Why one offshore wind developer hasn't given up on NZ yet

Sunday, 30 March 2025

Taranaki Offshore Partnership believes there may be space for only one offshore wind player, if seabed mining goes ahead.

It may not be a straight choice between seabed mining and offshore wind energy, after all.

A giant wind farm could co-exist with Trans-Tasman Resources’ proposed seabed mining scheme off the coast of Taranaki, despite earlier doubts, says Giacomo Caleffi, director of wind developer Taranaki Offshore Partnership.

But it would complicate an investment decision that already faces a lot of uncertainties and mean there would probably only be room for one player, he says.

Taranaki Offshore Partnership, a joint venture between Danish infrastructure fund Copenhagen Infrastructure Partners and the Government-owned NZ Super Fund, announced in 2022 there was “a really good chance” of it building a $5 billion offshore wind farm, capable of powering a third of Kiwi homes.

It has since spent millions of dollars measuring wind speeds in the area, monitoring whale movements, and liaising with policy-makers and local communities.

The wind speeds tests have just confirmed the bight has an “exceptional” average wind speed of about 10.5 metres per second, Caleffi says, making it significantly more valuable than other sites along the New Zealand coast.

The turbines would be colossal — taller than Auckland’s Sky Tower, with blades longer than a rugby pitch.

But the offshore wind concept appeared to come apart at the seams last year when Resources Minister Shane Jones signalled a determination to get Trans-Tasman Resources’ controversial iron sands mining scheme approved in the same area.

Resources Minister Shane Jones has increasingly been turning his interest to so-called supercritical geothermal technology.

When it comes to new sources of renewable energy, Jones has increasingly been turning his gaze to deep-well geothermal technology — a proposed technique for extracting power from water held at ‘supercritical’ temperatures and pressures deeper in the Earth’s mantle.

Trans Tasman Resources’ (TTR’s) venture would see it hoover up iron sands from the seabed, separate out the iron ore on board a ship, and then drop the residue back on to the seabed.

The Environmental Protection Authority declined approval for that scheme in 2014 and reversed that stance in a split decision in 2017, before that ruling was overturned by the courts — ahead of the venture getting a potential fresh chance through the Government’s ‘Fast-tracking’ regime.

Taranaki Offshore Partnership director Giacomo Caleffi says it has done a lot of work on what ‘co-existence’ could look like.

In May last year, all the major companies interested in developing offshore wind farms, including Taranaki Offshore Partnership and rival consortium BlueFloat, wrote to ministers suggesting they had to make a choice.

Farms couldn’t be built in areas where the seabed might shift due to mining and any part of the offshore wind zone not covered by mining permit applications would be too small to warrant any commercial developments, they said.

TTR’s chairperson Alan Eggers says it will soon submit a mining consent application to a fast-track expert panel and seabed mining is the bigger of the opportunities.

The Ministry of Business, Innovation and Employment (MBIE) in 2023 estimated the “in ground” value of the Taranaki iron sands at $100b, while “the wind farms claim at best that they will deliver $50 billion in returns”, he says.

But MBIE also advised Jones in June last year that offshore wind was “widely held to be the single biggest opportunity for Taranaki’s future economic well-being”.

Regardless, Jones told Parliament in no uncertain terms in November that seabed mining was coming to Taranaki, adding he wanted the fast-track consenting regime to be the “most permissive in the OECD”.

Eggers disputes seabed mining is the obstacle to offshore wind that it is made out to be.

“We have done the marine research, the whale surveys, the geo-technical drilling” and written to each of the offshore wind developers offering to work with them and share information, he says.

“They have declined that offer, point blank.”

The fact remains that BlueFloat has since pulled out of New Zealand citing the “allocation of the seabed” as one of the reasons, and fellow offshore wind hopeful Sumitomo has paused its operations.

Caleffi says Taranaki Offshore Partnership isn’t the sort of company to issue ultimatums and, for now, it is hanging in there.

The consortium has done a lot of work since last year working out what co-existence with seabed mining could look like, he says.

“Co-existence in the same area seems very tricky.”

Copenhagen Infrastructure Partners has developed offshore wind farms in other parts of the world, including off the coast of Germany.

But from a technical perspective, it might be possible to locate a “one gigawatt” wind farm — the size of its originally planned farm — to the west of the proposed seabed mining operation, he says.

“Having said that, it does look like seabed mining would add an amount of uncertainty to a project that already has hurdles to cross.

“It’s a pity at these early stages to have to spend money looking at ‘someone else’s proposal’, rather than trying to understand how we could create jobs in South Taranaki.”

One snag with ‘co-existence’ is that wind turbines might need larger foundations to ensure they could survive a collision with any of the ships that were transporting iron ore, Caleffi says.

