What's holding up an energy supply deal on Tiwai aluminium smelter?

Meridian Energy says price is not the only issue holding up a energy agreement to keep the Tiwai aluminium smelter operating beyond next year.

Power company chief executive Neal Barclay said it was yet to strike a deal with the owners of the New Zealand Aluminium Smelter (NZAS), despite nearly one-and-a-half years of negotiations.

There were a number of issues on the table, including NZAS having a committed plan to clean up waste at the site, Barclay said.

"I think that's pretty fundamentally important to all New Zealanders," he said.

Another issue was a long-term commitment from NZAS.

"We get a long-term commitment from the smelter to stay 20 to 30 years, not just the one or two years, we have been living with for quite some time."

Another issue was a contract that included a reduced demand response from the smelter, to benefit the electricity sector when the hydro lakes were low, he said.

"That's very valuable back to the electricity sector, and it can be very valuable for the smelter not to use energy at times like that."

The negotiations were making progress on all those issues, but expected it could take perhaps another six months before a deal could be struck, Barclay said.

"It all comes down to the price of energy and what we're trying to do is agree a price that we think is fair for the smelter, fair for Meridian, and also fair for all the other uses of electricity in New Zealand."

Barclay said NZAS was also talking to other potential generators as well, including Contact Energy, which previously said it was positive a supply agreement could be reached between the parties.

Earlier this year, Contact chief executive Mike Fuge said it was engaging constructively toward new commercial arrangements with NZAS, while smelter chief executive Chris Blenkiron confirmed late last year he was talking to power generators about continuing Tiwai's operation beyond 2024, when its current power contracts were due to expire.

Regardless of whether a deal could be struck, Barclay said it would not make much difference to the sector over the long term.

"We're getting on with our development in any respect. If Tiwai leaves, it is a relatively short term impact for the market."

New Zealand would need to build a lot more renewable energy capacity, regardless of whether Tiwai left or not, Barclay said.

NZAS previously indicated it would be interested in taking part in Meridian's green hydrogen development project underway in Southland.

"We've heard them mention that and certainly we'd be up for a conversation," Barclay said.

"So yeah, there's opportunities to work collaboratively with the smelter on the future of hydrogen use in New Zealand as well."