The System Operator does not own any generation capacity and cannot control how much electricity is offered to the system; this is a matter for generators acting in response to forecast demand and price signals.
However, we work closely with industry to understand whether there is enough generation to meet New Zealand’s electricity needs now and into the future, as well as enough transmission capacity to carry electricity from where the generators are located to where it is used to power New Zealand.
Our Security of Supply Annual Assessment provides our view of the balance between supply and demand in the electricity system over the coming decade. This helps generators, other market participants, investors and stakeholders understand security of supply risks and assists their decision making over things like building new generation.
The assessment includes energy margins and capacity margins. Energy margins tell us whether there is enough fuel in the system to power the country, including water in the hydro lakes, wind and geothermal capacity, and thermal generators that burn gas, oil and coal.
Capacity
Capacity margins look at where generation capacity is located and whether we have enough transmission capacity to deliver it to where it is needed. New Zealand is a long and thin country with most of our hydro capacity in the South Island and the bulk of electricity demand in urban centres in the North Island, which poses unique challenges.
As the System Operator, we work closely with the rest of industry, including Transpower as the national grid owner, to ensure we have a clear view of the transmission capacity the country is expected to need into the future. This covers a range of scenarios, such as how fast demand is growing and how quickly the sector switches away from carbon-based fuel sources like coal and gas.
Our New Zealand Generation Balance (NZGB) planning tool helps us identify whether generation and transmission capacity is sufficient to meet peak demand over the coming six months throughout the country. We also provide a Planned Outage Coordination Process (POCP) tool to help generators, lines companies and Transpower as the operator of the national grid plan outages so they can do the maintenance necessary to keep the system humming and minimise unplanned outages from faults.
Security of supply
We also publish detailed charts and graphics related to security of supply information for market participants every Tuesday and summarise these in our Weekly Market Movements report. This includes information on lake levels, including Electricity Risk Curves, the contribution of all fuel types to total electricity generation, as well as trends in demand and wholesale prices.
As we get within a week of real time, our market schedules then show more accurate demand forecasts, generation offers, and the bids made by retailers to buy the electricity that they distribute to electricity end users. Taken together, the market schedules show whether there is sufficient generation to meet demand throughout the week ahead. Live power system data is available here.
Matching supply to demand
If we are concerned that too little generation is being offered to the market, we will work with industry to increase generation offers. If enough additional generation is not offered to balance the system, we may work with lines companies to manage demand according to the process set out here.
We will only manage demand as a last resort to prevent cascade grid failure, which would result in widespread power outages for a significantly longer duration than if we manage demand in a controlled way. Managing demand will in most situations involve lines companies switching off hot water cylinders for a limited time, which consumers will not notice.
In an emergency, such as the sudden loss of a generator causing a supply shortfall, we may need to ask lines companies to disconnect a small number of consumers for a short time to prevent cascade grid failure. This has happened just once since the current electricity market has been in existence.