Tiwai smelter to cut production by a third as electricity supplies tighten

Monday, 22 July 2024

The Tiwai Point aluminium smelter is a big exporter earner, but will reduce its output until April next year.

One of the country’s largest industrial facilities, the Tiwai Point aluminium smelter, will cut production by a third, at the request of Meridian Energy, as concerns grow over electricity supplies.

The smelter has already cut back some production to conserve power, but will start further ramping down its activities from July 30.

The smelter will start gradually ramping its production back up on September 25, but full production won’t be restored until April 11 next year.

The smelter expanded an agreement with key supply Meridian Energy in May, under which it is incentivised to cut production when electricity supplies are tight.

At the peak of the savings, the smelter will free-up the equivalent of 4% of the country’s total electricity demand for other users.

Southlanders say they are relieved to learn the Tiwai aluminium smelter near Invercargill will stay open for another 20 years.

Electricity supplies have become increasingly constrained in recent weeks by a shortage of gas, relatively low hydro lake levels, and calm weather which has reduced the contribution of wind generation.

Transpower reported last week that hydro storage had declined to 66% of the historic mean for this time of year, while the average weekly price of electricity on the wholesale market rose above 30 cents a kilowatt-hour, more than many consumers pay for electricity.

Retailer Electric Kiwi announced on Thursday that it had suspended accepting new customers because of “soaring wholesale prices”.

Electricity supplies are tight, but Transpower has not at this point signalled a risk of power cuts.

Chief executive Luke Blincoe said prices had increased by nearly 50% over the past six months and futures prices had reached a point where every new customer would be loss-making for its business.

“It's hard to see this as anything but an indictment of New Zealand's electricity market structure and a terrible outcome for consumers in terms of reduced competition,” he said.

“Wholesale prices have been steadily rising and calls for market reform have fallen on deaf ears.”

A spokesperson for Rio Tinto, the owner of the Tiwai Point smelter, said all the smelter’s staff would be expected to show up for work as normal during the period it reduced production, but some would be assigned different duties.