Tiwai Point is Closing

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#2520275 9-Jul-2020 18:50

Regarding Titanium,

You would be hard pressed to find any company which wants to set up a big heavy industrial plant for a commodity product in NZ these days. There are other contries with cheaper power, labor and more relaxed environmental standards.

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#2520278 9-Jul-2020 18:54

frankv:

Well, no. It's only a subsidy if they pay less for the energy than it costs to generate and deliver to them. How much you pay for electricity is pretty much irrelevant.

How much is paid is completly relevant. If electricity is being sold below market price (accounting for transmission costs, and costs of building new transmission capacity etc), the function is that of a subsidy.

That said, it is possible that the power company was willing to sell power at a discount to the smelter, knowing their demand would hold up wholesale prices, allowing them to make more money from their other generation capacity.

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#2520295 9-Jul-2020 19:16

It is a sad day for every kiwi and for every environmentalist.

It wasn't high electricity prices as such but high electricity transmission costs. They paid ~13% (?) of the national transmission costs because everyone is charged for the volume of electricity they use, not the distance or infrastructure that the electricity is transmitted over - that isn't fair user pays. This means the north island electricity consumer paid approx the same transmission costs for electricity moved over ~1,000km that Rio Tino did for electricity moved over ~200km so were being subsidized by Rio Tino and will now pay higher/fairer transmission costs.

It is a sad day for the environment because the aluminum will still be refined, just in another country with cheap dirty coal instead of clean cheap hydro with inflated transmission costs. It doesn't matter where the C02 is being made, it adversely affects the entire globe.

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#2520297 9-Jul-2020 19:20

Scott3:
frankv:

Well, no. It's only a subsidy if they pay less for the energy than it costs to generate and deliver to them. How much you pay for electricity is pretty much irrelevant.

How much is paid is completly relevant. If electricity is being sold below market price (accounting for transmission costs, and costs of building new transmission capacity etc), the function is that of a subsidy.

That said, it is possible that the power company was willing to sell power at a discount to the smelter, knowing their demand would hold up wholesale prices, allowing them to make more money from their other generation capacity.

So someone who gets a discount for buying a fleet of cars is getting a subsidy? It's simple commercial logic - the bigger your buying power the lower price you pay.

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#2520301 9-Jul-2020 19:34

You must also remember that Manapouri was built for the smelter. I am sure they have paid for it many times over by now. You cant just look at todays situation without taking into account the politics of 40 years ago and the "Think Big" mentality. Taranaki was also built during this time.

You also need to look at the impact of it shutting down...the full impact. Considering the age of the plant (one of the potlines was closed down already at the request of Meridian due to high demand during lockdown), and the fact modern aircraft are now made for composites it could well be time for it to go.

To compare apples with apples you need to discover (which would be very difficult) what the cost price per unit is from Manapouri and then decide if they are getting it too cheap. Also you need to look at Australian smelter sand see what they are purchasing power for (albeit dirty energy).

My opinion is that if extra billions are needed to build an infrastructure to get Manapouri electricity to the North Island than the North should pay for it. After all Tiwai have been paying way more for transmission charges than anyone else. It could be said that smelter has been subsidising Aucklands power prices to a small degree.

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#2520302 9-Jul-2020 19:37

Handle9:
Fred99:

Alternatives to use the power? Maybe titanium? There's ilmenite on the SI West Coast, energy use per Kg is about double that of smelting aluminium, but market price is triple. Upside would be that possibly existing staff skills could be utilised, downside - it's another commodity that has been on a long-term downward price trend, and I guess most users don't care if it's been produced "green".

It'd be far cheaper to do it off shore with cheap power.

So with the (local) surplus, that argument applies to everything that we could use the power for - except sending it up North.

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#2520315 9-Jul-2020 20:13

Fred99:
Handle9:

It'd be far cheaper to do it off shore with cheap power.

So with the (local) surplus, that argument applies to everything that we could use the power for - except sending it up North.

Yes. There is no business case for energy intensive industry in a country for high energy costs.

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#2520322 9-Jul-2020 20:34

Handle9:
Yes. There is no business case for energy intensive industry in a country for high energy costs.

I'd expect that the energy cost from Manapouri would be very low. We have high energy prices - they aren't the same thing.

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#2520328 9-Jul-2020 20:47

Fred99:
Handle9:
Yes. There is no business case for energy intensive industry in a country for high energy costs.

I'd expect that the energy cost from Manapouri would be very low. We have high energy prices - they aren't the same thing.

What does it matter? It's not going to change anytime soon.

