Transpower says more investment is needed to keep the lights on.
National grid operator Transpower says New Zealand needs to up its investment in flexible power systems if it is to meet increased demand this winter.
The state-owned company has called for a step-change in investment in flexible power-system resources such as fast-starting generators, grid-scale batteries and demand that can be reduced quickly when the power system is tight.
In its winter outlook, Transpower said the system needed more flexible resources to ensure sufficient electricity supply capacity to meet peak winter demand as New Zealand transitioned to a more renewable and intermittent electricity supply.
The company expected the winter to be challenging from both a peak and energy perspective, due to a combination of continued demand growth, increased intermittent generation and its uncertainty during peak demand periods, the availability of firming generation due to planned and unplanned outages, project delays for the Tauhara geothermal and Harapaki wind farm projects and insufficient fast-start peaking capacity.
Transpower’s general manager operations, John Clarke, said that until more flexible resources are added to the system the industry would need to continue to work particularly hard together to ensure a reliable electricity supply for New Zealanders.
As grid operator, Transpower issued 14 customer advice notices (Cans) - a “heads up” to power generators when residual power to the grid is expected to drop below 200 megawatts - last year. That was up from 13 in 2022 and 10 in 2021.
“As New Zealand transitions towards more renewable generation, thermal generation is needed on the coldest mornings and evenings to provide security of supply when wind generation drops or if faults happen on the system,” Clarke said.
“However, much of New Zealand’s thermal generation fleet is slow-start and not suited to this firming role, unless it is already running.
“This poses a real co-ordination challenge for the industry to make sure all available generation is turned on and ready to be dispatched when demand is at its highest. Additional flexible resources will make a real difference.”
Genesis Energy and Contact Energy are relied on to supply thermal backup to the system when it is under pressure.
Clarke said the industry had responded well to the winter peak capacity challenge over the past two winters.
This included unplanned outages to around 700 megawatts of generation capacity last year due to several long-term unplanned outages of major generation units. This was around 10 per cent of peak demand during the coldest mornings and evenings.
The outages contributed to eight low residual generation situations last winter, four of which would have escalated to grid emergencies without industry responding through a mix of delayed or cancelled outages of other generation units and the commitment of additional slow-start thermal units.
Clarke said grid emergencies typically required Transpower to work with local lines companies to manage demand.
This would initially mean turning off hot water cylinders for a short time but could include power cuts if the electricity supply shortfall was significant.
“Thanks to co-operation from industry to make sure all available capacity was offered when needed last year, we were able to get through a really tight winter without any disruption to consumers’ electricity supply,” Clarke said.
“But we have been saying for some time that we need more flexible resources in the system and we urge industry to accelerate the necessary investments.
“This is particularly the case at this stage of New Zealand’s transition to increasing amounts of intermittent renewable generation in the system.”
Demand response – where industrial customers or electricity retailers working with their consumers scale back demand during peak periods in response to higher prices – also has a key role to play in the power system both now and into the future, Clarke said.
Five new electricity generation resources began offering electricity to the wholesale electricity market last year, the most in a single year since the current market was established in 1996.
Collectively the new units can offer 378 MW of electricity under ideal conditions, or around 4 per cent of New Zealand’s almost 10,000 MW of total installed generation capacity.
Transpower raised the spectre of power cuts this winter if there are outages in the system.
In its report, it said increased availability of existing generation during peak load periods and increased demand-response would help mitigate the peak demand challenge.
The commitment of two of Genesis Energy’s coal and gas-fired Rankines, in addition to both combined-cycle gas turbines at Huntly and Taranaki, would provide a “high likelihood” of meeting the peak challenge.
“However, increased outages will require additional thermal generation commitment (if available) and increased demand-response,” it said.
“Even then we may be operating with reduced reserves during the coldest evening peaks with low intermittent generation, leaving the system vulnerable to changing conditions or sudden faults.
“This could lead to demand management, which could include power cuts.”
The new resources included three wind farms plus two significant milestones for the New Zealand electricity industry – the first utility-scale solar farm and the first utility-scale battery energy storage system, Wel Networks’ 33 MW Rotohiko battery.
The new renewable intermittent generation connected to the market last year would provide much-needed energy across winter, Clarke said.
“But with peak demand growing year-on-year, increased investment in flexible resources like the Rotohiko battery will be critical to ensure we have the capacity to meet peak demand when the sun is not shining and the wind is not blowing.”
Late last year, Genesis Energy’s new chief executive, Malcolm Johns, previously CEO of Christchurch Airport, said the level of risk inherent in New Zealand’s electricity system would not be tolerated in the aviation world.
“System risk, as managed in electricity, is very different to aviation, and aviation would not tolerate the system risk that is sitting in electricity at the moment,” Johns told the Herald in November.
Mercury and Meridian Energy, which have extensive renewable generating assets, have called for more thermal peaking capacity to be built into the system.
As it stands, gas backs up the electricity grid, mostly through Genesis Energy’s coal- and gas-fired Huntly power station and Contact Energy’s fast-start “peaker” plants in Taranaki.
Genesis’ gas-fired turbine — Unit 5 — at Huntly was out of action for several months last year after one of its three circuit breakers failed. Unit 5 returned to service in late January.
In September, Contact announced the failure of one of its gas-fired, fast-start peaking units - GT22 - which supplies power to the grid when the system is stressed.
In an update provided to the Herald, Contact said it worked hard with GE to accelerate the repair and return of the unit to New Zealand.
The unit is now expected to arrive in May this year - ahead of the original March 2025 date.
“This would be an improvement to what Transpower has modelled,” Contact said.
“This important unit should assist in improving winter security margins and we are pleased to see it will be available for 2024 winter,” the company said.
Contact also said it expects to run its gas-powered Taranaki Combined Cycle plant through this winter.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
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