Zealand’s broader ambitions on decarbonisation.
“But as the COP26 approaches, the pressure is on nations and companies to walk the walk and not just walk the talk, which means making investments,” he said.
Since the creation of the New Zealand electricity market just over two decades ago, there had been billions of dollars of new investment in the sector.
Over the past five years, investment has largely been in renewables, which have seen big advances in technology.
Mercury’s Turitea machines produce six times as much electricity as the ones that were put in there in the early 2000s, and the price per unit has fallen sharply.
The sector generally has put placed a lot of emphasis on technology development aimed at reducing the country’s dry-year reliance on the coal and gas-fired Huntly Power Station.
“There is an incredible technologycurve – solar prices are coming down as well.”
Hawksworth said transitioning the electricity sector away from Huntly would not be in a straight line.
Over the past two years, the sector has had to turn to Huntly for power because of a turndown in gas availability with issues at Pohukura and the run down of Maui gas field combined with two low-water inflow sequences.
Contact in Tauhara geothermal project and Meridian in Harapaki wind farm.
Mercury, which acquired the New Zealand assets of Tilt Renewables earlier this year, is building the Kaiwaikawe wind farm near Dargaville, which will sell its output to Huntly’s owner, Genesis, allowing Genesis to retire more of its thermal plant.
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