Tiwai Point and Rio Tinto

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#789533 30-Mar-2013 09:41

I wonder if F&P in Mosgiel and the rail workshops in Dunedin would have closed if they could have got sweetheart electricity deals like RT?
How about providing Fonterra with the same energy deal as the smelter? At least the added value stays in NZ.

RT's current deal is through to 2016, with clauses for wind down and remediation if they cut and run early. That would certainly soften the blow over an extended period. If RT are intent on quitting NZ anyhow then we are just throwing tax payers funds down the drain. If the government is willing to do this, then why didn't they step in when all they jobs disappeared from Solid Energy or Telecom? RT are trying to leverage the Government's concern about the Mighty River Power share price to get us to virtually guarantee the price of aluminium through lower energy prices.

As for the carbon arguement, so we smelt aluminium here to save Australian power stations from burning coal, then we need to burn coal at Huntly to make up the electricity shortfall. So we pay the carbon charges. Go figure.

I suggest the government tell RT to "not let the doorknob hit them in the butt on the way out".

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gregmcc

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#789539 30-Mar-2013 10:12

I'm wondering why we don't see geothermal promoted here in Aotearoa more often, since we evidently have an abundance of it here in the North Island?

There are quite a number of new geothermal power stations around the Taupo area in the last 5 years, but there are some serious drawbacks with geothermal power, some very toxic chemicals are used to stop buildup of silica in the steam pipes, and some very flamable gasses used in the binary cycles so while there is a lot of potential energy for use there are some serious potential enviromental problems

TheMantis

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#789540 30-Mar-2013 10:15

Issues like this really prove how NZ has lost it's way. This government seems intent on screwing the citizens just to please big (usually foreign) business. There is no good reason why the cost of residential electricity is so much in this country, apart from greed. Rio Tinto pay no corporate tax and only 5c per kWh for electricity! They are most probably exploiting every known immoral accounting method to make it appear that the smelter is not making enough money just so they can try and screw us more. I know that we haven't had a decent government in a long time but National are just an abomination.

old3eyes

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#789550 30-Mar-2013 11:06

TheMantis: Issues like this really prove how NZ has lost it's way. This government seems intent on screwing the citizens just to please big (usually foreign) business. There is no good reason why the cost of residential electricity is so much in this country, apart from greed. Rio Tinto pay no corporate tax and only 5c per kWh for electricity! They are most probably exploiting every known immoral accounting method to make it appear that the smelter is not making enough money just so they can try and screw us more. I know that we haven't had a decent government in a long time but National are just an abomination.

For what it's worth. Labor was in power for 9 years and did nothing about lowering the cost of domestic power pricing.. They were seduced by the high returns from their SOEs.

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Old3eyes

TheMantis

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#789554 30-Mar-2013 11:22

For what it's worth. Labor was in power for 9 years and did nothing about lowering the cost of domestic power pricing.. They were seduced by the high returns from their SOEs.

Yes, you're quite correct. Perhaps that is the biggest problem - both Labour and National are utterly useless. NZ really needs a strong third party, one that has real policies unlike our current minor parties.

JimmyH

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#789573 30-Mar-2013 11:56

I tend to be pretty sceptical about attributing everything to shady "gummint" conspiracies without seeing actual evidence. Presumably Meridian wouldn't have signed the contracts unless they thought it was a commercially attractive deal, after looking at where else they might be able to sell the power, at what price, and how feasible it is to move the power elsewhere over the grid etc.

Price (whatever it is) is only part of the equation. Any big user taking huge quantities of any product in bulk (say, as supermarket or manufacturer) and committing to things such as guaranteed minimum purchase volumes etc for 10+ years would expect pretty good pricing from a supplier discount. Just because they are getting power at a lower rate than a much smaller purchaser in a different place who hasn't committed to anything long term doesn't mean it is an uncommercial arrangement.

Of course, without actually seeing the contracts, this analysis as well as all the statements about sweetheart deals and speculation in the thread, are pure conjecture.

Linuxluver

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#789595 30-Mar-2013 12:48

Dratsab: I think it would be highly unlikely the closure of the smelter would affect the retail price of electricity, especially in the favour of the consumer. As nickb800 points out, the lines to send "extra" electricity north don't exist - the implication of this is that there can't be an electricity oversupply; Manapouri will simply be scaled down. A build-out of lines to take electricity north to cater for future demand will then start to occur. Once this does, electricity prices will rise to pay for this build-out.

That's one scenario. You shouldn't really present it as a certainty.

That said...the government shouldn't use the effect on the wholesale market as an excuse if it isn't relevant.

Bottom line for me is that some or all of these excuses are.....bogus (lies?). Hardly matters which ones does it? :-)

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Linuxluver

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#789598 30-Mar-2013 12:53

blakamin:
raytaylor: I say data centres.

How long would it take to build data centres in the lower south?
Who's paying?
What will stop them just doing what RT are doing?
How do they get the data to the states, southern cross cable????

