Pumped Storage: what is the scale needed?

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#2531161 30-Jul-2020 06:38

Scott3:

Frankly (as an engineer), politicians absolutely should be careful to set objectives & outcomes, but not pick methods or technologies.

To paraphrase John Prebble -

"Politicians and engineers are the most fortunate of men - as they build their own monuments with public consent, public approval and usually public money.”

JessieB

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#2531206 30-Jul-2020 08:57

The ICCC pdf document (https://www.iccc.mfe.govt.nz/assets/PDF_Library/daed426432/FINAL-ICCC-Electricity-report.pdf) is very interesting. (Thanks Scott3). It shows we had dry years in 2001 and 2003, so getting two dry years in a row is a reasonable possibility.

Also if the Lake Onslow Project costs $4B to build, and using a 5% cost of capital, then this amounts to a $200M a year cost. If it is only used every 5 years then that is $1B spent per dry year. The Clutha projects went massively over-budget, so if this project instead costs $6B, then that is $1.5B per dry year.

I find it hard to believe that a planned shutdown/startup of an aluminium smelter costs $1B.

Sidestep

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#2531962 31-Jul-2020 11:07

JessieB:

The ICCC pdf document is very interesting. (Thanks Scott3). It shows we had dry years in 2001 and 2003, so getting two dry years in a row is a reasonable possibility.

Also if the Lake Onslow Project costs $4B to build, and using a 5% cost of capital, then this amounts to a $200M a year cost. If it is only used every 5 years then that is $1B spent per dry year. The Clutha projects went massively over-budget, so if this project instead costs $6B, then that is $1.5B per dry year.

I find it hard to believe that a planned shutdown/startup of an aluminium smelter costs $1B.

You've gone down a slipppery slope with your calculations there.

The Government's borrowing cost isn't 5%.. If you look at NZ Treasury's “funding” site, you'll see that New Zealand Government Bonds - even the longest (2037) - are yielding well below 1%..

With the ability to raise capital so cheaply, and the country's Debt to GDP ratio at a multi-year low, it's a great time to look at infrastructure.

This is an 'investigation' and costing exercise, to see if it's worth spending the money on building this pumped-hydro scheme, or if the money could be invested somewhere else for a greater return. What isn't in question is that there's an increasing need for some type of buffer - on a daily to multi-year timescale, for NZ's increasing supply of renewable power and increased electrification of transport, industry.. everything..

In that ICCC document, Section 5.1 Can the dry year problem be solved? Under the heading “Indicative Large Scale Demand Interruption” is a discussion about the technical possibility of a major load (such as NZAS Tiwai Point) being interrupted for months, on a perhaps 1-in-5 year cycle.

Their conclusion -“It is very unlikely that such a service would be commercially viable”
That's a euphemism for “this would loose an absolute sh**load of money”.

The question is not what starting/shutting the smelter would cost - but whether it's worth restarting it in the first place. And..unless something changes - it's not.

At the moment, NZAS processes alumina delivered to it – from Gladstone - by its owners (Pacific Aluminium New Zealand Ltd (PANZ) and Sumitomo Chemical Company (SCC), who then ship away and sell the primary aluminium (or, in the past, alloys/castings) created at the refinery.

NZAS production made a loss of $313 million! for it's owners in the year ended December 2019 – the year's underlying loss only fell to $46m after accounting for hedges used to insure against power price volatility.

It's very unlikely that SCC and Rio Tinto - PANZ's owner - would continue to subsidise the supply of alumina, disposal of dross and spent liner, sale of the product and provision of personnel if they didn't own the plant.

If NZAS, with it's integrated supply chain, looses so much, even with massively subsidised power (and Transpower's discounts), that since 2011 it's owner has been unable to sell – or even give it away – how likely is it to be profitable with the added costs of startup/shutdown, and continuing falls in world Aluminium prices?

A back-of-the-envelope calculation shows much, much larger losses if inputs approach market prices, it would need continuing massive subsidies to operate.

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#2532136 31-Jul-2020 14:00

Sidestep:

At the moment, NZAS processes alumina delivered to it – from Gladstone - by its owners (Pacific Aluminium New Zealand Ltd (PANZ) and Sumitomo Chemical Company (SCC), who then ship away and sell the primary aluminium (or, in the past, alloys/castings) created at the refinery.

NZAS production made a loss of $313 million! for it's owners in the year ended December 2019 – the year's underlying loss only fell to $46m after accounting for hedges used to insure against power price volatility.

It's very unlikely that SCC and Rio Tinto - PANZ's owner - would continue to subsidise the supply of alumina, disposal of dross and spent liner, sale of the product and provision of personnel if they didn't own the plant.

