1 May 2012

Contact Energy drops plans for Clutha dams

7:42 pm on 1 May 2012

Contact Energy has shelved plans to build hydro-electric dams on the Clutha River in the South Island, saying the costs are too high.

The energy company has spent the past three years investigating the options at four sites, Luggate, Beaumont, Queensberry and Tuapeka Mouth.

It says the costs were much higher than the expected $300 million to $1.5 billion per dam, meaning none of the options are viable in the foreseeable future.

Contact Energy already operates the Roxbourgh and Clyde dams on the Clutha and will now pursue building wind farms and developing geothermal generation because the costs per megawatt produced are more economical.

Hydro projects manager Neil Gillespie says Contact has got a range of new generation projects in the pipeline - either confirmed, consented or being constructed.

Other factors contributing to the decision include the unease within communities living along the Clutha and the cost of transmission, including future upgrades of the Cook Strait cable.

Land holdings will be reviewed along the Clutha and Contact Energy has not ruled out selling off significant parcels of land it had bought to develop hydro dams on the river.

Environmentalists are celebrating Contact Energy's decision, but supporters of the schemes say the local and national economies will feel the impact - for all the wrong reasons and for decades.

Clutha Mata-Au River Parkway chairman Lewis Verduyn says it is a victory in a battle that has been fought since the 1960s.

He says the days of large-scale hydro projects in New Zealand are over and future generations will be forever grateful that Contact has shelved its plans.

"We've kind of turned a corner into a new era when it comes to energy and we have to look more closely at efficiency. We have to look at the way the energy system is regulated to encourage generators to use less. At the moment, they have an incentive to use more."

However, former Central Otago mayor Malcolm Macpherson says the area has missed out on billions of dollars of investment.

"They're decade-long projects. The economic impact are felt right across the region - probably across the nation - during that period and they leave enduring benefits.

"There's no doubt from Roxburgh and Dunstan that the economy expanded enormously to accommodate the project, but didn't sink back to its pre-project levels."

While not ruling out the Clutha forever, Contact Energy says it is now unlikely the river will be touched for decades.

It is the second major energy development to be shelved in the region. Earlier this year, Meridian withdrew the Project Hayes Windfarm proposal.