Transpower Gives Industry Additional Flexibility To Manage Emerging Electricity Supply Risks

Transpower has today announced it will bring forward the ability of hydroelectricity generators to access contingent storage if necessary to alleviate risks to electricity supply resulting from historically low lake levels.

The decision follows consultation with industry and other stakeholders and comes as controlled hydro storage is at just 55% of average for this time of year, which is among the lowest levels in around 90 years of historic records.

Transpower Executive General Manager Operations Chantelle Bramley said the decision was largely supported by industry and will allow generators to access contingent storage at lakes Tekapo, Pūkaki, and Hāwea if a security of supply alert status is triggered.

“Contingent storage is water in hydro lakes that electricity generators can only access for generation at specific times to mitigate the risk of an electricity shortage,” Ms Bramley said.

“A key consideration in our decision has been that if hydro generators can’t access their contingent storage, they will have limited generation capability, which will increase system security risks.

“While storage levels tend to increase in spring as rain falls, our decision will give industry increased flexibility to respond to reduce system security risks if there is not sufficient rain and the situation continues to deteriorate.”

The various stages of Transpower’s response to emerging security of supply risks are triggered by what are known as Emergency Risk Curves (ERCs). The ERCs reflect the risk of running out of hydro storage over the next 12 months, taking into account the availability of thermal generation fuels like coal and gas as well as the impact of hydro inflows on controlled hydro storage levels.

Resource consent conditions vary but some hydro generators can typically only access contingent storage when national or South Island controlled storage drops below the ‘Alert’ risk level, which was not expected to be until October under settings prior to this decision.

However, because of mismatched drawdown of hydro storage lakes in recent months, it was anticipated that some individual lakes could have already reached their resource consent limits by this stage.

Transpower initially proposed raising the alert curve for only the month of September. In response to submissions, it has raised the alert curve for September as well as by a smaller amount for October to provide generators more flexibility to manage storage levels if inflows from rain and snowmelt are slow to improve.

Timing for potential electricity conservation campaign

There were two submissions urging Transpower to start asking New Zealanders to conserve electricity now, citing high wholesale prices as evidence the power system is already in an emergency situation.

Ms Bramley said that the wholesale electricity market is designed so that tighter supply conditions can lead to higher prices. However, the security of supply policies set by the Electricity Authority that guide Transpower in its system operator role, including specifying the information it provides to the industry, are focussed on physical system risks.

These include controlled storage levels, hydro inflows and the risk of running out of hydro storage given the availability of thermal fuels like coal and gas.

Transpower’s decision to bring forward the ability of generators to access contingent hydro storage if necessary to alleviate security of supply risks as well as more frequent security of supply reporting are its first steps in managing the emerging dry year risk.

If conditions deteriorate further and hydro lake levels fall below what is known as the emergency risk curve and are forecast to remain below that curve for at least one week, Transpower must organise an Official Conservation Campaign (OCC) funded by the Electricity Authority.

If a conservation campaign is called, retailers will compensate consumers each week for reducing electricity use. The amount is determined by the Electricity Authority and the minimum weekly amount is currently $12.00 per week.

Ms Bramley said at this stage New Zealand is not forecast to reach the emergency level in the next few months, even under worst case inflows, but Transpower is monitoring the situation carefully and will be giving regular updates.

The final decision along with submissions are on Transpower’s website.

Notes

Transpower’s role as system operator

Transpower doesn’t own, operate or control any electricity generation. As system operator, it runs the power system and the wholesale electricity market under the oversight of the Electricity Authority, but it doesn’t have a role in setting prices.

Wholesale prices are determined by the market based on consumer demand and generators’ offers to supply electricity at certain prices. More information about how wholesale prices are determined is on Transpower’s website.

One of Transpower’s key roles as system operator is to provide information on security of supply – a single view on how much fuel the industry has to run Aotearoa’s power system – and to help coordinate the industry response to changing conditions.

It has done a lot of work in recent weeks to assess the implications of the worsening hydro situation, has stepped up its security of supply reporting, and is working closely with MBIE, the Electricity Authority and industry on managing the situation.

Its system of risk curves for monitoring low lake levels as well as planning for energy conservation campaigns was initially developed in conjunction with the Electricity Authority in response to dry winters in the 2000s.

Because security of supply risk can manifest itself in a variety of ways due to system conditions, the system operator has discretion to modify its approach in response to specific conditions, such as through its decision today to alter alert curve buffers to give industry flexibility to respond to the worsening hydro conditions.

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