Yes, and it's very unlikely that SCC and Rio Tinto would be running the smelter now if it was actually losing that much money. With an integrated supply chain, it's very easy to increase the "cost" of alumina so that the mine in Australia makes money and the smelter doesn't and/or decrease the "price" of aluminium so that the recipient makes money and the smelter doesn't. Bear in mind that Rio Tinto made $3.32 billion in the first 6 months of this year... it didn't get there by running losing smelters.

And one has to wonder why a smelter with a fixed price contract for electricity supply was hedging against power price volatility.

SaltyNZ

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#2532139 31-Jul-2020 14:04

Scott3:
Regarding costs for EV's, they currently only work out economically in niche situations. i.e:

Swapping a petrol commuter car for a cheap-ish used leaf, when you do 100+km a week in it. (and don't need to take that car on long trips without stopping every hour)
Cross shopping a BMW 340i with a Tesla Model 3.
Cross shopping a range rover with a Tesla Model X.

I do take your point, but you must also understand that the majority of cars sold in NZ weren't bought brand new from an NZ dealer. They are second-hand imports. This includes my car, where the savings in fuel alone (never mind servicing) have significantly more than made up for the depreciation on the vehicle. Now admittedly I have one of the longest commutes it's possible to have in Auckland but there almost certainly more people that drive >100km a week than not, and as far as the long drives go then sure: if you need to drive to Wellington 12 times a year then a second-hand Leaf is not for you. But you can still go as far as Whangarei or Hamilton and back in a day without it making a serious dent on your time.

On the other hand the market for BMW 3-series, Range Rovers or Teslas is while lucrative, not exactly for the masses. So while you may not be wrong (although personally I'd prefer a Tesla to a BMW or Range Rover any day, having driven both electric and petrol cars - there's just no comparison for acceleration) it doesn't have a huge bearing on our overall emissions levels simply by the fact that there are probably 50 Corollas for every Range Rover.

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#2532143 31-Jul-2020 14:18

Interesting..

The claims that there will be gobs of electricity for everyone's EVs might not actually eventuate....and all the surplus could all get used by SI industrial processes moving from Coal and LPG

"The dairy giant Fonterra is casting ambitious eyes at the electricity that is about to become available after the Tiwai Point aluminium smelter closes."

"If a deal can be achieved, it is likely that the Clandeboye dairy factory in south Canterbury and the Edendale factory in Southland would switch from burning coal to using electricity."

"It is understood the two factories would plan to use about 1500 gigawatt hours of electricity per year."

"That is about third of the smelter's take - and is equivalent to the amount of electricity that would necessarily go to waste after the smelter closes and before transmission lines are upgraded to take the power North."

https://www.rnz.co.nz/news/business/422440/how-meridian-fonterra-and-tiwai-point-s-electricity-are-linked

In addition to Edendale and Clandeboye, it looks like there are at least another couple of 100MW of boilers that could go electric in the SI

https://www.newsroom.co.nz/why-electricity-will-replace-coal-in-dairy-plants

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#2532148 31-Jul-2020 14:25

wellygary:

https://www.rnz.co.nz/news/business/422440/how-meridian-fonterra-and-tiwai-point-s-electricity-are-linked

In addition to Edendale and Clandeboye, it looks like there are at least another couple of 100MW of boilers that could go electric in the SI

https://www.newsroom.co.nz/why-electricity-will-replace-coal-in-dairy-plants

How much rooftop solar and batteries in the NI does $4b buy you?

nickb800

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#2532152 31-Jul-2020 14:32

wellygary:

"The dairy giant Fonterra is casting ambitious eyes at the electricity that is about to become available after the Tiwai Point aluminium smelter closes."

Interesting article.

There's a real mish-mash of timeframes involved there which complicates matters. Meridian will want 'something rather than nothing' for the Manapouri power for the next 3-5 years, while the grid is reconfigured (both the Clutha-Upper Waitaki project and beyond), but Fonterra will be wanting a long term supply contract to justify the expense in changing their gear and upgrading their connection (1 year is a short timeframe for that, possibly unfeasible). Meridian will likely have to spill water from Manapouri from late 2021, but has a good chance at selling most of its output at market rates after 3-5 years.

Edendale is across the road from a Transpower GXP, so has the best prospect of gearing up to take the surplus power at short order. Clandeboye is further away from a GXP and is North of the Waitaki, so is less useful for Meridian as customer in the next 3 years.

wellygary

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#2532165 31-Jul-2020 14:57

GV27:

How much rooftop solar and batteries in the NI does $4b buy you?

