An energy revolution is just taking off in New Zealand, with offshore wind potentially doubling our renewable electricity output in just a few decades, Marc Daalder reports
Special report: They may not be in place for another decade, but offshore wind farms have the potential to remake New Zealand's energy economy and spearhead our path to net zero emissions.
Transpower estimates New Zealand will need to increase its electricity generation by 68 percent by 2050 in order to keep up with population growth and the electrification of transport and industry. Given we'll also need to retire our fossil fuelled power stations, meeting demand in 2050 could require the country to double its current renewable generation.
In just 28 years' time, the grid operator says, there will need to be nine times more electricity generated from wind. Offshore turbines could play a crucial role in that. They're bigger, meaning they generate more power, and wind speeds offshore are higher and more consistent.
If New Zealand wanted to fill the wind gap with land-based turbines alone, we'd need to build 25 percent more onshore generation, compared to an all-offshore strategy.
There's still a long way to go before offshore wind becomes a reality in New Zealand, experts warn. We have no regulatory regime to enable exploration or consenting of wind farms and the Government expects it will have to play a role in guaranteeing off-take of the electricity. But the opportunity it provides for New Zealand - and for regions like Taranaki that are expected to be hard hit by the transition to a low-emissions economy - could be invaluable.
Operational in 2030s
There are four offshore wind developers interested in building in New Zealand. The two which have made headlines are the Australian firm Oceanex and Copenhagen Offshore Partners (COP), which has teamed up with the NZ Super Fund for a feasibility study.
Also interested are Parkwind, a Belgian company, and a joint venture between the Spanish BlueFloat, the Australian Energy Estate and the homegrown Elemental Group.
Peter Spencer, Parkwind's manager in New Zealand and Australia, said the Government's climate ambition means the country is seen as a good place to build offshore wind.
"New Zealand is a progressive country. It has a Government with ambitious energy and renewable targets."
That sentiment was shared by others too.
"I think New Zealand’s got some real benefits over Australia. You don’t have green versus black fighting about renewables or fossil fuels. You deal with issues of a more national level much more quickly than we do," Oceanex CEO Andy Evans told Newsroom.
"So I think New Zealand’s a lot more progressive in understanding opportunities and actioning it. We’ve already had input into the infrastructure strategy, [Energy Minister Megan] Woods has made various announcements around a draft regulatory framework. I think you’re starting from a much more advanced platform than what we did in Australia all those years ago."
Evans would know. Nearly a decade ago, he kicked off Australia's first offshore wind project alongside international investors like COP. Called the Star of the South, the 2.2 gigawatt farm will be operational in 2028.
New Zealand's running a bit behind - construction here would only start in 2029 if you're being optimistic, Evans said.
"Realistically, you need a development period of around five years."
Justine Gilliland is now the partnerships director for the BlueFloat, Energy Estate and Elemental Group joint venture, after three years helming the Venture Taranaki regional development agency. She says smaller scale offshore farms could be in place in the 2020s, but agrees that the 2030s will be the decade of the offshore turbine.
"We’d hope to see the bigger scale really starting to be in place in 2030 and beyond," she said.
The other advantage of New Zealand, everyone agrees, is the quality of our wind.
"The South Taranaki bight has always been identified as the prime spot really, for two reasons. One, an absolutely excellent wind resource, by global standards, an outstanding wind resource in terms of wind speed," Giacomo Caleffi, the lead on the COP/NZ Super project, said. "And [two], relatively shallow water depth and that allows for installation of foundations that are fixed to the seabed and just keeps the technology in that realm of relatively cheap. Not cheap, relatively cheap."
The alternative, turbines on floating platforms, are becoming commercially competitive but haven't reached parity with fixed ones yet. If they do, then even more of New Zealand could be unlocked for development, including Bluff, the West Coast and the sea west of Auckland. That latter project would also help rebalance New Zealand's energy grid - most of our power is generated in the South Island but most of our demand comes from Auckland.
"That would become an almost unlimited resource," Caleffi said.
Why offshore wind?
The developers who spoke to Newsroom were careful to say that offshore wind doesn't need to compete with onshore. The two technologies can operate in tandem, alongside other renewable sources like solar power. If we're going to double our renewable generation in less than three decades, we'll need to pull all the levers we can.
