Pan Pac general manager Tony Clifford at the pulp and timber mill north of Napier. Photo / Warren Buckland
Pan Pac general manager Tony Clifford at the pulp and timber mill north of Napier. Photo / Warren Buckland
Kiwi households have been told to brace for power price increases from April. Large businesses are different to households in that they rely on wholesale pricing (which fluctuates through the year) or have their own fixed-price contracts that expire and renew at different times.
But some in Hawke’s Bay are already preparing for a rough winter. Gary Hamilton-Irvine reports.
Napier timber and pulp mill Pan Pac says rising power prices are making it challenging to compete internationally, particularly for pulp production.
In August last year, Pan Pac paused its pulp mill operation for two weeks due to the wholesale electricity price spiking to $800 a megawatt-hour (MWh), making it unviable to operate the mill. The price dropped again a few weeks later.
Pan Pac managing director Tony Clifford said the company could manage short-term peak pricing - such as by pausing operations - but there was a bigger issue.
“The real problem for Pan Pac and other large users is steadily increasing average pricing.”
He said average wholesale prices for the peak months of April to August had more than doubled from 2019 to 2024.
Pan Pac’s main competitors for softwood pulp are based in Canada.
Clifford claimed Canada had, by comparison, faced increases in electricity prices of only 20% over that five-year period.
Steam rising from one of the boilers at Pan Pac. Photo / Pan Pac
Pan Pac’s Whirinaki base, just north of Napier, was badly flooded by Cyclone Gabrielle in February 2023 and has undergone an enormous rebuild.
Its lumber mill, pulp mill, chip mill and the company’s two boilers are all back up and running.
The boilers have a steam turbine that can generate around 10% of the plant’s electricity needs, but that turbine is still being rebuilt.
Clifford said the company would be looking at a few options to mitigate rising power prices.
“Reducing demand within our pulp mill is first thing, by using different refining methods.
“We are [also] actively investigating increasing our boiler and electricity generation capacity, but this can only be justified on the premise that the New Zealand electricity market remains uncompetitive.”
He said the company formerly had fixed-price arrangements (hedges) for most of its electricity but now relied on wholesale pricing.
“Hedges are not a discount on wholesale prices – they are the future expected wholesale price plus a premium to the supplier of the contract.
“Hedges only fix short-term volatility, not steadily-increasing average prices.”
Apple giant T&G Global, which is a big employer in Hawke’s Bay, has invested in power-saving technology to help lower electricity usage.
“Our new highly automated Whakatu packhouse is one example,” T&G Global head of post-harvest Craig Kenny said.
“With over 800 connected devices and extensive sensors throughout the facility, it ensures the equipment only runs when it needs to and then automatically stops until it needs to be operational again.”
T&G has a fixed-price agreement for electricity for its Hawke’s Bay operations.
“Given our current agreement still has a good period to go, it’s challenging to predict what electricity rates might be at the time of renewal.”
Fertiliser plant Ravensdown
Ravensdown, in Awatoto, has a turbine that generates electricity, but it has been out of action since Cyclone Gabrielle.
Napier works operations manager Tony Gray said the turbine would be operational again soon to help combat electricity costs.
Ravensdown underwent a big upgrade in 2024. The iconic red and white stacks (left) have since been removed. Photo / Jaryd Louter
“We’re currently in the process of commissioning the turbine and expect it to be up and running imminently.
“When it’s in action, the turbine will meet most of the site’s electricity requirements.
“Co-generation means we are able to operate consistently during periods of high electricity prices.
“We also have a supply agreement in place with fixed pricing that offers protection against price changes.”
Gary Hamilton-Irvine is a Hawke’s Bay-based reporter who covers a range of news topics including business, councils, breaking news and cyclone recovery. He formerly worked at News Corp Australia.
