Power system operator warns of unacceptable risk of power cuts, without action

Friday, 9 August 2024

Winston Peters accuses power companies of 'profiteering', as many high energy users say business is getting tougher.

Transpower looks set to lower the bar for moving the country into electricity “alert status”, in an attempt to try to head off the potential for spring power cuts.

A proposal issued by Transpower and publicised by the Electricity Authority would make it easier for it to give generators the green light to draw down lakes Pūkaki, Tekapo and Hawea to levels that are not normally allowed, during the month of September.

It told power companies it was also considering starting preparations for an “official conservation campaign”, should the electricity supply situation worsen.

It has given the power sector just one week to make submissions on its plan, which comes as seasonal hydro lake levels fall to levels seen only four times in the past 90 years and as wholesale power price surge and factories close.

The “very tight timeline” for consultations reflected “the evolving security of supply situation, the need to quickly provide certainty to market participants and stakeholders, and the limited time available for the industry to respond”, it said.

Without any action, there would an unacceptably high risk of “both energy shortages and capacity shortfall” – in other words power cuts – during periods of peak demand, Transpower said.

One real risk was that, with fossil-fuel turbines running hard, a piece of generating equipment could fail, it said.

“Should a larger thermal generator fail the impact for energy security would be severe and with the potential for widespread supply shortages.”

Transpower warned there would be a downside in issuing an alert and allowing generators to draw down hydro lakes by dipping into their so-called “contingent reserves”.

That was because doing so would increase the risk of electricity shortages next year, when power companies were already signalling a heightened risk of an energy shortage, it said.

Dipping into hydro reserves this year would increase the risk of power shortages next winter.

“All else being the same, above average inflows through spring and summer will be needed to build up hydro storage ahead of winter 2025.”

Transpower said it was for that reason that it was only proposing to make it easier for it move the country into alert status during the month of September.

“Access to contingent storage, while necessary based on current information, must not continue longer than is necessary to ensure near-term security of supply,” it said.

Resources Minister Shane Jones said on Wednesday the Government was considering intervening in the electricity market to bring prices down, saying also that he felt there were “significant deficiencies” in the market.

But Energy Minister Simeon Brown said the fundamental problem was a shortage of power, stemming from a dry year, “low wind” and a lack of natural gas.

CORRECTION: An earlier version of this article stated that the proposal had been released by the Electricity Authority, rather than Transpower (amended 9.17am, 9 August 2024).