Contact Energy's new Tauhara geothermal power station will be delayed slightly, will cost more, but is expected to generate more power.
Illustration of the planned new Tauhara geothermal power station to be built by Contact Energy. Photo: Supplied
The cost of the new plant near Taupō has blown out by $140 million to $818m, which the company said was because of complexities in construction as well as higher costs caused by the pandemic.
"Obviously there are increased costs associated with the expansion in capacity and some of the complexities associated with delivering this increased capacity, but, like every project across New Zealand, we have some serious headwinds from the Covid-19 pandemic to navigate which have impacted project costs," said Contact chief executive Mike Fuge.
"The pandemic's tentacles reach far and wide and affect everything from increasing commodity prices, to finding the right people in an ever-tightening labour market, to the ongoing constraints impacting global supply chains."
The upside had been that the Tauhara field was found to be more productive, which would result in increased generation of 168 megawatts from the original expectation of 152 megawatts, Fuge said.
The completion of Tauhara had been put back to the second half of 2023 from mid-2023, he said.
Market demand for renewable energy had markedly improved in the past year, which had improved the economic outlook of Tauhara, he said.
"We've seen the emergence of multiple data centre projects, process heat conversions ramping up, and strong appetite from industrial users for long-term electricity supply deals."
Last year, Contact raised $400m through a capital raising to pay for development of the new field, which the company said was the best renewable energy project on the drawing board.