Sustainability and balance

Download PDF file of this section. PDF file (143KB)

OUR THOUGHT

If you take something out, you've got to put something back. Balance is a life necessity.

HIGHLIGHTS

Increased energy efficiency promotion and initiatives
Final inspection of second Manapouri tailrace tunnel successfully completes this project
Government decision to allocate Meridian emission credits for the Project Te Äpiti wind farm will assist in making the development viable.

FUTURE

Ongoing projects to optimise all existing generation assets
Ongoing research into new sources of renewable energy to help meet New Zealand's growing demand
Further promotion of energy efficiency initiatives to customers, staff and suppliers
Development and implementation of sustainability measurement process for project assessment.

OUR REFERENCE POINT

"We can cope with growing demand for electricity while continuing to make progress towards a more sustainable electricity industry… by advancing on three fronts:

Increasing investment in renewable sources of energy for electricity generation
Increasing the opportunities for demand–side participation in the electricity market
Increasing energy efficiency and conservation."

Hon Pete Hodgson, Minister of Energy, address to Electricity Engineers' Association of New Zealand Conference, 20 June 2003.

The "balance" concept that is so prominent in sustainable development thinking is a good description of the future direction of the
New Zealand electricity industry.

During the last year the dynamics of supply and demand were highlighted when New Zealand's electricity supply came under severe pressure early in winter 2003. A dry summer and autumn combined with a shortage of thermal fuel stocks and a reduction in Maui gas output signalled very tight supply over the high-demand winter period.

The tight supply position was eased in May by unseasonal rainfall in all catchments and the announcement of new thermal fuel contracts, however the need for careful management and disclosure of fuel stocks is likely to be a dominant theme over the next three years.

SUPPLY

Constraints on increasing electricity supply include:

Potentially long lead times for new production to come on-stream due to the regulatory environment
Increasingly competing demands for water
Cost and availability of thermal fuels
The appropriateness of energy projects in relation to New Zealand's Kyoto commitments and desire for sustainability
Transmission capacity – investment is needed to upgrade transmission lines to deliver additional electricity supply to end users.

Industry players are pursuing various options to address this challenge. For its part, Meridian is committed to sustainable energy solutions to meet rising demand, in particular those using water and wind.

As the largest hydro generator in New Zealand, the implications of the growing demands for water are vast. Meridian is facing increasing competition for water in the Waitaki catchment, in respect of both current and future uses for water. Without any real water allocation policy operative within the catchment all existing and future users face uncertainty in relation to their entitlements to take and use water. This was reflected in the number of submissions lodged on Environment Canterbury's latest Annual Plan where over 30 submitters, including Meridian, requested a water allocation plan for the Waitaki catchment.

DEMAND-SIDE MANAGEMENT

Meridian has been working with many industrial customers on demand-side management since inception, but particularly since the 2001 energy crisis. When the country was faced with a similar situation in autumn 2003, we increased these efforts and joined industry initiatives.

The challenge now is to help New Zealanders appreciate the need for a mind shift to sustained energy efficiency efforts. Energy efficiency is an integral part of Meridian's ongoing endeavours, and we will continue to work with customers to effect this.

OUR PROGRESS

MANAGING ANOTHER DRY YEAR

For the second time in three years, winter 2003 provided a timely reminder from nature that supplies of natural resources are not limitless. The low inflows in autumn, combined with reduced thermal generation, led to soaring spot prices on the electricity market. This meant that Meridian used its lake storage – already lower as a result of unseasonally low summer rainfall – earlier than usual. This had a direct impact on our financial performance as Meridian met its fixed price obligations to its customers by buying some of its requirements from the very high spot market. Our customers were spared this volatility at a significant cost to Meridian's own profitability.

Inflows

As soon as it was apparent that nationally we had a serious problem, we initiated a series of projects to help prepare for and manage an electricity shortage situation.

We assessed the impact of reducing lake levels below their typical operating range – balancing adverse environmental impacts and stakeholder concerns with the social and economic need for continued supply of electricity.
We worked closely with large organisations that have on-site emergency generators, preparing them to run continuously if the high spot prices continued.
We worked on an initiative in Christchurch in conjunction with Orion to seek resource consents to enable diesel generators in Christchurch to operate if required.
We briefed key industry groups to encourage industry savings and explain the situation.
We worked with network companies on contingency plans for potential rolling blackouts.
Meridian was an early and active member of the industry-wide Target 10 national media campaign to encourage New Zealanders to make voluntary savings.
We also developed our own energy savings initiatives to encourage and enable Meridian customers to save. These included:
– A community rewards scheme that resulted in a donation to Plunket of $500,000 cash and $150,000 worth of goods and services to reward New Zealanders for the savings they made during the Target 10 campaign.
– Rewards for the top 10,000 energy savers among Meridian's customers, who will receive a $100 credit on their pre-Christmas power bill, with the option of donating it to one of 10 charities
– An energy savings assessments and makeovers competition with five residental and five business winners
– In partnership with Community Energy Action and EnergySmart, we had teams travelling around Christchurch installing free energy-saving products, such as cylinder wraps, energy-saving lights, draught excluders and water-saving showerheads, in low-income households. The Energy Saver Vans teams knocked on 3,875 doors and visited 1,555 homes in six weeks, installing 5,500 energy-saving products.

