Wind generation useful but no panacea

Thursday, 2nd October 2008

Media release by the Major Electricity Users’ Group (MEUG)

Wind generation useful but no panacea

“More wind generation in New Zealand is useful, but is no panacea,” said Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG).

“A new report by the New Zealand Institute of Economic Research (NZIER) titled “Exploring wind-hydro correlation” has just been published. The report was commissioned by New Zealand Steel and MEUG. The correlation analysis in the NZIER report takes in to account wind readings between 1990 and 2008 in four locations, lake levels in 6 grouped catchments areas covering all of New Zealand and spot prices over that period. Variations over months and seasons and between wind and hydro catchments along with spot price trends are analysed.

“The report is a useful addition to the growing body of work by the electricity industry including detailed analysis by the Electricity Commission, the System Operator and wind generators on how wind can contribute to future needed new generation.

“The NZIER correlation analysis provides useful information for policy makers and investors.

“For example there have been frequent comments on possible synergies in co-optimising hydro and generation. The latest report demonstrates strong seasonal correlations between wind and hydro inflows within discrete regions. Therefore while synergies between wind and hydro might add value on an hourly or daily basis; in extreme dry or wet periods they will compound either supply shortages or excess supply on a seasonal basis within discrete regions.

“Across all of New Zealand different hydro and wind catchments are not always in sync on a seasonal basis. The report demonstrates that wind resources tend to be less variable and therefore more reliable than hydro storage on an annual basis. Therefore there is a place for more wind generation investment to take advantage of niche opportunities. It’s definitely a case of wind farm investors being alive to the risk that if they build in the wrong place where seasonal wind flows have a high correlation with lake storage levels, they’ll be paid for most of their output at low spot prices and will be unable to sell high volumes when spot prices are highest.

“New Zealand needs to keep open all generation options if we wish to have lowest cost and secure power supply. There will be niche opportunities for wind, but it’s definitely not a case of building a wind farm on every windy ridgeline” concluded Mr Matthes.

A copy of the NZIER report “Exploring wind-hydro correlation” is attached.

Copies of the NZIER report will also be available on the NZIER web site (www.nzier.org.nz) and the MEUG web site (www.meug.co.nz).

ENDS

Exploring_windhydro_correlation_FINAL.DOC

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