‘No need to panic’ over stressed electricity supply
New Zealand’s electricity system is taking steps to prepare for the risk of conservation measures, with Energy Minister Megan Woods acknowledging soaring wholesale prices are putting some companies in jeopardy.
Transpower has begun publishing daily reports on the security of electricity supply, as hydro lakes are unusually low.
Woods revealed on Wednesday that an inter-agency team to observe the electricity industry was being set up, as Transpower says New Zealand is now approaching an early warning level on its “risk curve”, which measures the risk of supply outages.
“I think everybody in the system knows that there is no need to panic; we’re not at the 1 per cent risk curve yet, ” Woods said.
“But the fact [is] 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, with the key South Island lakes lower than average and unlikely to see significant inflows as we head into winter in a La Nina weather pattern, which means below-average rainfall.
Currently around 66 per cent of average, the lake level is the lowest for this point in the year since before the wholesale electricity market was created in 1996.
Wholesale prices have soared, often to three to four times the long-term average.
“We are very stressed right now. There’s no way of dressing that up,” said John Kidd of Enerlytica, a leading energy analyst.
“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.”
Kidd, like other industry observers, sees rising risk of some form of political intervention.
Last week, Woods told an electricity retailers event that she had asked the Electricity Authority, the industry regulator, to check whether the current wholesale prices were fair, and what would be done to bring prices down. She denied this was a step towards intervention, and 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”. Transpower’s complex risk curve formula is approaching the 1 per cent point. In the event that it rises to 10 per cent — which would probably require a further two months of dry weather in hydro catchments or other unexpected disruptions — it would trigger a nationwide conservation campaign.