We also made significant internal power savings to do our bit towards the 10% savings target. Cumulative energy savings for all our offices reached as high as 35% throughout the month of May, falling to 15% through June as the winter power crisis eased. These savings were the result of operating a diesel generator at one of our sites, as well as a sustained savings campaign in all offices.

WATER ALLOCATION

We are participating actively in the development of Environment Canterbury's Natural Resources Regional Plan, which will ultimately set out a framework for water allocation policy for the region. It is unclear as to when an allocation regime for the Waitaki will be added to the Plan.

In parallel, Meridian has been engaged in a process with the Environment Court to clarify for the public record our existing entitlements to take water under our resource consents granted in 1990. This has been necessary because of confusion within the public arena as to how Meridian's consents work and what they provide for.

In order to protect Meridian's value, and without any water allocation policy, it has been necessary to oppose numerous water takes from farmers, both large and small, who are wishing to take water for irrigation purposes, some of which are for use outside the Waitaki catchment (Meridian only opposes new abstractions, not existing intakes for water). Many of these takes are not large in themselves, but we have significant concerns over the cumulative impact of these water takes on our existing consents.

We recognise that irrigation is a major value driver in the farming sector and that the sector is important to New Zealand's economy. Meridian has undertaken extensive research and investigations into alternative water sources and ways to harvest water for irrigation purposes. We have also researched different approaches to water allocation. Our objective is to source practical solutions that meet our own needs and those of other water users. We consider that hydro and irrigation don't have to be mutually exclusive, but that if worked through in a planned and integrated way, the two uses of water could be managed in a mutually beneficial way. Project Aqua is an example of this.

SECOND MANAPOURI TAILRACE TUNNEL

Last year we completed the second Manapouri tailrace tunnel, a major energy efficiency project that made the Manapouri power station 16% more productive, increasing the station's output by 640 GWh a year, enough to power the equivalent of an additional 64,000 homes.

This year the final tunnel inspection was undertaken. This entailed closing off and dewatering the second tunnel for 10 days, and carrying out a detailed inspection of the condition and stability of the tunnel. We were extremely pleased with our findings marking the successful completion of the project.

CLIMATE CHANGE

Meridian welcomes the Government's ratification of the Kyoto Protocol in December 2002 and the business opportunities that will arise from it. To date this includes the allocation of emission credits that assist in making the Project Te Äpiti wind farm development viable. We look forward to participating in the forthcoming Project Mechanism tender.

SUSTAINABLE DEVELOPMENT AT MERIDIAN

Last year we outlined how a sustainability philosophy has been built into Meridian's framework since inception and set ourselves the challenge to integrate it further into everything that we do.

In the coming year we plan to put a structure around our project evaluation processes and we are currently reviewing value accounting and sustainability models that may help with this.

We will also be reviewing our Sustainability Policy (developed in June 2000) to reflect better the balance between environmental, social and economic needs throughout Meridian.

CO2 FOOTPRINT

Using the same methodology as last year (Landcare's EBEX21 model), and the same source data, Meridian's CO2 footprint for 2002/03 shows a 10.8% increase over last year's figures. Most of his can be attributed to greater consumption of resources due to an 11% increase in staff and increased business activity.

However, the figure of record that we want to use as a benchmark going forward shows an 83% increase. This is due to a change in scope of what is measured. This year we have included the diesel used in the boats on Lake Manapouri, which was not included in last year's calculation.

This emphasises the importance of setting and maintaining a clear scope. To avoid confusion going forward, the CO2 footprint calculations include Meridian's core business, Meridian Solutions and DamWatch. They do not include any other newly purchased subsidiaries or external contractors, but consideration will be given as to the most appropriate treatment of these companies in the future.

It is interesting to note that the impact of Meridian's CO2 footprint for 2002/03 could be offset by about five days' generation from the proposed Te Äpiti wind farm or about two days' generation from Manapouri power station taking into account the second tailrace tunnel.

The latest greenhouse gas (GHG) data for the electricity sector indicates that a total of 5,579,000 tonnes of CO2 was emitted by the sector in 20023. So, while Meridian provided approximately 29% of New Zealand's electricity, it generated less than 0.04% of the GHG emissions.

CO2 footprint