Hydroelectricity has always dominated New Zealand’s energy industry. With moun-tainous topography, plenty of fast-flowing rivers and limited reserves of easily accessible thermal energy sources, the country is ideally suited to hydro generation. More than 70% of New Zealand’s generation is based on hydro, and the majority of this comes from dams in the sparsely populated South Island.

Early history

In 1888 the small South Island mining town of Reefton was the first in New Zealand to have electric street lighting, powered by a tiny hydro generator. More substantial projects followed which were built initially by local authorities and later by the government. By the 1960s there was a substantial number of hydro dams on strategic rivers across the North and South Islands.

A major challenge proved to be the development of an integrated national network to transmit power to where it was needed most — the North Island, where more than 70% of the population lived. By the 1960s the hydro generation potential of the North Island was almost exhausted. In contrast the South Island had surplus generation, plus its lakes had much better long term storage capacities.

The solution was the installation of a high voltage direct current (HVDC) link across Cook Strait, a 40km body of water separating the two islands. The undersea cable was only the third to be laid in the world and was commissioned in 1965. It was supplied directly by the Benmore hydro power station on the South Island’s Waitaki river. With a capacity of 540MW, Benmore was the largest hydro station in the country when commissioned in 1965.


By the mid-1980s, New Zealand had surplus generation capacity. Attention shifted to introducing a more commercial focus to the power industry, improving efficiency, and ultimately reducing costs to consumers (New Zealanders enjoy some of the cheapest power in the developed world).

In 1987 the Electricity Division of the Ministry of Energy, the government department responsible for generation and transmission, became the Electricity Corporation of New Zealand (ECNZ) and began operating on commercial principles. ECNZ was required to improve performance and efficiency, and to pave the way for a competitive market in electricity generation and supply. Initial preparation for the market began in 1988 with the establishment of an internal ‘spot market’ and an external week-ahead market. In 1993, local retail power companies were corporatised and fully deregulated. The following year the national grid operating company, Transpower, was separated from ECNZ.

The Electricity Market Company, M-co (originally EMCO), developed the wholesale pool and spot market which is now a model for international utility competition. From October 1996 supply contracts previously negotiated with individual power companies were replaced with open, commodity-based trading of electricity. The market is designed to co-ordinate energy buyers and sellers with minimum regulation, with spot prices set by the balance of supply and demand. Generators offer energy prices one day ahead at half-hourly intervals, purchasers make bids and revisions occur close to real time. Provisional prices are announced the following morning, with final prices calculated the following month for more than 200 nodes in the transmission system.

To protect themselves from spot price fluc-tuations, suppliers can purchase financial hedge contracts traded by M-co. M-co is responsible for pricing, clearing and reconciliation of energy market trading. The company was established by generators, suppliers and Transpower, and was sold last year to the Rand Merchant Bank of Australia. Market operating rules are set by industry participants and monitored by an independent standing Market Surveillance Committee.

In early 1996 a new company, Contact Energy, was separated from ECNZ. Contact owns 25% of the generating capacity comprising a mix of thermal, geothermal and hydro stations. The government has since sold the company through a combination of direct sale and public flotation. Last year ECNZ itself was split into three new state-owned enterprises:

•Mighty River Power (13% of generation from hydro stations on the Waikato river in the North Island).

•Genesis Power (17% of generation from Huntly thermal station, Te Awamutu and Kinleith co-generation plants, and Tongariro and Waikaremoana hydro stations in the North Island).

•Meridian Energy (30% of generation from Manapouri and Waitaki river hydro stations in the South Island).

Contact Energy and the private sector provide the balance of capacity.

Despite the series of changes retail competition and consumer choice were slow to develop. In response, last year the government forced electricity supply companies to separate their line businesses or local monopolies from their competitive activities of electricity retailing and generation. The companies were allowed to choose which business they remained in and were required to sell off the other.

This change also removed the restriction on generation companies being involved in energy retailing. The generators bought up energy businesses from local power companies, most of whom opted to retain their low-risk line businesses. This led to the emergence of six substantial, vertically integrated energy retail businesses: Meridian Energy, Contact Energy, Genesis and Mighty River Power (all net sellers of energy); and Transalta and Trustpower (net buyers of energy).

Traditionally, hydro and geothermal stations have dominated baseload generation, supplemented by gas and coal-fired stations when necessary. But with the recent establishment of a competitive energy market in New Zealand, competing energy businesses are now operating more thermal stations at the baseload end of the market. Although plenty of hydro generation capacity remains, no major dam construction is expected in the near future. Instead, recent hydro investment has focused on improving efficiency and maximising asset capability. Meridian Energy, New Zealand’s largest energy generator, is carrying out much of this work.