Doing it on a house by house basis just makes it much more expensive,

At scale it will buy you a pile of Panels,

NZ refining were looking at spending $36 million on a 26MW install.... at that price 4B would get you 2.9GW of installed,

Lets says its all near Auckland, LG say they will give about 3800Gwh annually....

https://www.lgenergy.co.nz/calculator/suburb/blockhouse-bay/600

As for batteries,

Tesla's Mega battery seems to go for about $100 million ($90 million AUD) for a $100 MW (129Mwh)

https://www.abc.net.au/news/2018-09-27/tesla-battery-cost-revealed-two-years-after-blackout/10310680

https://www.pv-magazine.com/2020/06/23/adding-50mw-64-5-mwh-to-teslas-big-battery-in-australia/

Scott3

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#2532170 31-Jul-2020 15:04

GV27:

How much rooftop solar and batteries in the NI does $4b buy you?

In short, not that much.

From family experience a system with 7kW of solar + a single Tesla power wall (5kW / 13.5kWh) costs around $50k installed.

So $4b could buy 80,000 setups installed (before any bulk discount)

560MW of rated solar output (using assumed capacity factor of 14% for MBIE, this works out to an average of 78.4MW).

The power-walls would provide 400MW of peaking capacity, and 1.08GWh of storage.

This is in comparison to 1000MW & 5000GWh proposed from lake onslow.

The issue with solar (other than costing more than other grid scale renewables) is that it has best preforms the best in summer, and has much reduced output in winter when we have our peak power demand. Also it doesn't contribute at during winter evening when we have peak demand. The existence of solar increases the need for peaking plants, and crowds out more cost effective base load generation.

The batteries are basically no good for providing dry year cover. We get roughly 5000x the storage for the same money via the proposed lake onslow scheme.

Batteries are good for covering peaks of a couple of hours, or for providing cover for 30 minutes after a power-station trips offline to give time for a thermal power plant to be ramped up. (As is the application in aussie).

Should note that most battery installs in NZ (with the exception of the 4 vector battery stations), are set up to maximize self consumption (incentive's by current retail pricing stricture). This frequently leads to the battery discharging charging in the middle of the day, and discharging in the middle of the night, exactly the opposite of what would be useful for the grid. (At least the do normally manage to cover the dinner peak at least).

From family members experience, the battery is unlikely to last more than a few hours past dusk, and is very unlikely to contribute to the breakfast time peak. (and they were using solid fuel for space and water heating, so less demanding than a typical household).

People are welcome to get solar & battery solutions for their own reasons (greater self sufficiency etc), but at a government / policy level we are fortunate to have better options in NZ.

Sidestep

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#2532191 31-Jul-2020 15:16

frankv:

Yes, and it's very unlikely that SCC and Rio Tinto would be running the smelter now if it was actually losing that much money. With an integrated supply chain, it's very easy to increase the "cost" of alumina so that the mine in Australia makes money and the smelter doesn't and/or decrease the "price" of aluminium so that the recipient makes money and the smelter doesn't. Bear in mind that Rio Tinto made $3.32 billion in the first 6 months of this year... it didn't get there by running losing smelters.

And one has to wonder why a smelter with a fixed price contract for electricity supply was hedging against power price volatility.

As a shareholder I'm pretty sure they're not cooking the books.

Rusal - a much larger producer of aluminium, and one of their main competitors - owns 20 percent of Rio's Queensland Alumina Ltd (QAL), at Gladstone.
If Rio was 'adjusting' the price of Alumina there to suit themselves we'd be looking forward to the court cases.

Here's a link to Rio's 2020 Half yearly results (released yesterday)

Something to note is how much of that money they're making from Iron ore (and gold)
-and how little profit from Aluminium, down another nearly 40% from the same period in 2019

"Average LME prices for copper and aluminium were down 11% and 13%, respectively, compared with 2019 first half.
The mid-west premium duty paid for aluminium in the US averaged $249 per tonne - 41% lower than in 2019 first half."

Tiwai's definitely a money losing operation at these prices. Half the world's smelters are running at a loss.
Rio (and Norsk, Rusal ect..) are only making money where they can supply their smelter's power at crazy low prices.

Time to use Manapouri's power somewhere else.

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Scott3

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#2532198 31-Jul-2020 15:26

Given manapori is going to be spilling the bulk of it's water for 2-3 years after the smelter closes, I wonder if Rio Tinto & Meridian could cut a deal to keep it running while the lines upgrade is underway. Marginal cost of generation to Meridian is near zero, and I assume an offer of something like a 90% discount on current power prices would be attractive enough to keep the plant operating for another couple of years.

Would make both parties look good as it would push the job losses further away from the current covid-19 situation. And hopefully delay the drop in NZ export earnings until after we get international students & tourists again.

wellygary:

Interesting..

