Meridian, NZAS invoke power cut deal for Tiwai

The Tiwai Point aluminium smelter could again reduce its power demand this winter. Photo/ Supplied

Meridian Energy and New Zealand Aluminium Smelters (NZAS) have agreed NZAS will provide 50 megawatts per hour of “demand response” as a precaution for this winter.

The companies’ demand response agreement allows for NZAS, the country’s biggest power user, to reduce consumption when the national grid is stretched.

The deal was put to use last year, which was unusually dry and windless.

This year has also started on a dry note, and lower inflows into key hydro lakes have driven wholesale power prices higher.

They currently trade at just over $200 a megawatt hour, still well short of last August’s peak of $800MWh.

Meridian said the full 50MW of demand response was expected to be provided from March 10 to August 31, with a ramp-up period of 86 days to follow.

“There is plenty of time for it to rain before winter, but based on current inflows it is prudent for us to use agreements like this to protect some of the water we’re holding and ensure we head into winter in the strongest possible position,” Meridian chief executive Neal Barclay said.

“NZAS has once again shown willingness to be flexible with our demand response agreement and work with us in the interests of all New Zealanders. We are hugely appreciative of that.”

NZAS said it had agreed to delay the ramp-up of potlines at the Tiwai aluminium smelter until as late as August 31.

Tiwai has been progressively restarting affected production after the 205MW demand reduction the smelter initiated to help New Zealand through the energy squeeze last winter.

The complexity of the ramp-down and ramp-up process meant full production was not scheduled to be restored until April this year, the company said.

NZAS chief executive Chris Blenkiron said the extension to August made sense for both Meridian and Tiwai.

“While it is always a difficult decision to reduce aluminium production, it makes sense to pause the ramp-up now and have 50 MW available to Meridian this winter.

“When we signed the 20-year electricity agreements in 2024, one of our goals was to work as partners in the energy system as we move ahead,” he said.

“The aluminium process requires constant energy, and while most of our global competitors are still powered by fossil fuels to solve this challenge, in New Zealand we continue to find better ways to work in partnership with our largely renewable grid,” he said.

Blenkiron said this winter would again test the smelter’s operational capability.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.