These would be much larger than anything else the partnership would need to plan for, he says.

Only having one wind farm operator in the region, rather than two, could also complicate the economic case for investment, he says.

“You can argue whether Port Taranaki being redeveloped or upgraded for just one offshore wind project would be efficient.”

Given that, “it makes sense that some developers might decide to invest elsewhere”, he says.

Trans-Tasman Resources executive chairman Alan Eggers says TTR will soon submit a mining consent application to a fast-track expert panel and seabed mining is the bigger of the opportunities.

Eggers is scathing.

“There's a lot of shipping in the South Taranaki Bight already, about 7000 commercial ship movements a year,” he says.

And it’s the turbines that would be creating risk for shipping, he says.

“We’re not putting any permanent structures into the seabed, which they are proposing to do, and to twist it and blame it on us — I’ve had enough of it.”

Despite the challenges, Caleffi wants an exclusive “feasibility” licence by December under a new permitting regime for offshore wind being established by the Government.

That could give it the confidence to invest the “couple of hundred million dollars” needed to get to the point of being able to make a final investment decision.

But to justify that expense, it would need more certainty of a return, he says, with its continued involvement in New Zealand subject to regular reappraisal.

It is a case of weighing the signals that come in every day to see if they are going in the right or wrong direction, he says.

“The investor committee is kept updated on a monthly basis. It's an ongoing conversation.”

The single thing that would be most likely to cause it to pull the plug would be if government help was off the table, he indicates.

“I don't know any examples of any country that has set up offshore wind without some form of government support.”

Support, if it came at all, would likely be in the shape of a government-guaranteed minimum price for at least some of the electricity the wind farm generated.

That would be a subsidy of ‘risk’, but a subsidy nonetheless, not dissimilar to the guarantees Jones at times appeared keen to offer offshore gas explorers to entice them back to New Zealand.

“You don't get projects of this scale unless you have some certain revenue, because that's effectively what banks are lending against, right?” Caleffi says.

“We don't know what electricity prices will look like in 10 years.”

Trans Tasman Resources says the seabed floor would return to its “natural state” two years after it was dredged.

To add a further complication, the venture would need cross-party support, he says.

“It has to be something that ‘lives’ through every possible government.”

Taranaki Offshore Partnership appears stuck at the stage of seeking to have “talks about talks” on the thorny issue of some such ‘offtake’ guarantee.

“I would say the signal that we are looking for now is the willingness to at least discuss it,” Caleffi says.

“We are a bit concerned that for the last couple of years, the reaction has been ‘oh, that's a subsidy, we don't talk about that’.”

Another reason why TTR’s proposed seabed mining scheme might be the lesser of Taranaki Offshore Partnership’s worries is it might never happen.

Opposition in Taranaki to seabed mining has been vocal and well organised.

Seabed mining is highly controversial both locally and internationally.

A paper published by researchers from the National Oceanography Centre in Britain in leading scientific journal Nature on Wednesday found that marine life in an area in the Pacific where mineral-rich seabed nodules were mined had not fully recovered 40 years later.

One influential environmental lobby group, the Blue Climate Initiative, is already calling for boycotts on companies that don’t support a moratorium on the activity.

Green Party MP Teanau Tuiono, a member of the Pacific Parliamentarians' Alliance on Deepsea Mining, says it is “incredibly concerning” seabed mining is being considered in the region.

“There is resistance, and there will continue to be resistance.

“What we’ve got to do is take away the profit motive and actually take a look at what we need to do to look after the place.”

Iron ore prices have come off the boil over the past five years to sit about US$100 a tonne, which won’t help TTR raise the US$600 million (NZ$1.05b) of capital it believes it needs to get the project off the ground

Analyst BMI, which is owned by credit ratings agency Fitch, is forecasting a longer-term slump to US$78/tonne by 2033 on the back of lower demand from China.

TTR advised investors on Wednesday that ore from vanadiferous titanomagnetite iron sands, which is what lies off Taranaki, tends to sell at a US$5 to US$15 per-tonne discount to more common “traditional hematite” iron ore.

Eggers says vanadium and, possibly in future, titanium co-products from the ore would add to the ledger.

It believes its operational expenditure would be US$27 for each tonne of ore it produced.

Add freight costs of US$10 a tonne and capital costs and its business case would still seem profitable based on BMI’s price forecast, but with less room for cost blow-outs.

For context, Australian mining giant BHP told the ASX in August it had been producing iron ore from Western Australia for the past four years at an — admittedly world-beating — direct operational cost of only US$15.84/tonne.

The message from offshore wind developers about seabed mining was once ‘one or the other, you can’t have both’.

Now that has morphed into the suggestion both could be possible.

But it is still conceivable that ‘NZ Inc’ might end up with neither.