Transpower Seeks Views On Draft Security Of Supply Assessment

Transpower in its role as System Operator has released its draft 2023 Security of Supply Assessment (SOSA) for consultation.

The annual assessment uses electricity demand and supply forecasts to assess whether there will be enough energy to meet New Zealand’s electricity demand over the coming decade and sufficient generation and transmission capacity to meet winter peak demand in major population centres in the North Island.

Transpower General Manager Operations Dr Stephen Jay said that generators, other market participants and investors use the annual Security of Supply Assessment to provide a long-term view of power system assets and inform investment decisions, including about development of new generation.

“Our analysis looks at existing generation as well as planned generation at different stages of the development process to determine whether there will be enough electricity generation in the system to meet total demand across the country over the coming decade,” he said.

“We are seeking feedback on this draft assessment to verify the information provided by industry around supply and demand forecasts and to test the assumptions we have made.”

The assessment includes a New Zealand winter energy margin, a South Island winter energy margin, and a North Island winter capacity margin. The energy margins assess the adequacy of generation to meet expected electricity demand across the winter months under different supply and demand conditions. The North Island winter capacity margin assesses the adequacy of generation and HVDC transmission capacity to meet peak winter North Island demand.

The margins are compared against security standards set by the Electricity Authority. Falling below the security standards does not equate to an electricity supply shortfall. Rather, it implies that investment in new generation would result in an efficient increase in reliability. It can also be interpreted as representing the likelihood of an electricity supply shortfall—the higher the actual margin observed the less likely an electricity supply shortfall will be.

Dr Jay said that when considering the New Zealand winter energy margin, the draft assessment shows that the power system will have enough resources to meet national demand out to 2033 should the pipeline of consented supply projects be developed as scheduled.

“However, we recognise that not all planned generation will be developed, and that demand may differ from our forecasts, so our assessments include a range of supply and demand scenarios,” he said.

“When considering only those new supply projects that are existing and committed, and which therefore have a higher likelihood of being developed, the New Zealand winter energy margin falls below the security standard by 2027.”

With the majority of existing and planned generation in the South Island, the system’s capacity to carry that electricity to meet peak winter North Island demand is also a critical consideration. The draft assessment shows the North Island winter capacity margin dipping below the security standard by 2025.

“This is pushed out beyond the ten-year assessment horizon if planned projects that are expecting to apply for consent in the next two years are included,” Dr Jay said.

“While there is a high level of uncertainty over delivery of these unconsented projects, the analysis is clear that an increase in the scale and pace of investment in North Island generation, additional HVDC capacity, storage and demand flexibility will be needed to meet capacity margins through to the end of the decade."

Addressing winter capacity risks

The draft assessment also shows that maintaining adequate capacity and energy margins above the security standards depends on existing and consented thermal generation remaining available. However, Dr Jay said that a new sensitivity included this year highlights the challenges of meeting peak winter capacity even with existing thermal generation remaining available.

“This new sensitivity demonstrates the operational and market co-ordination challenge of integrating increased intermittent generation with slower start thermal plant, especially when there is materially less wind generation than forecast and not all thermal units are committed,” he said.

The new analysis builds on a winter capacity paper published last year and further modelling released this year by Transpower as the System Operator after it called five separate grid emergencies during 2021 and 2022 when equipment failures exacerbated tight supply situations.

The analysis demonstrates how peak demand in the mornings and evenings has grown significantly in the last two years, increasing the amount of electricity generation required for short periods.

“While New Zealand has sufficient generation capacity, slow start thermal coal and gas generation is not always offered into the market during peak demand periods,” Dr Jay said. “This is especially true when full hydro lakes and wind generators are running at maximum capacity and depressing wholesale spot prices, as was often the case last winter.”

Around 1,100 MW of New Zealand’s 2,000 MW of thermal generation capacity is from slow-start units that take 6 to 12 hours to start generating, or significantly longer if they are cold, making them inefficient for managing winter peaks.

Transpower has therefore identified that additional flexible generation capacity or demand response needs to be available to the market to alleviate these winter capacity risks.

It has also been working with the Electricity Authority and the rest of the electricity industry on a range of other initiatives to help improve the sector’s ability to manage winter peak capacity risk.

About the assessment

The annual Security of Supply Assessment is prepared by the System Operator, an independent function within Transpower contracted by the Electricity Authority to manage the real-time power system and operate the wholesale electricity market.

The analysis uses a reference case that represents the resources available to the market then applies different sensitivities based on a number of supply and demand scenarios, such as demand rising much faster than forecast or the aluminium smelter at Tiwai ceasing operations.

The draft assessment and instructions for providing feedback are available on Transpower’s website. The final assessment will have regard for feedback and be published by the end of June.

More information about the generation supply pipeline can be found in Transpower’s March 2023 Whakamana i Te Mauri Hiko monitoring report. This report was developed by Transpower in its role as owner of the national electricity grid rather than as the System Operator.

ENDS

For further information please contact:

Nathan Green, Principal Communications Advisor
027 387 5256
nathan.green@transpower.co.nz

© Scoop Media