It is not the first time the System Operator has warned about a possible shortfall between available generation, transmission capacity and peak demand. 

However, this week it signalled that households and businesses may be asked to cut back demand, where possible demand that can be throttled back it will be and if that doesn’t work then rolling blackouts to maintain the system may be possible. 

Transpower messaging has been aimed at multiple audiences and shows that it is being very careful in its approach in the aftermath of the 2021 power cuts where the blame was firmly laid at the System Operator’s feet for mismanaging demand and supply. 

It wants no repeat of that. 

One audience is the public and politicians warning of what might come and the possible need to suddenly wind back electricity use on the coldest nights of the year or face blackouts. 

Another audience is the generators pointing out that they should be more prepared to get slow-to-fire generation closer to the point where it may be needed – even if it costs them money. 

The Electricity Authority is also on notice. 

In its release, Transpower diplomatically pointed out that the regulator had rejected the advice of the System Operator and the main generators to make it more financially worthwhile to keep slow-to-start generation warm and ready to go just in case. 

The sector is relying on a range of other measures, including more information, better forecasting and the impact of more timely pricing signals. 

Political risk 

All this effort will matter little if there are blackouts due to anything aside from acts of god. There will be political hell to pay in the run-up to the election, matched with harsh reminders about profits made while people sit in the dark. 

Transpower general manager of operations Stephen Jay said where there is an electricity supply shortfall due to a transmission or generation issue, and reducing 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.” 

Transpower chief executive Alison Andrew said higher volumes of renewable but intermittent generation like wind have 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,” she said. 

The issue of flexible generation in the system is a sensitive political issue as this has in the past been provided by gas and even oil – neither fit into the long-term plan of 100% renewable electricity. 

However, the absence of this backup means slow-to-fire thermal generation has been performing the peaker role.

Security of supply 

Transpower also recently released its draft 2023 Security of Supply Assessment (SOSA) for consultation. 

This looks into the future to assess if there is enough energy to meet electricity demand over the coming decade. It also analyses whether there is sufficient generation and transmission capacity to meet winter peak demand in major population centres in the North Island. 

The changes since the last work in this have been a minor increase in the demand forecast compared to that reported in the 2022 SOSA, largely due to information provided by the distributors from forecasts of expected increases on their networks.

The existing and committed supply pipeline (Stage 1) has increased by approximately 215 MW and the consent expected pipeline (Stage 4) has decreased significantly compared to that reported in the 2022 SOSA. 

These movements indicate the supply pipeline is being developed, which is further evidenced by the 910 GWh of new wind generation currently under construction. 

There were 334 enquiries for new grid-connected generation - an increase from 63 in 2021 and 124 in 2022 – indicating that the supply pipeline will continue to grow. 98% of the unconsented supply pipeline is made up of intermittent generation sources (wind and solar) and is 100% renewable. 

Intermittent generation has a larger impact on increasing the energy margin than the capacity margin. 

Moving margins 

The reference case (which represents the resources available to the market) falls below the upper-security standard by 2027 when considering only those new supply projects that are existing and committed.

When including all consented projects, the margin stays above the security standards for the 10-year assessment horizon.

This shows that the market has consents to build resources that could maintain the winter energy margin (WEM) for the 10-year assessment horizon. This assumes a rate of build that is significantly greater than seen in recent years.

Lower-than-expected growth in demand could delay the margin crossing the upper-security standard from 2027 to 2029. 

If either of the sensitivities that decrease the rate of demand growth occur (Tiwai exits or low demand growth) then investment is still needed before the end of the assessment horizon. 

If demand were to grow faster than the reference case, new investment could be needed as early as 2025. 

Sensitivities 

Four key sensitivities reflect a transition away from thermal generation and its fuel supply. 

These are underpinned by: 

a. intentions signalled by the market to decommission or not develop new thermal generation; and 

b. risks to ongoing thermal fuel development and flexibility highlighted by industry groups. 

These sensitivities show that the contribution of thermal fuel generation and its supply required to maintain the WEM above the uppersecurity standard can reduce from 2028. 

From 2028, the pipeline of renewable generation projects is sufficient to maintain the WEM above the upper-security standard with reduced contribution from thermal resources. 

North Island Winter Capacity Margin 

The reference case falls below the upper-security standard by 2025 when considering only those new supply projects which are existing and committed. 

A key reason for the capacity margin falling below the upper-security standard earlier than the energy margins is because the supply pipeline is primarily made up of intermittent generation, which has a lower contribution to peak capacity than controllable resources. When including consented and unconsented projects the margin stays above the upper security standard until beyond the 10-year assessment horizon. Some of these resources have a greater contribution to the peak capacity margin such as non-intermittent generation, batteries and demand response. 

Some resources can be developed more quickly than others (e.g. demand response does not need to be consented). 

If demand were to grow faster than the reference case, the NI-WCM would still cross the security standards in 2025 but to a greater degree than in the reference case.

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