Firms go own way to secure power

A fertiliser company drilling for gas, a sawmiller building wind farms: these two extreme examples show just how worried businesses are about the state of New Zealand's energy supply.They have been fortunate to a certain extent because of the past rainy, damp year - so was the average consumer who was spared another winter of appeals to save electricity. And with the pressure off, the underfloor heating went up a notch or three and heated towel rails were back in action.

But in the world of business there is alarm about the steady climb of electricity prices.

This concern has led to several large businesses investigating new ways to generate their own power and conserve energy and so reduce their reliance on the national grid and those ever-rising and increasingly volatile energy prices.

The Government's response has been to try to encourage business energy efficiency through the EECA - the Energy Efficiency Conservation Authority.

Not that that has been especially successful: Energy Minister Pete Hodgson released research last month showing that energy efficiency had improved by a whole 1 per cent during the two years to March 2003.

Authority chief executive Heather Staley said there were special challenges in getting businesses to look at their energy bills, particularly when economic times were good.

"One of the things about a booming economy is that people are more interested in sales."

That was only natural, but in the present climate many business leaders were starting to report capacity constraints on plant, equipment and staff. "This is the perfect opportunity - if they're starting to think about investing in the business to pursue that magic formula of increasing sales and reducing costs at the same time - to look at an investment that is going to increase their capacity and is also going to be cheaper to run," she said.

That also meant that when the economy "started to tighten up", the companies' lower cost structure would make it easier for them to survive.

Staley said the authority had found that companies that ran energy audits were better equipped to analyse their business.

An example was the National Bank, which found it was paying power bills in buildings it no longer inhabited.

Such holes in management systems could often be found when energy outputs were studied in detail.

Staley said she was sometimes tempted to offer money-back guarantees that an EECA energy audit would find 10 per cent cost reductions that would be cost-effective within a 12-month to 18-month payback period.

"If it was anything sexier than energy efficiency, I wouldn't have any difficulty in pitching this."

The authority spends a lot of time helping big business cut back on energy wastage.

These include companies such as brewery DB, which has a total annual energy bill at its Waitemata brewery of $1.44 million ($960,000 in electricity, the rest in gas). As part of the multinational Heineken group, DB has been able to work out accurately how much energy is required to make a bottle of beer, then compare it with similar operations overseas.

Staff performance targets now include energy-efficiency improvements, which can lead to bonuses of 5 per cent of salary. If staff double their performance to reach the next year's target in advance, then the bonus is 10 per cent.

Heineken set a target of 7.5 per cent in energy savings last year and 15 per cent until 2010 for all 115 breweries. After 18 months, it had hit the 7.5 per cent target for the first two years. DB's Waitemata brewery managed 19 per cent.

Part of its success lies in the simple art of metering: companies cannot save if they do not know what they are wasting.

One of DB's energy managers, Tom Coup, told the energy authority that putting meters at different points on the system was crucial to getting savings.

'No one doubts the worth of measuring things. If we don't know what we're using in a certain area, we install a measuring device. If we don't measure, we don't manage."

An Australian energy consultancy has given DB a "five-star platinum" ranking - the best of all sites tested, which includes 30 in New Zealand and 22 beer and malt manufacturers around the world.

The situation is somewhat different for smaller outfits: the cafes, restaurants, shops and small businesses that employ thousands of people across the board. This year, the Waitakere City Council, with other partners, is planning a trial project in which small businesses in the Auckland region will be able to get free energy reviews.

Although small businesses cannot make huge savings in energy, they can still achieve plenty by fixing faulty fridges, hot water heaters, air-conditioning systems, stoves and so on.

But one of the biggest headaches is the dependency of some industrial powerhouses on plentiful supplies of cheap energy - projects such as Methanex's Taranaki methanol plant, the Comalco aluminium plant and the Kinleith pulp and paper mill - which is now drying up, starting with Maui gas.

Carter Holt Harvey chief financial officer Jonathan Mason said a wet 2004 resulted in cheaper prices on the wholesale electricity market.

It generates 45 per cent of its own energy, while about half of the remainder is bought on fixed contracts, the rest on the "spot market". Mason said Carter Holt was increasingly worried there would not be enough new generation available to keep energy prices at a reasonable level. That has meant that the company has, for the past few years, been looking at possible wind farm sites near its plants as well as the possibility of setting up new geothermal sites.

"The generators are interested in generation now. Contact and the SOEs don't want to see us getting into a bad energy situation, or have big energy consumers shut because of high energy prices.

"But you look and think: who loses if we have two or three years of really high energy prices?"

Mason said the biggest losers would be the consumers. And while high prices would trigger the building of new capacity, the great fear of Carter Holt was that there would be those two to three years of "really high energy prices".

"Our philosophy ... is to do what we can on our own to mitigate the risk. In the area of energy, we're looking at the best wind farm sites that we have access to and whether those would be economic in supplying our facilities."

Access to the national electricity grid is also crucial for Carter Holt. Mason said access was crucial for consideration of energy swaps - where the company would export power from its plants at peak times, but take it from the grid when it was cheaper.

Carter Holt was also looking at two geothermal sites for energy to power its pulp, paper and sawmilling operations.

One geothermal study is in Northland, where the company is investigating building a big new sawmill to process the millions of tonnes of logs coming onstream in the next decade.

"We supply 40 per cent of our own electricity and we're looking to amp that up - we have moved towards more direct ways of generating energy at our own sites, we have access to geothermal fields and we could use them more efficiently than any other user."

However, Mason was cautious about that, since it could take Carter Holt outside its natural competency.

"We are trying to mitigate the risk associated with higher energy prices. We've been working pretty hard on it since 2001 but it's hard work and it's ongoing."

With other big power users looking increasingly "upstream" to secure supply, companies are being pushed - often against their will - into areas outside their core competencies.

Ballance Agri-Nutrients is now part of a Taranaki natural gas exploration joint venture, as it seeks to ensure it has enough gas to keep doing business.

The energy authority and the Government want companies to think hard before embarking on that risky paddle upstream - and to look for those holes in the hull first.