The fall in NZ’s exchange rate could put a dent in the ambition of NZ’s power generators to move rapidly in expanding wind farm production. In its annual report state-owned Meridian Energy warned its renewable energy project pipeline is “challenging” against a backdrop of movement in the costs of materials, exchange rates, “and what are too often turning out to be lengthy and expensive resource consenting processes.” Meridian says mitigating these factors, it has “some of the highest quality wind sites and access to turbines through our scale and quality of supplier relationships.”

Internationally the massive expansion of wind generation capacity has outstripped the ability of manufacturers to keep up, leading to big order backlogs, which along with rising raw material costs have raised turbine prices by more than half. Simon Wannop of the renewable energy team at consultancy Ernst and Young in London says capacity shortages, in terms of bottlenecks in parts of the wind turbine supply chain, are likely to remain in place for at least four to five years, and perhaps longer until a global player emerges from China. While generators base their projections on the economic costs of respective sources of electricity over the long-term, it appears the potential of wind power to become cost competitive with fossil fuel generation may have been moderated by the sharp rise in the capital costs of wind power projects. Meridian Energy is currently building Project West Wind near Wellington which when completed by the end of 2009 will double its wind capacity and provide electricity for the equivalent of 75,000 average households. It will also help significantly reduce AC transmission network constraints. In addition it will provide a substantial increase in the security of supply for the lower NI.

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