Aluminium smelter power supply deal paves way for second largest wind farm in NZ

One week after Rio Tinto sealed a groundbreaking electricity deal to power its New Zealand Tiwai Point aluminium smelter – and keep it from being shut down – plans to build a new 155MW wind farm have been given the all-clear.

NZ listed energy company Mercury said on Thursday it will proceed with the $486 million expansion of the Kaiwera Downs wind farm near Gore, on the South Island, off the back of the long-term agreement signed with Rio-owned New Zealand Aluminium Smelters.

The wind farm expansion will take the total capacity of the Kaiwera Downs wind farm to 198 MW, making it the second largest in New Zealand and capable to generate enough electricity to power the equivalent of around 73,000 homes per year.

As RenewEconomy reported last week, the deal to power the massive Tiwai Point smelter includes contracts with electricity generators Meridian Energy, Contact Energy and Mercury NZ to set pricing for an aggregate of 572 megawatts (MW) of electricity to meet the smelter’s full needs, backed by a mix of South Island renewables.

The 20-year deal is significant as it guarantees the future of the smelter, which accounts for around 13 per cent of all electricity demand in New Zealand, and which Rio Tinto had threatened to close.

It is also significant for its inclusion of demand response contracts with Meridian Energy and Contact Energy, under which New Zealand Aluminium Smelters (NZAS) can be called on to reduce its electricity consumption by up to 185MW, at times of tight supply and high demand.

Effectively this transforms the smelter into the country’s biggest battery – and energy analysts have said smelters in Australia, which also have an uncertain future because of the soaring costs of their fossil fuelled electricity supplies, can go down the same path.

For its part in the deal, Mercury said last week that it would give the company the confidence to “move fast” on plans to bring more renewables to New Zealand, starting with the expansion of Kaiwera Downs.

Mercury said this week that construction on the project is expected to start in June 2024 and reach full generation by the end of calendar year 2026.

“We’re committed to playing our part, and increasing New Zealand’s renewables is a key way we can contribute,” said Mercury’s executive general manager of portfolio, Phil Gibson.

“New Zealand’s future is brighter because of the role of renewables, and we’re keen to see more renewable generation projects delivered at the scale and pace required to meet New Zealand’s climate change goals,” Gibson said.

In Australia, Rio has begun locking in contracts for its smelters and refineries in Queensland, including with gigawatt wind and solar projects, and is currently seeking agreements with governments on “firm power”, which could include a significant demand response component. The Tomago smelter in NSW is about to go down the same path.

And just this week the resources giant announced Richards Bay Minerals (RBM) in South Africa has signed a renewable power purchase agreement (PPA) to source 140MW of power from a new wind farm being built in the Western and Northern Cape Province.

Werner Duvenhage, managing director of Richards Bay Minerals and Rio Tinto Iron and Titanium African Operations said the companies were determined to find “better ways” to produce the materials the world needs from the world leading mineral sands operation.

“Rio Tinto has committed to reduce Scope 1 and 2 emissions by 50% by 2030 and achieve net zero by 2050. The Khangela Emoyeni Wind Farm has the potential to reduce RBM’s annual carbon emissions by 20% and reduce our existing reliance on traditional energy sources by 26%,” Duvenhage said.