The New Zealand Aluminium Smelter (NZAS) and Meridian Energy have agreed on a deal to allow more flexibility of power demand from the smelter during times of grid stress or hydro shortage.
Under the deal, which will cover the remaining term of the supply contract to December next year, Meridian can require the smelter to cut demand by up to 50 megawatts when the electricity system is under stress, such as during winter peak periods, or when generation or transmission is experiencing an outage or not available.
Meridian would pay NZAS - the energy provider's biggest customer - a monthly fee in return, as well as an amount per megawatt reduction.
The companies are discussing a possible new agreement that would apply after the end of next year.
Meridian chief executive Neal Barclay said the company appreciated that NZAS made this option available over the next two years.
"New Zealand needs to build more flexibility into its electricity market and we believe demand response has an important role to play."
The agreement was conditional on receiving approval from the Electricity Authority, with Meridian to make an application on Wednesday. Under the code, the authority had 45 business days to make a decision.
NZAS chief executive Chris Blenkiron said the smelter had reduced consumption in eight out of the last 10 years, and would continue to do so to ensure there was a reliable supply of electricity.
"This conditional agreement will give Meridian the flexibility it needs to manage demand at critical periods, and we are pleased to continue to play our part as a responsible electricity user," he said.
The agreement will end on 31 December, 2024, the same date as the current electricity agreement - but the pair were in ongoing discussions about a possible new agreement that would apply after that date.