The claims that there will be gobs of electricity for everyone's EVs might not actually eventuate....and all the surplus could all get used by SI industrial processes moving from Coal and LPG

"The dairy giant Fonterra is casting ambitious eyes at the electricity that is about to become available after the Tiwai Point aluminium smelter closes."

"If a deal can be achieved, it is likely that the Clandeboye dairy factory in south Canterbury and the Edendale factory in Southland would switch from burning coal to using electricity."

"It is understood the two factories would plan to use about 1500 gigawatt hours of electricity per year."

"That is about third of the smelter's take - and is equivalent to the amount of electricity that would necessarily go to waste after the smelter closes and before transmission lines are upgraded to take the power North."

https://www.rnz.co.nz/news/business/422440/how-meridian-fonterra-and-tiwai-point-s-electricity-are-linked

In addition to Edendale and Clandeboye, it looks like there are at least another couple of 100MW of boilers that could go electric in the SI

https://www.newsroom.co.nz/why-electricity-will-replace-coal-in-dairy-plants

From the top article:

"Fonterra wants to get a much cheaper price than the smelter pays, possibly a third to a half less."

Obviously that price level is not sustainable once the transmission upgrades are done.

Regarding coal price. My understanding is that it currently runs at about $5.4/GJ for sub-bituminous coal used at Clandeborne, and $1.8/GJ for the Lignite used at Edendale.

$5.4/GJ = 1.95c/kWh. If burnt at 75% effichency it works out to 2.6c/kWh. Given those plants are already tooled up to burn coal, any investment to use electric process heat looks woefully uneconomic in the current climate.

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#2532199 31-Jul-2020 15:30

Scott3:

From the top article:

"Fonterra wants to get a much cheaper price than the smelter pays, possibly a third to a half less."

Obviously that price level is not sustainable once the transmission upgrades are done.

Regarding coal price. My understanding is that it currently runs at about $5.4/GJ for sub-bituminous coal used at Clandeborne, and $1.8/GJ for the Lignite used at Edendale.

$5.4/GJ = 1.95c/kWh. If burnt at 75% effichency it works out to 2.6c/kWh. Given those plants are already tooled up to burn coal, any investment to use electric process heat looks woefully uneconomic in the current climate.

If the price of burning coal included the full cost of climate change, it may not be so financially attractive

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#2532223 31-Jul-2020 15:57

Scott3:

Given manapori is going to be spilling the bulk of it's water for 2-3 years after the smelter closes, I wonder if Rio Tinto & Meridian could cut a deal to keep it running while the lines upgrade is underway. Marginal cost of generation to Meridian is near zero, and I assume an offer of something like a 90% discount on current power prices would be attractive enough to keep the plant operating for another couple of years.

Would make both parties look good as it would push the job losses further away from the current covid-19 situation. And hopefully delay the drop in NZ export earnings until after we get international students & tourists again.

I believe something like that's being discussed - or at least hinted at in releases.

Transpower may well be the issue.

The EA’s proposed changes to transmission would have saved the smelter money – halving their $65 million bill, but wouldn't have taken effect until April 2023.
The changes to SI being at the cost of increases for most businesses and residential households in New Zealand

Transpower's line from Manapouri to Tiwai Point would have to be part of the deal.
The smaller part of the line - Meridian's connection asset, they, as the owner of Manapouri would also cover it's costs I imagine.

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#2532228 31-Jul-2020 16:10

elpenguino:

Scott3:

From the top article:

"Fonterra wants to get a much cheaper price than the smelter pays, possibly a third to a half less."

Obviously that price level is not sustainable once the transmission upgrades are done.

Regarding coal price. My understanding is that it currently runs at about $5.4/GJ for sub-bituminous coal used at Clandeborne, and $1.8/GJ for the Lignite used at Edendale.

$5.4/GJ = 1.95c/kWh. If burnt at 75% effichency it works out to 2.6c/kWh. Given those plants are already tooled up to burn coal, any investment to use electric process heat looks woefully uneconomic in the current climate.

If the price of burning coal included the full cost of climate change, it may not be so financially attractive

Yes indeed.
I wonder what carbon price Fonterra is paying for these plants at the moment?
Are they paying the $25/tonne 'current market price', or are they on a 50% deal (many are) or are we taxpayers actually paying all their carbon fees? A full carbon price recovery regime would immediately change the fuel economics.

I think previous governments have not pushed too hard on that because it would put a major squeeze on Fonterra milk price and shareholder returns, and would put out of business a bunch of coal miners, truckies, maintenance service providers and other downstream businesses. Politically hard

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