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Tiwai Point Closure – Let’s Not Squander This Opportunity To Use Surplus Energy Responsibly

On the 9 th of July Rio Tinto announced the closure of the Tiwai Point Aluminium Smelter in Southland, New Zealand. This is a devastating blow for the community of Southland, and those facing employment disruption as a result will need to be supported to transition into another employment or business opportunities.

Tiwai Point Aluminium Smelter is New Zealand’s largest user of electricity, with the majority of the Manapouri Hydroelectric Power Station output being used by the smelter. While a huge set-back for the local economy over the short term, the closure of the smelter presents an opportunity for New Zealand. The power used by Tiwai is generated by the Manapouri Power Station. And while we may consider it ‘renewable’, this scheme was built at great cost to the environment. Every cubic meter of water that is used in the generation of electricity at Manapouri is lost to Deep Cove, instead of taking its natural course down the Waiau River, significantly impacting that freshwater ecosystem.

This electricity surplus needs to be used in a way that benefits New Zealand both socially and environmentally. This is a significant amount of additional, cheap generation for New Zealand, representing around 13% of New Zealand’s electricity demand. To put this into perspective, the smelter uses more electricity in a year than the whole Wellington region.

In the coming year, as the aluminium pots begin to ramp down, there will be an increasing surplus of hydroelectricity for the South Island. Transpower are already well underway in planning transmission upgrades that would allow this surplus electricity to be brought north – for example, the Clutha Upper Waitaki Lines Project, which will enable additional generation to be exported from Southland.

With such a large increase in available cheap power to the electricity system, we would expect that the wholesale price of electricity to near crash, but electricity companies are profit driven. The big generators/retailers gain the highest profits when the last MWh generated to match demand is priced high, generally from burning coal or gas. All generation that is used to meet this demand at that time, including cheap hydro, geothermal and wind, is rewarded with this high $/MWh. The announcement of the smelter closure is likely to defer geothermal and wind projects in the North Island.

Due to the profit-driven nature of the generators/retailers, and the complexities of the electricity system in ensuring system reliability, such as needed reserve capacity, I am not holding my breath that we will see a large decrease in electricity prices in New Zealand as a result of this surplus. What we could see is a more strategic use of Lakes Manapōuri and Te Anau as a part of New Zealand’s wider storage system. We may also see an earlier retirement of the Taranaki Combined Cycle and/or Huntly Power Station coal/gas-fired rankine units.

New Zealand’s resources are valuable. Our resources should be used in a way that is socially desirable for New Zealanders, and enables economic diversification for businesses that have the environment in mind.

Some in industry at discussing how this surplus electricity could be used is in the drying of milk, a process that currently uses coal. This would be an inappropriate use of this highly valued resource for the following reasons:

  • Electricity is an energy carrier with a uniquely high thermodynamic potential (high quality energy carrier). Electricity can be used efficiently for heating with heat pumps, use in electronics, refrigeration, lighting, electrified rail etc.
  • Using electricity to generate process heat for drying milk requires electrode boilers which degrade the uniqueness of this highly valuable energy carrier.
  • Electrode boilers may require long term electricity contracts with Transpower, further incentivising the use of agricultural practices that cause long lasting impacts to our fresh water systems, especially those in Canterbury.
  • Big demand uses of electricity drive up the electricity price for everyone.

In the short term, if Fonterra (and other sites requiring process heat) wish to decarbonise, they should look at using industrial heat pumps for pre-heating and low temperature heating, and waste biomass for the higher temperatures. Utilising waste biomass for process heating provides more value than utilising it to generate electricity only.

The surplus electricity should be treated as a highly valuable resource, and used efficiently for businesses that are wanting to make a positive social and environmental contribution to the economy. Additionally, in the short term, as surplus hydroelectricity increases, a limited block of electricity, say 2,000 kWh per year of cheap electricity could be provided to increasing numbers of householders as the smelter winds down. The smelter currently uses around 5 billion kWh per year.

This should start with those closest to the smelter, extending north as new transmission capacity is built.

Southland is currently being hit hard. There will be job losses as a result of the smelter closure, at a time when it is already suffering from low tourism numbers. Southland residents, especially those with cold, damp homes, would benefit from this cheap block of electricity over the winter months.

As an energy specialist, and member of the Better Futures Forum, I believe that we must strive for an electricity system that benefits people without further degrading the environment. Our electricity system must be designed to optimise resource efficiency so that its environmental impact is minimised. In other words, we should not be using more than we need to. Every kWh generated should be used in the best interest of New Zealand as a whole. Surplus electricity should not be an excuse to inefficiently decarbonise industries that are not making a positive environmental and societal contribution to New Zealand.

Authored by Glen Baxter, a core group member of the Better Futures Forum, a forum advocating for a more resilient Aotearoa New Zealand in the wake of the Covid-19 crisis. Glen is an experienced adviser to New Zealand industries in strategies to reduce energy usage. Having seen the high energy wastage and inappropriate usage of energy in New Zealand, Glen joined the Better Futures Forum as a way to help build awareness about the responsible use of energy.

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