”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,” she said.
“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 the industry calls “Emergency Risk Curves” (ERCs).
The ERCs reflect the risk of running out of hydro storage over the next 12 months, taking into account availability of thermal generation fuels such as coal and gas, and the impact of hydro inflows on controlled hydro storage levels.
Resource consent conditions vary but some hydro generators 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 today’s 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.
But in response to submissions, it has raised the curve for September as well as by a smaller amount for October to give generators more flexibility to manage storage levels if inflows from rain and snowmelt are slow to improve.
There were two submissions urging Transpower to start asking New Zealanders to conserve electricity now, citing high wholesale prices as evidence the power system was already in an emergency situation.
Bramley said the wholesale electricity market was designed so tighter supply conditions could lead to higher prices.
But 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 focused 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.
If conditions deteriorate further and hydro lake levels fall below the emergency risk curve and are forecast to remain below that curve for at least one week, Transpower must organise an official conservation campaign 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 per week.
Bramley said that, 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 was monitoring the situation carefully.
Several measures have already been implemented to take pressure off the grid.
New Zealand Aluminium Smelter (NZAS) this week agreed to reduce electricity consumption by another 20 megawatts (MW) to further help New Zealand’s national grid through the energy squeeze.
That was in addition to the 185MW demand reduction the smelter recently initiated.
Wholesale power prices have fallen after peaking at over $800/megawatt-hours (MWh) this month, but they remain elevated at around $450/MWh.
Last week, Methanex, the country’s largest natural gas buyer, temporarily mothballed its remaining operations at Motunui in the midst of an acute gas supply shortage.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
