20% by 2030

1. 20% by 2030 The future of wind energy in New Zealand Eric Pyle, Chief Executive

2. Vision: Wind Energy 20% by 2030 • Fits with the existing electricity system • Accepts the constraints of our available resources • Viability – best investments first • Achievable – NZ has excellent sites • Economic benefits

3. The industry has come a long way in a short time… • 1993: 0.225MW 2007: 3MW • A 13 fold increase in power in 14 years.

4. Globally the industry has grown rapidly • It is now a mainstream industry

5. Electricity Supply and Demand • From 43,000 to 52,000 GWh annual in 2030, 8GW peak (7GW now) • Based on 1.0% demand growth p.a. – with faster growth, we get to 20% wind sooner • Much of the annual demand growth will be met by more wind energy • 90% renewable means a substantial increase in renewable generation

6. Make up of the Electricity System

7. What the Forecast Means - 2030 • Hydro: +200MW, +5% • Limited capacity reduces % share, more variable (peak) supply • Gas: +900MW, +65% • More peak / demand response to maximise value, (e.g. Contact Energy’s recent investment in peakers) • Geothermal: +500MW, +70% • Expansion until low cost options run out • Coal: -750MW, -75% • Huntly: 2 units mothballed by 2015. • Wind: +2,800MW, +450% • Wind is the cheapest form of new generation

8. Wind to 20% - it is available and is reliable • The fuel is free and abundant. • Predictable short and long term (24 hours, 20 years) • Cost effective technology now and getting even better

9. Integrated supply and Market

10. Earning from Energy • Some types of generation can be varied to take advantage of higher peak prices

11. Generation – a Business Decision • Investment based on future returns and portfolio • Peak generation earns more $/MWh • We still need non-peak generation – long term price needs to pay for this • Operation – must cover operating costs • O&M costs predictable for wind long term • Fossil fuel costs uncertain (eg.20 yrs time) – but very certain for renewables - ZERO

12. Viability of Investments - now Deloitte – past projects to 2010

13. Wind costs still reducing • Relatively young technology • 12% cost reduction in next 5 years (Bloomberg) • 14% reduction for every doubling of world capacity to date – turbine cost reductions, efficiency improvements • O&M costs falling

14. Best Dressed Future Investment LRMC – 2016 $/MWh Deloitte + Bloomberg

15. The sector’s view - consents

16. Achievable – Expansion Path • We have consents • One ‘West Wind’ per year.

17. What Type of Wind Farms? • Mixture of sizes, depending on fit with generation portfolio • Some large wind farms • Many Te Uku – West Wind size • Smaller projects too • Mixture of developers • Major Gentailers • Smaller developers • Owner operators – industry • New entrants

18. Where Wind Farms may locate – the windy places

19. Modest investment • Cost of 140 MW wind/yr = $300m • Capex (new build) for main generators over last 3-5 years: • Meridian: $200m/yr • Contact: $300m/yr • MRP: $300m/yr • Total: $800 +m/yr • $300m/yr for wind is not inconceivable

20. Challenges • Understanding by public, Govt, Councils • Perception that wind is unreliable and expensive • Limited recognition of the economic benefits • Consenting • Improve speed and consistency • Integration of windfarms • Grid - needs to cater for future generation map • More sophisticated electricity market • Generator portfolio • Developing an industry • Supply chains • Servicing and training • Supply chains

21. Economic Benefits • Benefits for every New Zealander – up to $390/person each year • 1400 permanent jobs (3.5GW) mainly in regional/rural areas • Exportable skills and technologies • Keeping the cost of electricity down • Steadying effect on electricity prices

22. Summary 2030 • Electricity generation outlook includes 20% wind • Wind distributed around country • Small and large wind farms / operators • Affordable and achievable • Best investments for generators • Economic benefits for NZ