Power watchers on alert for threat to winter lake levels

By CHRIS DANIELS energy writer

The threat to national energy supplies of another cold, dry winter has been outlined by a group set up to predict the likelihood of another 2001-style crisis.

The Winter Power Group 2003, made up of power industry and Government representatives, says it is too early to say whether New Zealand will suffer another year like 2001, when the Government was forced to ask for public power savings as inflows into the southern hydro lakes fell to record lows.

The steering group had little to do last winter, since high rainfall allowed electricity generators, particularly the state-owned Meridian, to make large amounts of cheap electricity.

Latest data issued by M-Co, which runs the wholesale power market, shows storage lakes about 90 per cent full, with national inflows for the past week well above average.

Since the lakes hold between six and eight weeks of storage, it is the inflows that are most important for security - the dry year of 2001 began with very high water levels, but the lakes were never topped up during autumn.

The group is estimating a 4 per cent growth in electricity demand this year.

Transpower, which owns and manages the national grid, has made some changes to the system, including increasing the capacity of the link between the North and South Islands.

The companies that rely more on thermal power stations, such as Contact Energy and Genesis, have previously counted on dry years to make more money by supplying electricity into the higher priced wholesale market. But now that they have retail commitments to supply power roughly in line with what they can generate, the opportunity to make big profits has been reduced.

Conversely, the risk of losing huge amounts - NGC lost more than $300 million in 2001 - is also cut.

Another change in the energy sector that could make a difference in any dry year will be the ability and willingness of big power users to cut back on their electricity use.

Such "demand side response" has become more popular among the power retailers, who are developing ways of paying big users to scale back energy use in times of high wholesale prices.

The Winter Power Group will soon launch its own website showing the different possible scenarios of electricity generation that include low lake inflows and power stations' breakdowns in their analysis.