Meridian Energy

Meridian Energy began operating on 1 April 1999. The company owns and operates nine power stations, all in the South Island. These comprise about 70% of the total hydro storage in New Zealand. Meridian Energy has a total capacity of 2323MW of hydro generation, capable of producing about 12,500GWh in a mean year (ranging from 10,000GWh to 14,000GWh in hydrological extremes). This represents 32% of New Zealand’s total installed capacity (7200MW) and 35% of the total annual demand (36,000 GWh). Meridian is New Zealand’s lowest-cost energy producer.

Automation and remote control

Meridian’s NZ$64M (US$31.4M) automation and remote control (ARC) project enables Manapouri and the eight Waitaki river stations to be controlled from a single control centre in the small town of Twizel. Manapouri and the Waitaki stations were not previously managed together.

Under the project, control and protection equipment dating from the 1970s has been progressively replaced with modern computer controls over a seven-year period, making the generat-ing plant more responsive and flexible in the market. The project, which uses 180km of fibre-optic cabling for the Waitaki system, has enabled all the generating plants to run unattended.

The five upper Waitaki stations already had automated systems, although these were due for replacement, and the mid-Waitaki stations were automated for the first time. The new system captures a wide range of data for recording and monitoring plant performance. This allows more reliable maintenance techniques and condition monitoring to be performed.

ARC supports the electronic dispatch and automated optimisation of river chain generation, and is expected to improve efficiency by at least 1% in the Waitaki Valley, or around 85GWh a year. ARC is also expected to reduce ongoing operation, staff, maintenance and communications costs. At the 585MW Manapouri station, ARC will reduce operation and maintenance costs and improve flood control by replacing obsolete communication links with a more robust local network, including a local paging system. Establishing a hierarchy of control allows the constantly changing demands of the market to be translated into the optimal operation of individual power stations.

Voith is the principal contractor for the power plants and associated equipment and systems. The control centre uses supervisory control and data acquisition (SCADA) technology and advanced applications manufactured by sub-contractor Telegyr. New equipment includes digital electronic governors. The control centre is currently operating an interim SCADA system, with the full system expected to start operating by the end of June 2000.

Following completion of the ARC project the company will achieve world class productivity of 110GWh per employee.

Second Manapouri tunnel

Full commissioning of the 585MW Manapouri power station took place in 1971. It was built primarily to supply power for New Zealand’s single largest power user — the Comalco aluminium smelter at Tiwai Point in the lower South Island — which uses about 40% of Meridian Energy’s generation output. Manapouri is located in the vast, remote and environmentally sensitive Fiordland National Park, and its construction was highly controversial and technically challenging. But the completed station has made little impact on the surrounding environment as the power house is more than 200m underground. Water is supplied from Lake Manapouri through seven vertical penstocks and is discharged from the power house to the sea along a 10km, 10m wide tailrace tunnel.

Soon after Manapouri power station was commissioned unexpected frictional losses in the tailrace tunnel had reduced the capacity of the station from the expected 700MW to 585MW. The net head available for generation was effectively 30m lower than the gross head.

Various options were explored to remedy the problem. Enlarging the existing tunnel would require the station to be shut down for an unacceptably long period. Instead, it was decided to bore a second tunnel alongside the first using a tunnel boring machine (TBM) which would only require a three-week shut-down to connect the tunnel to the station. The TBM drills from the downstream end, finishing behind the tailrace bulkhead. The headworks will be completed by drill and blast technology and will connect to the existing tailrace

headworks. The second tunnel will allow freer water discharge and reduce the lost head by around 18m. The efficiency gain will increase annual generation by 640GWh.

A joint venture involving Fletcher Construction of New Zealand, Dilling-ham Construction of the US and Ilbau of Austria, is carrying out the work. Construction began in September 1998, although it is not expected to be finished by the scheduled completion date of 1 October 2000.

Aviemore re-runnering project

Another project being undertaken by Meridian Energy is the installation of four new high efficiency turbine runners at the 220MW Aviemore power station. The previous runners experienced significant cavitation wear and had to be repaired every three years. The three new runners have so far shown no audible indication of cavitation during operation, and the repair cycle should now be extended to every ten years. The new runners will allow optimal river flows to be matched more closely on the mid-Waitaki chain of three stations. The NZ$14M (US$6.9M) re-runnering project will be completed this year.


Meridian Energy also owns and operates DamWatch, which provides dam safety advice and surveillance services for Meridian Energy and other energy companies. Meridian inherited the DamWatch surveillance team when ECNZ separated. DamWatch provides:
Surveillance data processing and analysis.
Dam, tunnel and canal inspections.
Comprehensive safety reviews.
Remediation of dam safety deficiencies.
Instrumentation reviews and upgrades.
Dam surveillance training.
Although there is no specific dam safety legislation in New Zealand, the New Zealand Society on Large Dams has produced safety guidelines which are widely used by dam owners in their own dam safety programmes.