Renewables race: Who will win the $30b electricity transition?

New Zealand’s major power companies are set to spend $30 billion by 2050 building new geothermal, wind, and solar power plants to lift generation to 100 per cent renewable.

The spend is equal to the total market capitalisation of Meridian, Genesis, Mercury and Contact combined, so what’s giving them confidence to invest so much?

“It’s a once in a generation transition,” Contact Energy chief executive Mike Fuge told Markets with Madison.

The long-time energy executive said the renewables race was equal to New Zealand’s shift to using gas in the 1970s, from coal.

However, the transition’s success was dependent on an increase in demand from industrial processors and manufacturers, and consumers.

Contact cut a deal with New Zealand Steel to move away from coal earlier this year, but it was also operating on the assumption New Zealanders would want more renewable-sourced power.

“We do see mass market growth, obviously with the electrification of electric cars.”

The $30b industry spend was a figure shared in a Meridian presentation to investors this year, which assumed growth in electricity demand would increase to 65,000 gigawatt hours by 2050.

New Zealand currently generates around 43,500 GWh of power every year, according to the Ministry of Business, Innovation and Employment.

The renewables projects already announced by the four major power generators, Contact, Meridian, Mercury and Genesis, and some smaller players, was set to add 11,718 GWh of supply by 2030, according to Jarden research. Of that, 46 per cent (5,447 GWh) would be from wind power projects, 31 per cent geothermal and 22 per cent solar.

Interestingly, some of them may not actually go ahead. The majority of the projects had not been absolutely confirmed - they were awaiting what’s called a final investment decision (FID).

Contact alone would add about 5000 GWh to the grid by 2030 through its announced projects (some were still missing that FID) - an undertaking forecast to cost it between $3b and $4b.

Fuge was “absolutely confident” the transition would work out, but said “there will be some surprises on the way”.

Watch him discuss the risks of the renewables rush in today’s episode of Markets with Madison above.

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Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.