Transpower announces new Demand Side trial

Media Release
9 May 2007

Transpower announces new Demand Side Participation trial

Transpower today announced its intention to seek approval from the Electricity Commission to fund a groundbreaking Demand Side Participation trial beginning this winter in the upper South Island. Results from the two-year trial will help form a wider Grid Support Contract which looks at ways to defer transmission investment.

Demand Side Participation (DSP) is one of the means by which Transpower may be able to defer transmission investment in a region through contracting to reduce peak electricity demand.

This trial will be a first for New Zealand and will be a learning curve for all involved. It will involve Transpower running an Expressions of Interest process to identify organisations that are able to act as ‘aggregators’ .The role of the aggregators would be to sign up demand side offers which may come from large industrial users, commercial users or some domestic households.

For example, the ‘aggregators’ contracted by Transpower could approach a range of electricity users in Christchurch to become involved. If those users agree to sign up to the trial, those users would reduce their electricity use at specified times and would receive a payment in return.

General Manager, Grid Investment Tim George said that the upper South Island was chosen for the trial because of the need for transmission investment in that region in the medium term.

“Our Annual Planning Report includes work already underway to enhance transmission capacity into Christchurch. There is also work still on the drawing board to reinforce that capacity in later years. It is therefore a natural nursery for DSP.”

“The first year of the trial will be conducted on the basis of “reasonable endeavours”, as this is more about obtaining experience of DSP in terms of the reliability, quantity of load reduction available and the effect of the financial incentives. Provided it does make economic sense, the subsequent trial year will be on full commercial terms.”

The trial is being run at a time when transmission capacity to the upper South Island is adequate to meet demand. Consequently, there will be no risk to supplies if some of the demand response is not forthcoming when requested.

The information gained will be useful in developing and refining the final Grid Support Contract product and in particular identifying and reducing barriers to demand side participation.

For further information please contact:
Rebecca Wilson, Transpower Communications Manager, 04 498 2695; 021 578 608

Frequently Asked Questions

Why are you doing the trial in the upper South Island?
The upper South Island was chosen for the trial because of the need for transmission investment in that region in the medium term. There is already existing work underway to enhance transmission capacity into Christchurch, and also work on the drawing board to reinforce that capacity in later years. This trial will help identify options for managing the timing of future transmission investments.

The annual demand growth in the region (around 20-30 MW a year) is of a size that allows for demand-side initiatives to potentially defer future investments.

Why didn’t you release this in the North Island prior to putting your proposal in for a new line to Auckland?
Transpower does not have a product developed that can be used in the North Island. This trial will be used as an input in developing a Grid Support Contract product, that when completed, will be able to be used nationally as a mechanism to potentially defer future transmission investments.

Growth in the upper North Island is higher than growth in the upper South Island, and therefore the benefits from a Demand Side Participation scheme may be considerably lower in terms of deferring a larger transmission investment. For example, Auckland’s growth is around 50-100 MW a year which means that to get a two year deferral from a DSP product, at least 100 MW in year 1 and 200 MW in year 2 would need to be secured.

How will this impact on the real-time operation of the power system, where some customers already contract to have their load interrupted?
This Demand Side Participation trial will run independently of the existing arrangements the lines companies and others have to contract for load management. It will be a contractual condition of the trial that load already contracted can not be used as part of this trial.

This is only a trial when will it be rolled out as a full product available to other regions?
The Demand Side Participation trial is to help populate a larger Grid Support Contract that Transpower expects to release and have available for use across all regions in 2008. The Grid Support Contract when developed will include a combination of Demand Side Participation and generation options.

How much load do you think you can actually reduce through this product?
The trial will provide Transpower with valuable information that will allow us to gauge the volume that we may be able to contract with. This volume will vary depending on the region where a investment need is identified. Undertaking this trial will allow us to accurately identify the possible load reduction.

Have you been in discussions with the EC before lodging the application?
Yes, Transpower had previously released its plans of a trial as an appendix to its Annual Planning Report. It has also separately briefed both the Electricity Commission and will shortly be briefing the Transmission Advisory Group.

What is the process from here?
The Electricity Commission will call for submissions on Transpower’s application for Interim Grid Expenditure to fund the trial. Following a period for submissions and review, the Electricity Commission will make a final decision, which we expect to be around the end of June 2007. In parallel with this process, Transpower will shortly release an Expressions of Interest document and seek to hold a workshop session in Christchurch with interested parties to go through the framework of the trial for the winter 2007.

Ends

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