All that said, offshore wind have does some advantages over onshore. Some of the reasons for development overseas don't necessarily apply to New Zealand - we do have plenty of land and decent wind resource, while Europe didn't, for example.
But others are universal.
"In terms of offshore, there are some advantages," Ian Mason, an energy and engineering researcher at the University of Canterbury told Newsroom. Mason has pioneered offshore wind in New Zealand for years and a 2019 paper he wrote with a grad student caught the attention of officials and sparked a wave of government interest.
That paper concluded an 877-turbine wind farm in the South Taranaki bight could generate an enormous 28 terawatt hours of electricity each year. That's two thirds of all the electricity produced in New Zealand each year today and almost entirely closes the renewable power gap identified by Transpower.
"There are few constraints on the size of turbines when you go offshore. As long as the port can handle the components, then it opens the door for very, very large turbines," Mason said.
"People are now building nine megawatt turbines. Ten is on the table. These are absolutely massive turbines which you would have a lot of trouble building onshore. It makes new generation scalable to an extent which is not really feasible for onshore."
So the first argument for offshore wind is the scalability - you simply can't build a wind farm that big on land.
"We’re looking at one gigawatt. It would be really hard to get a one gigawatt onshore wind farm," Caleffi said.
The second is reliability. Onshore wind farms have an upper limit capacity factor of maybe 40 percent - which means they're producing electricity 40 percent of the time, at best. Offshore, in South Taranaki in particular, that figure is closer to 50 or 55 percent.
"It’s stronger, more constant wind offshore and will lead ultimately to higher capacity factors," Cristiano Marantes, the chief executive of the Ara Ake future energy centre, told Newsroom.
It may not sound like much, but that 10 or 15 percent difference is significant. It means a one gigawatt offshore wind farm would generate 500 megawatts on average or 4.3 terawatt hours a year. That's enough to power 625,000 homes. To generate the same amount with onshore turbines would require at least a 1.25 gigawatt farm - greater capacity to account for the lower capacity factor.
A new energy system
The massive scale and relative consistency of offshore wind hold the potential to transform our energy system.
New Zealand is currently reliant on fossil-fuelled electricity generation to keep the lights on. While the vast bulk of our power is produced renewably, between 10 and 20 percent comes from gas or coal. Fossil fuels kick in when lake levels are low or when the wind isn't blowing - recalling that our gigawatt of onshore wind is really closer to 400 megawatts due to capacity factors.
A fully renewable electricity system needs to be able to operate in even the most pessimistic scenarios - on winter nights when energy demand is high, the sun has set, the wind isn't blowing and hydro lakes are dry.
Spencer said New Zealand tends to see greater wind offshore in winter, so that syncs up well with winter demand.
Former Energy Minister Jonathan Young, now the head of policy at Ara Ake, also said offshore wind is part of the solution.
"The thing about offshore wind is that the capacity factor is there but it’s reasonably consistent so it can become baseload," he said. "Then we can start to rely on hydro as the battery backup."
In other words, offshore wind would replace hydroelectricity as the foundation of our electricity generation and hydro would take the role of fossil fuels.
"What we need is something that’s going to be able to switch in within seconds. Gas stations can. The only other thing that can do that is hydro. You’ll kind of see a shift where maybe hydro doesn’t become the significant baseload it is but offshore wind can become that and then [hydro] becomes the firming behind that."
The Government is also currently investigating a massive pumped hydro scheme at Lake Onslow in central Otago. This would effectively turn the lake into a massive battery, able to alleviate dry year risk, but also affecting the investment logic for other big generation projects like offshore wind.
Young says the key with all of this is planning. The Government's energy strategy, funded in the latest Budget, will be central to an orderly transition to fully renewable electricity, he said.
"Without sequencing what comes off, what goes on, the timing of all of that so the economy’s not impacted with energy shortages and therefore massive prices. It’s going to be a finessed piece of work, I would have thought."
Power to X
There's also a lot of doubt about exactly where the electricity generated by offshore wind will go. Some of it could flow into the grid, but there's also a case for plugging wind farms directly into green industries - a concept called Power to X.
