Taking responsibility for the future4 January 2012
Hydro delegates in New Zealand have been urged to be true engineers and take responsibility for their projects – be it a new development or one of the remarkable refurbishment schemes which are continuing to take place. It is crucial that high quality stewardship remains on the agenda. Edward White from NZ Energy News gives us more details in his special report from the third Australasian Hydro Conference.
Dams are incredibly important to New Zealand and their value goes far beyond what they bring to company balance sheets. This is the belief of Meridian Energy’s former chief executive Keith Turner. Speaking at the 2011 Australasian Hydro Conference, Turner said that New Zealand’s hydro engineers have an important responsibility to get the most out of the country’s many hydroelectric dams.
“It carries an image for this country which allows us to brand ourselves globally as a clean, green country. I don’t think any of us understand just how valuable that is,” he said.
Turner, who led Meridian from its inception in 1999 through to 2008, has since assessed dams in Canada. He believes New Zealand has been ‘as good as anywhere’ in maintaining its hydro assets but said it is crucial that a ‘very high quality of stewardship’ continues into the future.
“All of us are only here for part of the life of a hydro [project]. And it is very important that we act as stewards for hydro plant that we have today,” he said. “They are not only serving us, they will serve future generations.”
It is increasingly difficult to develop new hydro plants in New Zealand, Turner told conference delegates, noting that other technologies, especially solar photovoltaics, will be increasingly cost competitive in the future.
“If you go back to the 1950s and 60s, hydro was by far the cheapest energy source for this country. The alternatives that we know today were not readily available,” he explained. “Today of course, developing hydro is pretty hard. It takes a lot of tenacity, a lot of money and a lot of determination to get there. And it takes a real will to win public support.”
But hydro’s inherently indefinable end-of-life, its flexibility and its increasing efficiency makes it of great value to the power system.
Turner spoke of the remarkable improvements which have been made through refurbishment and add-ons over the past 10-15 years, driven by the commercial disciplines of the New Zealand market.
“I think the commercial pressures of current institutional structures put strong drivers on efficiency. So there has been a tremendous amount of effort to refine and improve and extract the last opportunities of lifting the efficiency of our total hydro system, or individual components of it,” he said.
“It’s very valuable because it is flexible. It has a very low marginal cost and it is very flexible to operate. So it has been able to survive the transformation of state to corporatisation of the markets, pretty comfortably.
“I believe hydro will remain fundamental to any mix of electricity supply. And now that we've got it, we don't really want to give it up.”
Hydro accounts for about 54% of New Zealand’s generation capacity. While wind and geothermal have dominated the recent pipeline of new developments, hydro capacity has edged higher over the past decade as refurbishments at the Benmore and Arapuni dams, among other sites, have lifted unit ratings.
At the conference delegates also learnt how companies will continue to spend money on both new developments and further upgrades. Amongst these Contact Energy is trying to select a favoured development option for another dam on the Clutha River. And while Meridian Energy is pressing ahead with its planned 85MW development on the Mokihinui River, it is also looking closely at options to develop a ninth station for the Waitaki chain – a 35MW power station in the discharge canal from Lake Pukaki. The company has consent for the project which will be sufficient to power about 10,000 homes. Chief financial officer Paul Chambers said in August that Meridian is now looking at ways to get project costs down.
Meanwhile, having acquired the Tekapo A and B stations from Meridian in June, Genesis Energy expects to spend about A$103M over the next three to four years upgrading the plants and repairing a section of the 26km canal linking the two stations.
Furthermore, at Mighty River Power's full-year earnings briefing in August, chief financial officer William Meek indicated the company had earmarked a large proportion of A$90M for hydro refurbishment this year. A year ago, Mighty River signalled that spending on its hydro fleet during the coming decade was likely to rise to between A$400-500M. That projection envisaged hydro maintenance climbing from about A$48M in 2010 to more than A$80M in 2012, averaging about A$68M through to 2018.
TrustPower, which owns 36 hydro plants around the country, also has an active programme to add new capacity to its books. The company in late July announced that its board has approved detailed designs for the Esk Valley hydro scheme in Hawke’s Bay and an upgrade of the Arnold plant on the West Coast.
