National grid operator Transpower has a $600 million scheme ready to get electricity out of the South Island if the Tiwai Point aluminium smelter shuts down, it says.
Tiwai Point aluminium smelter Photo: Wikicommons
A statement from Energy provider Contact Energy said last week a fourth cable could be needed if the smelter, which uses about one seventh of New Zealand's power, closed.
The smelter has an agreement to buy electricity for manufacturing aluminium until 2030, but it has the right to cancel that agreement from 2018 as long as it gives one year notice of its intentions.
Closure of the plant at the entrance to Bluff harbour would leave 572 megawatts - mainly from Manapouri power station in Fiordland - unused.
Transpower chief executive Alison Andrew said she had a contingency plan ready.
"For around about $600 million we could move all of Manapouri's energy into the North Island," she said.
"That would involve things like finishing work [on transmission improvements] in the Clutha Waitaki areas."
It could also involve adding an extra Cook Strait cable and making improvements in the central North Island and near Auckland.
She said these improvements in transmission would have to be compared with other options, including having plants in the North Island that could start generating quickly during cold weather, rather than developing more transmission from the South.
The smelter company often complained its power was too costly, and had threatened to shut its doors in the past.
However, most observers expected it would stay on next year as well because its finances were hanging on and remediation costs would be high if it closed.
In July, the company declined to reduce the amount of power it bought from 576 megawatts to 400.