"Offshore developers are a little bit coy on this, in terms of how the electrons might be utilised, whether it’s domestic decarbonisation or downstream, potentially hydrogen or some other derivative," Grenville Gaskell, chief executive of the New Zealand Wind Energy Association, told Newsroom.
"[Developers are] talking not only about feeding into the grid but they’re also talking about dedicated industries, energy intensive industries, such as big data centres. Some people are talking about making hydrogen and other chemicals," Mason, the academic, said.
Gilliland is particularly keen on hydrogen and other green gases. She says they could slot into the existing gas network and help the Taranaki gas industry decarbonise.
"It’s not like onshore wind, you can’t just go and have a coffee with a few farmers and sign up with an agreement."
This would involve building more new generation than is strictly needed to decarbonise New Zealand alone.
"Instead of the Government’s current aspirational 100 percent renewable electricity goal, what if it was 600 percent renewable electricity goal? Which means that we would have abundant green energy that we can use both for increased domestic manufacturing and production, which is things like hydrogen, green methanol, data centre operations as well as other forms of manufacturing," she said.
"The amount of green energy that we could produce here, export, and help other countries decarbonise is really, really significant. We’re talking tens of gigawatts here which is multiple times the existing, entire New Zealand electricity sector. So the opportunity there is absolutely to turn that into hydrogen and then utilise that hydrogen as a gas to power those existing uses that natural gas is used for."
A recent report commissioned by the Government found hydrogen is unlikely to be used for cooking and heating homes in 2050 like fossil gas is today. But it did see a case for hydrogen production for export and as a way of firming up the grid. When generation does lapse or demand does spike, hydrogen electrolysers could be switched off and their power sources (likely offshore wind) redirected into the grid.
Offshore wind to hydrogen could even be done entirely offshore on so-called energy islands, Caleffi said. COP is working on these in Europe, though he concedes the case for hydrogen in New Zealand isn't quite as advanced as the case for offshore wind.
"Offshore wind, we can build an offshore wind farm tomorrow, we know what it produces, we know how to use it. Hydrogen, there’s still a bit of uncertainty on procurement of electrolysers, how they work, how efficient they are," he said.
Spencer said there were many potential customers for hydrogen in New Zealand, including Air New Zealand and fertiliser producer Ballance AgriNutrients. Overseas, Parkwind has developed hydrogen shipping and trucks and might seek an integrated operations here as well.
"A lot of the stuff that is being talked about here in New Zealand is stuff that we are doing already in Europe," he said.
Energy Minister Megan Woods is bullish about the opportunities for offshore wind and hydrogen.
"Internationally, what we’re seeing is that work on making electrolysers that sit on offshore platforms so you make hydrogen right there," she said. "Electrolysers are getting smaller and smaller. They’re basically around the size of a shipping container now."
The barriers
For all of the positivity about offshore wind, there are certainly obstacles to building it in New Zealand.
The biggest one is cost. These are billion dollar projects that can take a decade from applying for consents to actually see turbines start spinning. Even after that, it will take years to make the money back. That requires a certain kind of investor, although Evans says there are still plenty of people interested.
"They’re brand new industries, they’re expensive industries, so you’re only in the game if you’ve got money and good backing. It’s not like onshore wind, you can’t just go and have a coffee with a few farmers and sign up with an agreement," he said. That said, "the world is going crazy for offshore wind".
One of the key measures to enable investment is long-term power purchase agreements. These were a major plank of the energy section of the Emissions Reduction Plan and are commonplace overseas.
Essentially, major energy users (and sometimes the Government) ink a deal with an offshore wind developer to buy the power at a certain price for years or decades to come. That gives users certainty about prices, when price volatility is expected to increase in a fully renewable market, and allows the developers to ensure they'll make their money back.
"To push investments of this size forward, we need to have some kind of certainty on prices," Caleffi said. "There will be a lot of work done on understanding off-take opportunities - who would buy that electricity, whether it be large energy users or corporate power purchase agreements. We will be investigating that quite a bit."
The other barrier is the lack of any regulatory framework for offshore energy. The development of those rules was funded in the latest Budget and Woods has promised they'll be in place by July 2024. In the meantime, developers are reluctant to sink too much money into New Zealand.
