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Should we shut Tiwai to save the planet?

As environmentalists once more turn their sights to the Tiwai Point smelter and its massive consumption of electricity, Thomas Coughlan looks at the difficult choices around energy supply.

The fact that we often don’t consider how central energy is to life is testament to its importance. It’s invisible, like air.

The United Nations sees energy as so crucial that it included access to energy in its Sustainable Development Goals. By 2030, it wants to ensure universal access to “affordable, reliable and modern energy services”.

Establishing how much energy is needed for life is complex. The International Energy Agency (IEA) estimates the minimum level of energy to be 100 kilowatt hours of electricity and 100 kilograms of oil equivalent of modern fuels (equivalent to roughly 1200 kWh) per person per year.

That’s not all that much. New Zealand’s per capita energy consumption is in fact nearly 90 times higher than the IEA minimum (roughly 9 mWh per capita). And we know that if we’re going to survive the next century, nearly all of that has to come from renewable sources. 

At the moment, the big theme of energy consumption is efficiency. In an ideal world, energy efficiency would be so good that we could continue consuming energy at the same rate we do now, whilst shutting down polluting energy sources, and shifting to renewables. 

But the demand for electricity is huge and growing. Electric power consumption per capita roughly doubled between 1970 and 1990 and a landmark Transpower report last year estimated that electricity demand is likely to more than double again by 2050 as electric cars become the norm.

Energy efficiency is improving and new technology will only see this efficiency improve. But to really make a dent in the climate problem, not only do we need to get more efficient, we’re going to need a whole lot more electricity. That’s because electricity is only one side of the energy story.

At the moment, New Zealand runs hydro-dams for the majority of its electricity, but relies on fossil fuels for transportation and industrial energy. Transport in particular is very difficult to de-carbonise. 

According to the IEA, nearly 90 percent of transport fuels are oil-based, a proportion that has changed little since the 1970s, despite incentives to move to more fuel efficient vehicles. 

That has to change. In the best-case scenario, New Zealand will need to source all of this energy, which currently comes from coal and oil, from its national electricity grid.

In order to accommodate this increased demand without building a suite of new coal-fired plants, which would rather defeat the purpose of electric cars, we need to look at growing energy supply, and using what we have more effectively.

That leads to some pretty difficult choices. Hyrdro and wind power tend to be in places where people don’t want power stations. Just this week, conservation Minister Eugenie Sage added land that was once intended to host a hydro-dam to the Kahurangi National Park. 

Eyes turn to Tiwai

The other option on the table is looking at using what electricity we have more effectively. And in New Zealand that comes down to one thing in particular: Tiwai.

The aluminium smelter at Tiwai Point in Southland has been at the heart of the environmental movement in New Zealand for nearly 50 years, or more particularly the power station at Lake Manapouri that was built to supply the smelter. Smelting aluminium is one of the most energy-intensive industries in the world. So intensive in fact, that the Tiwai smelter currently absorbs roughly 13 percent of the entire national grid. 

Not everyone in New Zealand pays the same amount for their electricity, and especially not Tiwai point.

The Green movement in New Zealand was galvanised by proposals to raise Lake Manapouri by 30 metres to supply Tiwai. They won; the dam was built, but the lake level was not allowed to rise by anywhere close to 30 metres. 

The legacy of the decision is everywhere. Professor Alan Mark told New Zealand Geographic that the contemporary Official Information Act and the Resource Management Act trace their roots to the outcry over Manapouri.

Now, the Green movement is interested in Tiwai again. They view it as central to meeting New Zealand’s emissions targets, whilst also keeping energy affordable to consumers. The key is that magic number: 13 percent — the percentage of New Zealand’s electricity use that could be used for something else if the plant were switched off. 

A big issue is cost. As electricity becomes cheaper, people have more incentive to move more transportation to electric power. With so much renewable generation from hydro power, electricity should be relatively cheap in New Zealand, but it isn’t.

According to the electricity price review, residential electricity prices excluding tax in New Zealand are in the lower half of the OECD, but still twice as high as prices in Norway, which is one of the only countries in the world to generate a similar amount of energy from renewable, hydro sources. 

The caveat of residential prices is important. Not everyone in New Zealand pays the same amount for their electricity, and especially not Tiwai point. Under a deal negotiated with Meridian, supported and supported by contracts with Contact Energy, Genesis Energy and Mercury Energy, the smelter’s electricity costs are less than a quarter of what consumers pay. 

Switching off Tiwai could allow New Zealand to run almost entirely on renewable energy

But that’s only part of the problem. The other concern is that Tiwai’s drain on the grid helps to keep prices high, by forcing New Zealand to keep expensive — and polluting — fossil fuel generation in business. 

Dr Geoff Bertram of Victoria University’s Institute for Governance and Policy Studies told Newsroom closing Tiwai was essential to bringing the cost of renewable energy down in New Zealand. 

“From the perspective of the electricity companies the Tiwai Point smelter has the function of keeping the electricity price up because it prevents the situation arising where renewables are bidding in at zero price to the margin of the market.”

Energy consumer campaigner Molly Melhuish agrees.

“In order to keep demand constrained by supply, the game of the gentailers including Meridian is to with-hold supply whenever they feel they can get away with it,” she said.

Switching off Tiwai could allow New Zealand to run almost entirely on renewable energy — with the generators providing surplus energy for electricity peaking and dry years on the hydro dams.

But with Tiwai point running, the price of electricity is essentially set by the more expensive thermal and coal generation in New Zealand. Shutting those plants down would allow the price to be set, more or less, by the price of water.

Tiwai has one big environmental card up its sleeve. Fuelled by renewable energy, it can claim to produce some of the “greenest” aluminium in the world. 

For its part, Meridian denies Tiwai keeps prices high. They blame high prices on gas constraints and dry conditions. The company believes that if Tiwai closed, “the market would adjust”. 

The problem is so acute that some, including the Green Party’s Gareth Hughes have called for Tiwai to be included in the second stage of Energy Minister Meghan Woods’ Electricity Price Review.

Tiwai is currently excluded from the terms of reference, because the review is not meant to look at individual consumers — even if that consumer dominates the grid. 

But Hughes said there should be a conversation about the effect Tiwai has on the market as the second-largest consumer of energy in New Zealand. 

Tiwai has one big environmental card up its sleeve. Fuelled by renewable energy, it can claim to produce some of the “greenest” aluminium in the world. 

This mark of distinction is important. Aluminium, not unlike electricity, is essential to modern life. It’s endlessly recyclable, and for that reason it’s being used more and more in everything from packaging to cars. 

As more and more companies seeking to design waste out of their systems aluminium is likely to become one of the commodities of the future. Companies wishing to use aluminium that doesn’t come from fossil fuels are likely to turn to Tiwai, which is one of the few smelters in the world that can draw on 13 percent of the national grid, using mainly renewables. 

Climate, waste, and the protection of pristine rivers from hydro-generation are all in conflict here. It’s a very 21st century problem, where not one, but several environmental goals are in conflict with one another. There are plenty of right answers, unfortunately our history shows we have a habit of picking the wrong one. 

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