The past two years have been a boom time for wind farming in New Zealand, with almost a gigawatt of new generation announced, and even larger facilities on the way. But according to this week's Independent, all of that could be about to come to a crashing halt.
The main problem is the low dollar. While good for farmers, as they receive a higher effective price for exports, its means that imported goods are more expensive. And the problem for power companies interested in wind farms is that the turbines are imported. Higher prices have already caused Trustpower to put its proposed 300 MW Mahinerangi wind farm on hold, and others may follow. On the plus side, its unlikely that generators will pursue gas or coal projects instead, as they also rely on imported equipment and will be similarly affected by the low dollar. Instead, we'll just see projects deferred, or built at a slower rate - with a consequent effect on security of supply.
But its not just a question of exchange rates; several wind farm developers are quoted as expressing concern about the uncertainty around carbon prices in the wake of the government's dumping of the carbon tax. This makes it more difficult to predict profitability (will a future government impose a price on carbon, or will wind farms be undercut by environmentally subsidised coal and gas?), and has put the shift to a more sustainable electricity system - which looked to be well underway - in doubt. While the government has said that it wants more renewable energy, unless it comes to the party with price or regulatory mechanisms to favour renewables over dirty generation, the policy will be just like their forestry-based Kyoto policy in the 90's - so much hot air.
One could argue, perhaps, that a country interested in a long-term energy strategy rather than short term bottom-line accounting might want to invest in the training and facilities to make such equipment locally.
ReplyDeleteOne would no doubt be called names for venturing such a postion.
Chris: Almost certainly.
ReplyDeleteWe actually have a local wind-turbine manufacturer - Windflow. Their turbines should be getting cheaper in relative terms (they import some of the components, but nowhere near all of them) - but they only do 500 kW, and while they have a good case that they are more efficient in terms of land use (MW/Ha) as well as cheaper, the culture in the industry seems to favour big turbines over small.
In the long run fixed costs should have diminishing importance unless you are making decisions based on budgets or in this case potentially are doing a sort of currency speculation.
ReplyDeleteIn reality the NZ dollar is not low now it is, if anything, still a touch high.
Genius: One word: discounting.
ReplyDeleteIf many of the alternatives to wind, e.g. oil or coal are priced on the global markets in foreign currency then drops in the NZD (and there are more to come) will not neccessarily weaken winds competitiveness.
ReplyDeleteAnon: the problem is that wind has a higher upfront capital cost vs low running costs, while coal and gas are the opposite - but the dollar will certainly have made other projects more expensive as well.
ReplyDeleteWhoops, I forgot about Windflow. My grandfather has shares in them too.
ReplyDeleteAnother cost of running a "low dollar" strategy to benefit the tiny proportion of the population who farm (or export other goods made primarily in New Zealand).
ReplyDeleteI guess it also helps to "trap" New Zealanders here, and entice expats back, and so helps to address the "brain drain". :)
Anonymous: it's not only farmers who benefit from a lower dollar, the huge tourism industry does too.
ReplyDelete