Sector taking steps in face of risk
NEW Zealand’s electricity sector is taking steps to prepare for the risk of conservation measures, Energy Minister Megan Woods acknowledging soaring wholesale prices are putting some companies in jeopardy.
Transpower has begun publishing daily reports on the security of New Zealand’s electricity supply, as water levels in hydro lakes — the key driver of New Zealand’s daytoday power needs — remain at unusually low levels.
Dr Woods said this week an interagency team to observe the electricity industry was being put together. Transpower has said New Zealand is approaching an early warning level on its ‘‘risk curve’’, a model which measures the risk of the country facing supply outages.
‘‘I think everybody in the system knows that there is no need to panic,’’ Dr Woods said.
‘‘But the fact that we have to make sure that the systems are ready to go, we need to make sure we’re preparing.’’
Some energy observers say the industry is already under immense strain as the key South Island lakes are lower than average and unlikely to see significant inflows heading into winter during a La Nina weather pattern, which means belowaverage rainfall.
At around 66% of average at present, it is the lowest for this point in the year for any year since before the creation of the wholesale electricity market in 1996. Wholesale prices have soared, often to above $300 per megawatt hour, three to four times the longterm average.
‘‘We are very stressed right now. There’s no way of dressing that up,’’ John Kidd of Enerlytica, a leading energy analyst, said.
‘‘And it’s not obvious in the system, how it’s going to fill itself during the peak demand period which is, of course, winter.’’
New Zealand would be short of electricity were it not for the giant Huntly Power Station ‘‘running hard’’ on coal, he said. Mr Kidd, along with other industry observers, sees the rising risk of some form of political intervention.
Last week, Dr Woods told an electricity retailers event she had asked industry regulator the Electricity Authority to check whether current wholesale prices were fair, and what would be done to bring prices down.
She denied this was a step towards some other kind of intervention, and said she was simply asking the question: ‘‘is it fair; is it reasonable? And, if it’s not, I want advice on what my options might be’’.
The complex risk curve formula of Transpower is approaching the 1% point. In the event it rises to 10% — something which would likely require two more months of dry weather in hydro catchments or other unexpected disruptions — it would trigger a nationwide conservation campaign.
Dr Woods played down the significance of such a measure, likening it to ‘‘a summer water [saving] campaign, without the rules about when you can put your sprinkler on’’.
She had identified the risk that elderly people — who tend to be the best in conservation campaigns — could expose themselves to the winter cold in unheated homes.
But she was not aware of a key aspect of a conservation campaign which would require electricity companies to pay account holders $10.50 a week if a campaign was called, a mechanism which would cost the sector millions of dollars a day, Dr Woods said. — The New Zealand Herald