Transpower warns of potentially tight winter power supply

National grid operator Transpower says it is working closely with the electricity sector to manage potentially tight supply during cold snaps this winter - and warns consumers may be asked to cut back on power use at peak times.

Transpower said tight supply situations during short periods of peak demand were a result of increasing electricity demand, as well as New Zealand’s transition to a future with a decarbonised economy powered by renewable electricity generation.

Chief executive Alison Andrew said higher volumes of renewable but intermittent generation, such as wind, had left the electricity system susceptible to equipment faults and changing weather conditions at times of high peak demand, particularly during winter cold snaps.

“The transition to higher levels of renewables is critical but we also need other flexible generation capacity or demand response that can react quickly to support it during times of high usage,” he said.

“Transpower is committed to doing what it can to ensure that consumers are not disconnected due to an electricity supply shortfall at these times, and we are working with the sector and government to put in place solutions.”

Transpower in its role as the system’s operator, highlighted winter capacity risks in a paper last year.

The paper came after it was forced to call five separate “grid emergencies” during 2021 and 2022 when equipment failures exacerbated tight supply situations.

“It demonstrated how demand at peak times in the mornings and evenings has grown significantly in the last two years, increasing the amount of electricity generation required for short periods,” Andrew said.

“It also showed that New Zealand has sufficient generation capacity, but slow-start thermal [coal and gas] generation is not always offered into the market during peak demand periods.

“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.

“If conditions change, such as the wind dropping and demand spiking, this can squeeze the buffer we keep in the system for security reasons, known as residual generation.”

Renewable but intermittent generation, such as wind, has left the electricity system susceptible to equipment faults and changing weather conditions. Photo / File

Andrew said that Transpower called for generators to make more electricity available on numerous occasions in 2021 and 2022 where forecast residual generation dropped below the minimum 200 megawatt (MW) buffer it aims to keep in the system.

“When this happens, often the only generation that is not already committed is slow-start thermal generation, and this typically requires a number of hours to start up.

”Generators need to make a decision on whether to start up their plants to provide residual generation just in case it is needed, which can cost tens of thousands of dollars that they will not recover if it is not needed.”

Around 1100 MW of New Zealand’s 2000 MW of thermal generation capacity is from slow-start units, which typically take 6 to 12 hours to start generating, or significantly longer if they are cold, making them unsuitable for managing winter peaks.

In its winter capacity paper, Transpower identified the need for additional flexible generation capacity or demand response to alleviate these winter capacity risks.

Transpower said it has also been working with the Electricity Authority and the rest of the sector on a range of initiatives to better manage winter peak capacity risks including making better information available on residual generation and wind forecasts.

General manager operations Stephen Jay said Transpower would continue to work closely with industry to make sure that residual generation margins were healthy going into winter peaks, providing extra security if faults happen on the system, but that demand management remained a critical tool.

“If we do face tight spots, we are also able to work with lines companies and large industrial users to switch off discretionary demand to get us through.”'

Hot water systems are regularly switched on and off by lines companies to manage peak demand.

“We may also ask New Zealanders to help by switching off power in rooms they are not using and doing washing and charging devices and electric vehicles outside of peak times,” he said.

Jay said that where there is an electricity supply shortfall as a result of a transmission or generation issue and discretionary demand is not enough to balance the system, Transpower may be forced to work with lines companies to switch off power for a short time to some customers.

“We will continue to work with industry to ensure that we have enough residual generation as we go into periods of peak demand,” he said.

“But if we face a situation where there isn’t enough electricity to meet demand for any reason, we will need to work quickly with lines companies to disconnect some consumers for a short time.

“This will be a last resort until peak demand passes or until the electricity supply shortfall is restored and will prevent the risk of grid collapse, which would result in widespread uncontrolled outages that would last significantly longer.”

The Electricity Authority, which implemented “real-time” pricing for the wholesale electricity market last November, said the first instance of reserve scarcity pricing occurred on May 9, which saw spot prices spike.

For about 13 minutes, the system did not have enough reserves to cover the loss of the largest risk on the system. Reserve prices went up to the reserve scarcity price of $3000/MWh.

The EA said a second instance of reserve scarcity happened two days later, on May 11, and a third on May 16.

“These instances of reserve scarcity pricing are examples of real-time pricing functioning as designed,” the EA said.

“They signal to the industry what was happening in real time, and allow participants to react.”