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Monday, February 25, 2008

Smelter gorges on national grid

Smelter gorges on national grid
Lake levels at the hydroelectric station supplying Southland's power-hungry Tiwai Pt aluminium smelter are so low that electricity is being diverted from the national grid to feed it - at a time when industry experts are already warning of a looming domestic power crisis. Meridian Energy is locked into a contract to supply the smelter with about 550MW 24 hours a day, but low lake levels have lowered Manapouri's output to 200MW. Meridian is being forced to buy the 350MW shortfall from other generators and pass it on to the smelter at a loss of as much as $1 million a day.
Meridian recently signed a new contract guaranteeing supply until 2030.

Ummmm – why are our power companies signing juicy public money contracts to a company that seems to have the deal very much written by them and for them and have in fact signed up such guaranteed supply deals in a global warming future up till 2030! It sounds less like business and more like corporate welfare.


At 25/2/08 9:41 am, Anonymous jr said...

Its a commercial contract and ordinarily provides Meridian with an awesome flat load demand for a big portion of its energy. They know the risks, but consider it worth it, which is why they so actively sought the continued load.

The electricity market is predominatly a sellers market, so as far as them bullying Meridian I wouldn't be so sure, and despite some of the rhetoric coming out of Comalco prices would have to rise VERY high before they would head off shore, the decommissioning / restart up cost would make the "cheaper energy price" pay back way too long. Meridian weren't held over a barrel here, to be honest the negotiation seemed a bit too closed shop to me if anything!!

The fixed price hedge contract they've set up is standard stuff for large users and they would be far more cautious with their load / generating capacity balance then companies were around the time of the first power crisis (The one that killed OnEnergy as an electricity retailer.)

They'll take a knock now and make it up later, they of all companies will understand the vagaries of Hydro supply and will have factored in scenarios worse than this one when setting up the contract. The last thing Southland and NZ in general needs is another piece of large industry heading overseas.

IF (a big if for reasons outlined above) it did actually leave it would be very bad for Invercargil and the new source of its energy would probably be far more carbon intensive, so the planet as a whole would be worse off.


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