"The sooner the regulatory framework can be put in place, the more companies and developers are going to invest money," Evans said. "Most developers, we just want the opportunity to come in and spend money. The regulators can let developers come in and spend the money."
Specifically, developers want to understand the process to get an offshore farm consented and to know they have some form of exclusivity over a given bit of ocean.
Consenting offshore wind is complicated by the fact that two different legal regimes apply to the sea - the Resource Management Act (and its successors) have jurisdiction over anything within 12 nautical miles of the coast, while the Exclusive Economic Zone Act applies to the area beyond that.
Even a wind farm in the Exclusive Economic Zone (EEZ) will still run transmission cables back through the territorial sea, coming under the resource management laws.
"If someone came in tomorrow [to build offshore wind], I think they’d probably have to jump through a lot of hoops, depending on where it was relative to the 12 mile line," Woods said. "The idea is a streamlined, simple process that will be a kind of front door."
Offshore wind firms also want to see a licensing and exploration regime similar to the oil and gas rules. This would mean developers could apply to explore in a given area and then have the exclusive right to build there if the wind, depth and other attributes are suitable.
"You can imagine that no developer would spend the hundreds of millions of dollars required to understand the resources without knowing that they have some kind of exclusivity over that area," Caleffi said.
Exploration is much less environmentally damaging than for oil and gas - it mostly entails the deployment of small buoys equipped with radar sensors called LiDAR. The sensors point up and measure wind speeds at different heights.
"Especially what we will be looking for is the wind speed at so-called hub height - the height of the centre of the rotor. One year could be enough, but normally two years gives you that kind of extra certainty of what kind of wind resource you’re looking at," Caleffi said.
Just transitions
Rough measurements from sensors on oil and gas platforms show the South Taranaki bight is likely to be a key spot for development. Evans' Oceanex is also looking at opportunities north of Taranaki, to be able to better access New Plymouth's port and potentially supply electricity more easily to load centres like Auckland.
While floating turbines would unlock most of the New Zealand coast for development, in theory, Taranaki is the focus right now. Data availability and shallow depths are one reason. But the Government and developers also see an opportunity to aid with the region's just transition away from fossil fuels.
"The whole area of just transition is also a part of the thinking. South Taranaki for example has historically been an oil and gas area, but a lot of the skills and the knowledge for offshore oil and gas can be transferred into offshore wind," Mason said.
Gilliland has spent years searching for ways to align decarbonisation with preserving energy jobs in Taranaki. She helped launch the first two offshore energy fora in 2020 and 2021.
"There are thousands of people in Taranaki and then across wider New Zealand who are involved in that sector and who have meaningful, well-paid jobs and [we’re] wanting to ensure those people can continue to have meaningful well-paid jobs," she said.
"That skillset that we have in our region is reasonably rare and really only exists where there’s offshore infrastructure and work. We would hate to lose that, I think it’s a huge benefit and bonus not only to our region but our country," Young agreed.
Another component of the transition is Māori and iwi involvement.
"In the case of Taranaki iwi, they feel like there’s been an energy sector there for decades that has extracted from their region but they haven’t seen the returns," Woods said.
Gaskell, from the wind energy lobby, said the developers are all cognisant of the need to engage with iwi. That's work that will take time and which can begin even before the Government sorts out its regulatory proposals.
"Obviously we're talking about a new technology, something that is new for New Zealand and that we need people and especially local communities to understand it and to support the project," Caleffi said.
"Quite a bit will go into making sure the local communities, the iwi who have mana whenua, mana moana in the area, they need to support the project. They need to be convinced that this is good not only for New Zealand but for the region as well."
Developers also aren't waiting for the Government before they begin other feasibility work. Oceanex and COP are both undertaking supply chain studies to understand where they might source resources, labour and expertise from. A lot of that will be local, Evans said, because of Taranaki's existing skill base and because of New Zealand's remoteness.
Environmental studies will also have to be designed to fit the New Zealand context.
Offshore wind may not yet be a sure bet in New Zealand. But enough big players are interested that the potential is clear. Pretty soon, says Young, we'll know whether we can expect to see offshore turbines dotting the horizon.
"I think we’re at a nexus right now and I think that the next year in particular, with what the Government work is going to be, is going to signal whether this is going to be an industry that can actually be established here."