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#2520402 9-Jul-2020 22:21

Mahon:

You must also remember that Manapouri was built for the smelter. I am sure they have paid for it many times over by now. You cant just look at todays situation without taking into account the politics of 40 years ago and the "Think Big" mentality. Taranaki was also built during this time.

You also need to look at the impact of it shutting down...the full impact. Considering the age of the plant (one of the potlines was closed down already at the request of Meridian due to high demand during lockdown), and the fact modern aircraft are now made for composites it could well be time for it to go.

To compare apples with apples you need to discover (which would be very difficult) what the cost price per unit is from Manapouri and then decide if they are getting it too cheap. Also you need to look at Australian smelter sand see what they are purchasing power for (albeit dirty energy).

My opinion is that if extra billions are needed to build an infrastructure to get Manapouri electricity to the North Island than the North should pay for it. After all Tiwai have been paying way more for transmission charges than anyone else. It could be said that smelter has been subsidising Aucklands power prices to a small degree.

"the North should pay for it."

By that "logic" the Sth should have paid the full bill of the Kaikoura and ChCh EQ's too right? :/

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#2520424 9-Jul-2020 22:24

Handle9:

So someone who gets a discount for buying a fleet of cars is getting a subsidy? It's simple commercial logic - the bigger your buying power the lower price you pay.

I think you have a point. It would only be a subsidy if the seller was operating at a loss on the fleet sales.

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#2520431 9-Jul-2020 22:33

Mahon:

My opinion is that if extra billions are needed to build an infrastructure to get Manapouri electricity to the North Island than the North should pay for it. After all Tiwai have been paying way more for transmission charges than anyone else. It could be said that smelter has been subsidising Aucklands power prices to a small degree.

My understanding is that Transpower reworked their fee schedule earlier this year to get rid of the historic sharing of transmission charges around the country, instead allocating to those who got benefit from the transmission.

https://www.stuff.co.nz/business/121765229/some-consumers-will-pay-more-with-new-way-to-carve-up-transpowers-1b-bill

Frankly this is the economically efficient way to do it, and it is a bit disappointing it took so long to make the change.

But seen as it has been made, I would expect the cost of any future investment to feed power to the north would be paid for by those benefiting from it.

Mahon

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#2520498 10-Jul-2020 00:57

driller2000:

Mahon:

You must also remember that Manapouri was built for the smelter. I am sure they have paid for it many times over by now. You cant just look at todays situation without taking into account the politics of 40 years ago and the "Think Big" mentality. Taranaki was also built during this time.

You also need to look at the impact of it shutting down...the full impact. Considering the age of the plant (one of the potlines was closed down already at the request of Meridian due to high demand during lockdown), and the fact modern aircraft are now made for composites it could well be time for it to go.

To compare apples with apples you need to discover (which would be very difficult) what the cost price per unit is from Manapouri and then decide if they are getting it too cheap. Also you need to look at Australian smelter sand see what they are purchasing power for (albeit dirty energy).

My opinion is that if extra billions are needed to build an infrastructure to get Manapouri electricity to the North Island than the North should pay for it. After all Tiwai have been paying way more for transmission charges than anyone else. It could be said that smelter has been subsidising Aucklands power prices to a small degree.

"the North should pay for it."

By that "logic" the Sth should have paid the full bill of the Kaikoura and ChCh EQ's too right? :/

I think you will find that the damage to Wellington and surrounds was massive.

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#2520500 10-Jul-2020 01:37

tripper1000:

It is a sad day for every kiwi and for every environmentalist.

It wasn't high electricity prices as such but high electricity transmission costs. They paid ~13% (?) of the national transmission costs because everyone is charged for the volume of electricity they use, not the distance or infrastructure that the electricity is transmitted over - that isn't fair user pays. This means the north island electricity consumer paid approx the same transmission costs for electricity moved over ~1,000km that Rio Tino did for electricity moved over ~200km so were being subsidized by Rio Tino and will now pay higher/fairer transmission costs.

It is a sad day for the environment because the aluminum will still be refined, just in another country with cheap dirty coal instead of clean cheap hydro with inflated transmission costs. It doesn't matter where the C02 is being made, it adversely affects the entire globe.

Yeap. That is why I wonder why green people are so for this move. They have even claimed it will lead to cheaper powers for NZers. But I am not so sure, because the generation capacity will still be there, but a large customer will have disappeared, but the generation maintenance costs may not decrease much.

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#2520546 10-Jul-2020 08:49

Handle9:

What does it matter? It's not going to change anytime soon.

But maybe it should - if there was a case to use it (energy from Manapouri) for zero CO2 production of "something" that's currently damaging the global environment.

It's quite a unique situation - having a surplus of 24/7 green electricity.

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