Fast-tracked $506m Otago wind farm Mahinerangi breaks ground

Mercury will start building a $506 million wind farm in Otago after receiving fast-track approval for the project in July.

The Puke Kapo Hau wind farm is the second stage of the Mahinerangi farm, about 50 kilometres west of Dunedin.

The current 12-turbine Mahinerangi farm started generating in 2011, and produced enough power for the equivalent of roughly 16,000 homes every year.

Puke Kapo Hau would boost turbines to 52 and the installed capacity by 192 megawatts to 228 megawatts with an expected annual generation of about 648 Gigawatt-hours.

Together the two stages were set to become the country's biggest wind farm, generating enough power for the equivalent of about 92,000 homes.

The second stage was anticipated to take two years to build and inject an estimated $200m into the economy with up to 200 people working on it each day during peak construction.

Mercury chief executive Stew Hamilton said Puke Kapo Hau was Mercury's first renewable energy project approved under fast-track and would be the first wind farm constructed under the legislation.

There was "unprecedented investment" in new renewable energy generation, he said.

"As new generation comes online and increases supply, it helps ease pressure on the electricity system and supports lower costs over the long term," he said.

"Over the past year we've seen wholesale electricity prices fall significantly, with average spot prices dropping from around $196 per megawatt hour to $79 per megawatt hour.

"While many factors influence electricity market prices, increasing supply is an important part of improving affordability and reducing overall system costs over time."

Mercury also has a 140 megawatt power purchase option agreement with Datagrid for its large-scale data centre project in Southland.

Mercury previously confirmed the decision to approve the expansion was supported by the agreement with Datagrid.

"Data centres can play an important role in New Zealand's economic growth, but new demand needs to be matched by investment in new electricity generation," he said.

"By developing demand and supply together, New Zealand can support growth while maintaining energy security and helping manage long-term electricity costs."

Mercury also has invested $53m for a 12.7 percent minority stake in Datagrid.

Hamilton initiated the groundbreaking ceremony with Te Rūnanga o Ōtākou on Tuesday at the 1700 hectare site.

Rūnanga Ūpoko, Edward Ellison, said the location on the eastern foothills of the Lammermoor Range held cultural significance for mana whenua.

"The name Puke Kapo Hau was recommended by Te Rūnanga o Ōtākou and means simply, the hill that catches the wind," Ellison said.

Once operational, Hamilton said the wind farm would employ around eight to 10 full-time staff as well as rely on local and regional subcontractors to run and maintain the turbines over 30 years.