Project Hayes: counting the costs 

The extent to which Meridian Energy’s ditching of its controversial Project Hayes wind farm has been met with mixed reactions by even ardent environmentalists gives some clues as to the complexity of the energy issues the decision anticipates.

On the one hand, while many people who are not otherwise particularly “green” have been able to appreciate, and react against, the visual pollution the wind farm on the Lammermoor Range would have represented, other environmentalists who believe staunchly in renewable energy generation will see the failure of the project as a blow to this cause.

How now, they might ask, will inexorably increasing energy demand be met?

Will the curtailing of this project give impetus to renewed calls further to dam the Clutha River for hydro-electricity?

Could it mean that lignite deposits beneath ground in classically beautiful parts of the Maniototo – following on from the Mataura pilot plant – become the focus for future environmental battles?

One thing all can probably agree on, however, is that prospecting for new energy sources is an increasingly costly business. Meridian, especially, will have good reason to be rueful on this account. In April 2004, it dropped the $1.2 billion Project Aqua scheme on the Waitaki River because of opposition. It had spent $45 million on the project and another $50 million buying land in the Waitaki Valley. Its decision to shelve the $2 billion Project Hayes leaves it a further $8.9 million in the red.

Announcing the move last Thursday, Meridian chief executive Mark Binns described it as a “prudent commercial decision”.

He added that the company’s portfolio now contained options that made more commercial sense, while acknowledging the high cost to date of the proposal, the continuation of court proceedings, and uncertainty as to the ultimate outcome.

Project Hayes was a hugely ambitious generation project. Sited 70km northwest of Dunedin and 40km south of Ranfurly, it was to have covered 92sq km on the upland part of five high country stations and would have hosted 176 turbines with a capacity of 633MW.

Given resource consent by the Central Otago District Council and the Otago Regional Council, it ran into difficulties when the Environment Court found, in November 2009, the negative impacts of the project outweighed the positive, and countermanded the consents.

It ruled the Lammermoor Range to be an outstanding landscape. An appeal to the High Court in August 2010 saw the matter sent back to the Environment Court with instructions that additional evidence, such as possible alternative wind farm sites, be considered.

That evidence was to be presented to the court by the end of this month.

One implication to be taken from this was that Meridian had not properly considered sufficient options in the original design phase of the project, lending weight to prominent opponent artist Grahame Sydney’s reaction to the news: “Our concern was this was an inappropriate scheme in an inappropriate place.”

As such the outcome can be seen as a victory for the hard-working and determined “little guys” of organisations such as Save Central, who dedicated countless hours and an estimated $400,000 to combating the scheme. But as passionate as they were to the cause, the scheme did divide communities and there will be others who see the outcome as a blow to economic regeneration and employment possibilities in Otago.

Further, those whose overriding concern is the promotion of renewable energy might see Meridian’s withdrawal as a strategic feint.

What are these other, higher priority, projects that make better financial sense?

And do they involve renewable energy generation?

The timing of the announcement also raises questions. Meridian Energy is one of the state-owned generation companies destined for partial privatisation. Mighty River Power will be the first to be listed.

Meridian could be next up, and the last thing the company might want on its books, as it seeks the best possible price for its 49% listing, is messy, long-running and potentially revenue-sapping litigation. A cost-benefit scoping exercise may simply have indicated it would be cleaner and more profitable in the long run to cuts its losses in order to present a crisp, uncomplicated prospectus to would-be investors.