Researchers from the Energy Centre at the University of Auckland have been investigating ways to prevent power price
spikes caused by the fluctuating capacity of renewable electricity sources.
The government has set a target of achieving 100% renewable electricity by 2035. However the growth in wind powered
generation raises concerns about price variability arising from intermittent supply.
Le Wen, Kiti Suomalainen, Basil Sharp, Ming Yi, and Mingyue Selena Sheng’s recent paper Impact of wind-hydro dynamics on electricity price: A seasonal spatial econometric analysis, looked at ways of mitigating renewable power’s price volatility.
New Zealand’s wholesale electricity prices are determined by generators offering supply at nodes connected to the
national grid that supplies distribution networks which connect with consumers. Nodal prices vary across the network,
reflecting demand and the relative cost of wind, hydro, geothermal and fossil fuel generated electricity.
Nodal prices are determined every half-hour based on power availability and power demand. However power generated by
wind can fluctuate greatly, which coupled with periods of low hydro inflows and high power demand, can result in high
nodal costs, creating price spikes. While a wind-hydro system is shown as a favourable low-carbon combination during wet
seasons, in other seasons without backup generation the system remains susceptible to price volatility.
The researchers estimated price volatility associated with increased wind generation, seasonal rainfall patterns and the
role of hydro in reducing price volatility. Nodal price volatility was lower during periods of high inflows into our
hydro lakes creating an opportunity to generate electricity when there was intermittent wind generation.
Currently New Zealand lacks significant hydro storage capacity but the government has recognised this dry-period
electricity problem and approved funding of $30 million to evaluate a proposed Lake Onslow pumped storage solution.
The researchers found that with sufficient hydro storage capacity, a hydro/wind power combination could provide New
Zealand with an ideal renewable low-carbon power solution.
Ref: Wen, L., Suomalainen, K., Sharp, B., Yi, M., & Sheng, M. S. (2021). Impact of wind-hydro dynamics on electricity price: A seasonal spatial econometric analysis. Energy, 122076. https://doi.org/10.1016/j.energy.2021.122076