Private business won't do it alone. They either want monopoly guarantees or government hand-outs.

It would take longer term investment following a coherent government-lead strategy to make this happen. Like Canada did when they set up their "silicon valley" around Ottawa. They invested $300M in that 40 years ago and the industries it spun off have earned many, many billions since, along with creating a critical mass of skilled IT people who do, in turn, become "wealthy creators".

But left to the private sector, it never would have happened at all. Because....it hadn't.

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Linuxluver

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#789599 30-Mar-2013 12:57

TheMantis:
For what it's worth. Labor was in power for 9 years and did nothing about lowering the cost of domestic power pricing.. They were seduced by the high returns from their SOEs.

Yes, you're quite correct. Perhaps that is the biggest problem - both Labour and National are utterly useless. NZ really needs a strong third party, one that has real policies unlike our current minor parties.

You dismiss the greens too lightly. They have *exactly* the policies for dealing with this appropriately.

You should learn more about those policies - the current ones, not the (distorted) ones National talks about from 15 years ago - and see for yourself.

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Zeon

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#789652 30-Mar-2013 15:43

From my understanding there isn't sufficient transmission capacity from Manapouri to where else in the grid energy is required. So even if it shut down tomorrow it could be 15 years before that electricity reaches Auckland..

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JimmyH

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#789655 30-Mar-2013 15:56

Zeon: From my understanding there isn't sufficient transmission capacity from Manapouri to where else in the grid energy is required. So even if it shut down tomorrow it could be 15 years before that electricity reaches Auckland..

Plus, I guess, you would lose a fair bit of the power in transmission through resistance in the wires etc sending it all the way from the bottom of the South Island to Auckland. Assume the loss is 20% (any engineers out there who can comment on whether the loss is significant and who can take a more accurate stab at what the loss actually is), this would mean Meridian would have to sell at 12.5 cents in Auckland to get the same revenue as selling for 10 cents to Tiwai.

TheMantis

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#789659 30-Mar-2013 16:10

Zeon: From my understanding there isn't sufficient transmission capacity from Manapouri to where else in the grid energy is required. So even if it shut down tomorrow it could be 15 years before that electricity reaches Auckland..

Of the two 220kV transmission lines from Manapouri one goes direct to Tiwai Point, the other connects into the national grid at Invercargill. At this point there is insufficient capacity in the grid to run excess generation up to Benmore and into the HVDC link. A new link would need to be constructed between Manapouri and Benmore, probably $100 million plus. A good portion of the grid around Otago is also at or near capacity already.

In the North Island there is limited ability to push significant excess generation past the lower North Island due to capacity issues in the grid. Normally when generation is sent north via the HVDC link a sizeable portion is used in Wellington/Manawatu with the remainder pushed north. The majority of North Island generation is kept in the middle/upper North Island.

Unfortunately Transpower are well behind with grid upgrades as it is. Last year I took my apprentices on a field trip to Manapouri and the Waitaki hydro schemes, I'd never been to Manapouri before and was astounded with the engineering involved. What we have built in the past is incredible, unfortunately the RMA and NIMBY's make the development of significant infrastructure far more expensive and drawn out than ever before.

Rio Tinto really do have the country by the balls here. This should never have been allowed to happen.

Linuxluver

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#789677 30-Mar-2013 17:34

TheMantis:

Unfortunately Transpower are well behind with grid upgrades as it is. Last year I took my apprentices on a field trip to Manapouri and the Waitaki hydro schemes, I'd never been to Manapouri before and was astounded with the engineering involved. What we have built in the past is incredible, unfortunately the RMA and NIMBY's make the development of significant infrastructure far more expensive and drawn out than ever before.

Rio Tinto really do have the country by the balls here. This should never have been allowed to happen.

The other thing to bear in mind is that everywhere market "reforms" have been introduced into the electricity industry the countries concerned soon found they were having power shortages....which, after all, are FAR more profitable than building more power plants.

Running electricity as a market has been demonstrated fairly conclusively to be a scam.

It's time to go back to the way we used to do electricity. If you need it, you build it. If you need more, you build more. Very simple. It worked.

Instead we have: price rationing and very little new power generation capacity....while generators make big fat profits for NOT producing more power.

Max Bradford and National were warned about this 20 years ago when they brought it in. They didn't listen....and this is just one of the many reasons I never vote for that party. They haven't got a clue. Not then and not now.

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jfanning

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#789678 30-Mar-2013 17:36

Linuxluver: So let me get this straight.

If Rio Tinto abandon the Tiwai Point smelter, EVERYONE ELSE gets cheaper power?

Shut the plant down!!!

No, the price of power will not drop if Tiwai closes, you would be very foolish to think that it would

jfanning

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#789685 30-Mar-2013 17:51

Linuxluver:
The problem is making 4.5 million Kiwis pay more for power to keep those (estimated) 3,200 jobs.

If the power plant is basically only there to supply Tiwai, how are we paying more for power because of Tiwai?

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