The Esk Valley project will see a 3.8MW scheme constructed north of Napier. The high head project will produce about 15GWh/yr and is expected to take 18 months to build. Meanwhile, the Arnold upgrade will see enhancements boosting generation capacity by 2.6MW at the existing 3MW scheme. The combined cost of the projects is about A$28M. They will likely proceed to construction in the last quarter of the calendar year.
Peter Lilley, TrustPower’s hydro development manager, said it is important for companies to consider utilising their existing assets before trying to develop new projects.
“It comes back to this concept of the wider environment and stewardship of the environment and the assets we have. Before we go out and develop new resources, and possibly do it poorly, we've got to bear in mind that if we're not going to do a good job of it - don’t start. Focus on the assets we've got,” Lilley said. “And get the most out of them.”
TrustPower also has bigger schemes in the pipeline. The company was awarded resource consents for the larger, 44MW upgrade of the Arnold scheme in November 2008. However, it appealed the consents and, with the Environment Court decision in its favour, has gained more favourable operating conditions.
The 70.5MW upgrade of TrustPower’s Wairau scheme had also been bogged down in the resource consent process since 2005 amid appeals by Save the Wairau, Jetboating New Zealand, the Department of Conservation, Fish and Game New Zealand, Ormond Aquaculture, and New Zealand Clearwater Crayfish. However the decision by the Environment Court to uphold resource consents in November 2010 has cleared the way for the company to advance this scheme.
The A$200M Arnold project is likely to proceed first, with the company’s board due to sign-off on detailed dam design later this year.
Lilley said when considering long term developments, such as Arnold and Wairau, flexibility is important, not only in plant operation but also in companies’ willingness listen to communities and stakeholders.
“It's a long term development. They’re going to be around here for hundreds of years. You’ve got to think about more than the project on the day that you’re building it,” he said. “Nobody knows how the scheme is going to be used in the future and this might include other uses such as recreation, irrigation and town water supply.”
TrustPower earlier this year completed an expansion of the pumping capacity at its Highbank project to supply the Barrhill Chertsey irrigation project. The company is looking to use its storage at Lake Coleridge to supplement irrigation flows, while its Arnold project near Greymouth will also involve construction of a world-class kayaking course.
Lilley told the Australasian conference that a major challenge in the consenting process is helping stakeholders, including the experts working on the projects, to understand the issues outside of their individual remit. This can be difficult given the number of factors at play.
It is also important to remember that communities and councils may have little or no expertise in hydro developments as they are not an everyday occurrence, Lilley said. Companies should take time in the consultation process to educate people about the wider benefits of the scheme.
“I don't believe there is any other large scale project that you can contemplate that has such a marriage between the physical, the social and different engineering disciplines. And it then has this longevity,” Lilley said of hydropower. “I can’t think of another type of project that has this combination of drivers. It makes them quite unique.”
Whilst projects clearly have to make economic sense, Lilley told the conference that these other unique characteristics mean engineers working on developments need to consider the environmental and social impacts of what they are doing.
“Be a true engineer. Engineers historically had to look at things a lot wider than just their discipline. Through the process you’ve got to look at everything. You’ve got to understand the interrelationship between society, cost and the technical side of things.
“You've got to put yourself in the shoes of the society that you are going to go along and affect,” Lilley commented. “If you lose a little bit of water out a proportion of the year, does it really matter? If you are constrained in lake operations on weekends, does that really matter? Purists would say ‘that is inefficient, you're losing flexibility’, but look at the long term. Do you really perceive that would be an issue?”
IWP&DC would like to thank Edward White and NZ Energy News for this report. www.energynews.co.nz.
|Australasian Hydro Conference|
The third Australasian Hydro Conference was held in Queenstown, New Zealand from 5-7 September 2011. With over 120 delegates, the conference was a key event for the energy sector, with important project updates from major local and international firms. This was coupled with technical discussions delivered by industry experts across a range of topics including strategy, risk, planning, civil and environmental engineering, asset management, upgrades and new construction.