Transpower says there has been a material increase in the number of power generators wanting to connect to the grid. Photo / Getty Images
Transpower chief executive James Kilty baulks at the suggestion that the national power grid operator has been slow off the mark in connecting new power projects.
In its latest Security of Supply Assessment (SOSA), released in June, Transpower said the decline in New Zealand’s gas availability meant the country needed to deliver more electricity generation to reliably meet growing demand.
At the time, Transpower’s executive general manager operations, Chantelle Bramley, said New Zealand needed to speed up development.
“Any delay in new resources entering the market will put more strain on existing resources, impacting the ability to manage energy and capacity challenges, which will impact the sector’s ability to meet growth in demand for electricity across New Zealand,” she said.
The sector is still smarting from last year’s price spike, which highlighted a lack of progress in bringing new power generation projects on stream.
One industry source, noting Transpower’s SOSA’s call for more generation, laid part of the blame on delays in getting Transpower to connect new projects to the grid.
Kilty, six months into the job as CEO, says there has been a “material increase” in the number of players endeavouring to connect to the system.
“We’re now absolutely flying into it,” said Kilty, who was previously chief executive of electricity and gas distribution company Powerco.
“There’s been a 75% throughput increase this calendar year, which is quite extraordinary.
“Throughput” means projects moving from the queue stage and into the investigation phase.
Over the last 18 months, 47 projects have entered the investigation stage and another 42 are awaiting resources.
The current financial year will see 930MW of new generation, batteries and capacity upgrades as the build phase of New Zealand’s energy transition picks up pace.
This is a step increase from 2024-25, when Transpower connected 300MW of new generation and capacity upgrades.
Key projects have included Lodestone Energy’s Solar Farm at Waiotahe, Genesis Energy’s 47MW Lauriston Solar Farm, Contact Energy’s 54 MW Te Huka 3 geothermal power station and Meridian Energy’s grid scale battery at Ruakākā.
For now, he says, the system looks to be in a good shape thanks in no small part to heavy rain falling in the country’s hydro lakes.
“Yes, the system does look in good condition for this year, but in our system you can never say never,” Kilty says.
“My 25 years in the market tells me that you’ve got to keep that in mind.”
Looking to next year, the grid was still looking good, even though Contact Energy’s ageing gas-powered Taranaki Combined Cycle station is expected to drop out of the mix.
Kilty says last month’s agreement between the big four power generators to establish a strategic energy reserve - more coal - at the Huntly Power Station was a step in the right direction for security of supply.
“What we have seen is the rapid decline in gas supply, hence me pushing for that Huntly arrangement to go into place.
“Hope is not a strategy and we needed a coal stockpile to support the system.
“Hopefully gas comes back, but, if not, then the system has got to continue to support New Zealand.”
Transpower, he said, had 16 generation projects, representing 2400 megawatts, “in delivery” at the moment.
“We’ve got, in the investigation stage, 44 projects (representing about 8000 megawatts) under investigation.
“That’s a massive increase, so that’s all moving through really successfully.
“And then in the queue waiting to go through we have got that down to 12 months, which globally is very good.
“That’s a long answer, but the reality is that we’re moving things through really, really quickly now.
“And some of these things are quite tricky because at the same time we’re looking at major investments like the HVDC [Cook Strait Cable] upgrade.”
It also has plans for the upper South Island and the Queenstown region.
“What we’re finding from customers is they come to us with a concept and we do some initial work in that queue stage and then they change their mind, because there’s other work happening, and then we are back to square one.
“So we’re looking at how we optimise that part of the process better for customers and how we standardise the work, how we publish designs, and how we enable customers to do a bit more DIY as well.”
Throughput means projects moving from the queue stage, “where people express frustration”, and into investigation.
“With all these new technologies, rapid change and expansion of the system does need our protection engineers and our PhDs to do their work really well, so that we don’t have a Spain or Portugal style [blackout] problem.”
As investment steps up, Kilty says the system will evolve into something more complex than the current hydro-dominated network backed up by Huntly.
“It’ll become much more extensive in terms of the footprint of the system as well with wind farms dotted on hillsides and solar panels in fields and poles and wires getting that to market.
“There’ll also be more batteries, both small domestic ones and grid-scale batteries over time, and demand response will be more actively managed by our system operations business.”
Transpower is working with the Electricity Authority on increasing “demand response” capacity - when users agree to button back on demand when the system is stretched - as the level of renewable energy sources increase.
As to talk of power constraints leading to de-industrialisation, Kilty said the sector needed to be careful that “demand response” did not become “demand destruction”.
Transpower, as grid operator, is responsible for matching power demand with supply in an extremely volatile market, where wholesale prices change on the half hour, and often trade through a huge range in the course of a day.
The SOSA report maps out Transpower’s long-term view.
In the shorter term, Transpower looks over the next 200 days to identify any potential moments of shortfall that take into account the risk of the wind dropping away or of a plant failure and all those things that you would expect.
And in the even shorter run, Transpower looks at the next seven days, analysing weather data and tracking the expected balance between supply and demand.
Load is quite sensitive to temperature, particularly in the north of the country.
“In Auckland, a one degree drop in temperature in winter can mean a 100 megawatt swing in demand, so we model all that.”
“Where we see a risk, we’re communicating with participants.
“It’s a very complex operation that the team runs in real time and involves at times engaging directly with large industrials, directly with generators to work through what’s happening with their plant and ensure that the system can meet that demand 24-7, 365 days a year.”
Kilty said last year’s price spike “took a few people by surprise” and was very hard to cover in what was an extremely dry year.
“What’s happened since is the industry has ramped up its generation investment.
“It was already doing that, to be fair,” he said.
In the meantime, there is the safety net of Huntly’s coal reserve for back-up if gas supply continues to decline.
Kilty, who spent much of his career on Contact Energy’s projects around the central North Island, said geothermal was a “superpower” for New Zealand.
“We’ve developed some, certainly not all of it, and it’s gone from about 5% of the electricity mix 20 years or so ago, to now offering 20%.
“And it’s baseload [continuous] - it just sits there and runs.”
In a “shameless” plug, Kilty says Transpower would dearly love to see more geothermal assets built.
He said there was a huge opportunity for New Zealand as it transitions to net zero carbon emission economy.
At it stands, renewables account for about 90% of the grid, the envy of most industrialised countries, he says.
“We have everything we need to do that in terms of our endowment of natural resources,” Kilty says. “We’ve just got to have the ambition to go after it.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.