Fonterra’s Shift to Renewables Risks Straining Transmission Infrastructure

A Decade of Renewable Power for Dairy

Contact Energy has formalised a significant 10-year electricity supply agreement with Fonterra, one of New Zealand’s largest dairy producers. The contract will see Contact provide approximately 415 gigawatt-hours (GWh) of electricity annually to Fonterra’s Whareroa dairy site, starting with an initial supply of around 140 GWh in August 2026. This volume is expected to ramp up by 2028, following necessary transmission upgrades, reflecting the site’s growing energy needs.

Aligning Supply with Renewable Ambitions

The timing and structure of the agreement are particularly noteworthy. Contact’s supply is weighted towards summer months, a strategic fit with its expanding portfolio of renewable energy assets, including solar projects developed in partnership with Lightsource bp. This seasonal alignment not only optimises the use of renewable generation but also supports Fonterra’s broader sustainability goals by reducing reliance on fossil fuels like natural gas.

Dorian Devers, Contact’s Chief Development and Major Projects Officer, highlighted the synergy between the companies: "New summer-weighted demand aligns with Contact's portfolio of renewable generation and is a great fit for the solar projects Contact is developing with Lightsource bp. With its strong renewable development pipeline, Contact is well placed to support customers as they decarbonise." This underscores a growing trend in New Zealand’s energy landscape where industrial sectors are increasingly turning to renewable electricity as a cost-effective and environmentally responsible alternative.

Pricing and Market Implications

The pricing terms of the agreement are consistent with Contact’s recent long-term sales in the North Island, adjusted for the specific shape and location of the supply. This suggests a stable and predictable revenue stream for Contact, while providing Fonterra with cost certainty as it transitions its energy consumption. The deal also signals confidence in the ongoing development of New Zealand’s renewable infrastructure and the viability of large-scale industrial electrification.

Broader Sector Impact

Fonterra’s commitment to sourcing a substantial portion of its electricity from renewables at Whareroa could serve as a bellwether for the dairy industry’s decarbonisation efforts. As one of the country’s largest energy consumers, the dairy sector’s shift away from natural gas towards renewable electricity could accelerate investment in grid upgrades and renewable projects, benefiting the wider energy market.

For Contact Energy, this agreement not only reinforces its position as a leading renewable energy supplier but also showcases its ability to tailor solutions that meet the evolving needs of large industrial customers. The partnership with Fonterra may well pave the way for similar deals as other sectors seek to reduce their carbon footprint.