Most of New Zealand's electricity is produced from renewable fuels – primarily hydroelectricity, then geothermal and lastly wind.

Each of the big five generator/wholesaler/retailers – Meridian Energy, Contact Energy, Genesis Energy, Mighty River Power and TrustPower – includes renewables in its generation portfolios.

The biggest, state-owned Meridian, and smallest, NZX-listed TrustPower, only use renewable resources – hydroelectricity and wind power – and both are investigating further small hydro schemes, and windfarms.

NZX-listed Contact and state-owned Genesis have a mix of hydro stations, gas or coal-fired stations, windfarms and cogeneration plants. Contact also has geothermal stations in the central North Island, as does the government's MRP, which is largely hydro based, though it owns the Southdown gas-fired power station in Auckland.

However, the last of the big hydro schemes – Meridian Energy's NZ$1.2 billion 570MW Project Aqua – was canned in 2004 and questions remain over how impressive the forecast large incremental gains for geothermal and wind will turn out to be.

When Meridian pulled the plug on Project Aqua, McDouall Stuart executive director Chris Stone told EnergyReview.net that dumping the project had turned the solution of New Zealand's energy supply-demand equation into a huge challenge.

He predicted a stark choice between future electricity stations powered by the cheapest, fossil fuels, or the cleanest, renewables, if the country continues its energy demand growth of about 2% per year.

According to organisations such as the Major Electricity Users Group (MEUG), the power picture is further clouded by the government in effect subsidising wind power by granting windfarm developers millions of dollars worth of tradable emissions units.

MEUG executive director Ralph Matthes says wind is not a panacea for secure and lowest-possible power prices and even big windfarm developments – such as Meridian Energy's 210MW West Wind venture near Wellington – will only cover peak demand growth for just over a year.

But the government says its Projects to Reduce Emissions Program, involving internationally tradable emissions units, has helped bring forward more than 800MW of renewable power projects that might not otherwise have gone ahead.

The wind industry, which accounts for less than 3% of New Zealand's generation capacity, is the country's fastest growing energy sector. Currently about 170MW is installed, about 200MW of new capacity has the necessary resource consents, and another 600MW is in the consenting process.

The New Zealand Wind Energy Association believes wind energy can account for 20% of New Zealand's electricity needs and says New Zealand wind power and hydro power can complement each other. Hydro generation can be turned on or off quickly in response to wind conditions, allowing water in hydro lakes to be stored when the wind is blowing.

New Zealand Wind Energy Association (NZWEA) chief executive James Glennie said the report showed there was a need for national wind forecasting.

"Knowing where New Zealand's wind resources are, and when, is critical to the responsible development of wind energy," Glennie said.

A report released last October by the New Zealand Electricity Commission found the country needed to change its electricity infrastructure to accommodate fluctuations in wind power.

The study looked at how wind generation affected grid frequency, how the accuracy of wind forecasts affected system management, and at the effects of changing power flows across the grid as a result of varying turbine output.

Meridian is planning a NZ$360 million, 210MW windfarm at Makara, west of Wellington, which it estimates will generate electricity over 90% of the time and will operating at full capacity about 47% of the time – more than double the international average of 23%.

The Project West Wind would complement Meridian's existing 92MW Te Apiti windfarm in Manawatu.

Meridian has invested over NZ$500 million in new renewable – wind and hydro – generation capacity during the past five years, and had expects to spend another NZ$500 million on future investments.

TrustPower is also investigating the feasibility of further windfarm schemes – a possible NZ$500 million, 300MW South Island project that would overshadow its existing 161MW Tararua windfarm, also in Manawatu.

It says resource monitoring of the Lake Mahinerangi area, south of Dunedin, indicates the potential for a world class installation, capable of achieving performance similar to its Tararua windfarm, where a NZ$180 million, 93MW third stage expansion is being constructed.

The location of the proposed project, close to TrustPower's largest hydro catchment area at Lake Mahinerangi and the four associated 84MW Waipori power stations, would also provide opportunities to harness the natural synergies between hydro and wind.

TrustPower is pursuing several other windfarm opportunities around the country, as well as several small enhancements to various North and South Island hydro schemes.

Genesis Energy is planning to have its 18MW Awhitu windfarm, southwest of Auckland, providing power to about 7500 homes from late 2007.

Several small projects could make Wellington the country's wind capital as well as its political capital. Developer Wainui Hills Wind Farms is planning a possible 30MW, 10-turbine farm at Wainuiomata, and Buckingham Asset Management a possible 70-turbine windfarm at Long Gully.

The Wellington Regional Council has said it is open to development applications for a project that could sustain up to 20 or larger wind turbines at Puketiro, or a larger project, up to 80MW in capacity, in Belmont Regional Park.

Still further projects are being mooted by various companies and private consortiums.

While wind power generally attracts more attention, geothermal is a hot contender to become New Zealand's favourite renewable fuel.

Known for its geysers and volcanoes, the country is rich in geothermal resources.

Geothermal activity, in and around the central North Island's Volcanic Plateau, currently provides about 7%, or 450MW, of New Zealand's total electricity generation capacity.

Late last year Rotorua geologist Ashley Cody said he believed geothermal power could ultimately provide up to a third of New Zealand's electricity, while former Contact Energy chief executive Steve Barrett said New Zealand could double its geothermal electricity production within a decade.

Contact – which supplies about 66% of all geothermal power from its Wairakei, Ohaaki and Poihipi Road stations – has drilling programs to add another 39MW of generation capacity at several of its fields, including Te Mihi and Ohaaki.

Meanwhile, MRP is planning a new 70MW geothermal station at Kawerau, though that could ultimately be upgraded to 300MW or so. MRP is also involved in exploratory drilling near Mangakino to determine whether a station there would be viable.

MRP has existing geothermal stations at Mokai and Rotokawa and a recent 39MW upgrade at Mokai pushed that plant's total capacity to 94MW. MRP is hoping to at least double Rotokawa's capacity to 66MW.

In addition, MRP has formed a partnership with Palmerston North City Council for a potential wind farm development at Turitea in Manawatu.