This section explores the factors that determine energy supply risk.
We have:
generation fuel,
capacity and availability,
how generation is used, or market behaviour,
and there are also other factors such as the Code.
Together they provide a profile of the risk to security of supply.
Let’s take a closer look at the main ones.
The System Operator needs to know as much as possible about the fuel situation going forward.
You can think of stored hydro as a kind of fuel.
Since New Zealand relies so heavily on hydro,
the System Operator reports on and forecasts hydro storage levels.
Remember, the market can’t contract for more rain,
and we can't predict draught, so there is always some degree of unpredictability around this!
For thermal fuels we can estimate the contracted positions for each generator.
Have they contracted for enough thermal fuel to compensate for a dry winter?
Geothermal is a highly reliable source of fuel. Although we can't store it, we can forecast it for the year ahead.
Wind is another fuel source we take into account.
Although it can’t be stored or contracted, over the long term it is almost as reliable as geothermal energy.
While wind in real time is quite unpredictable,
over a longer period (like a winter)
we can make reasonably reliable assumptions about the energy a wind farm will produce.
Of all these fuels, hydro is the least predictable.
Since it is such a big part of our generation mix, you can you can see how important it is to manage it effectively.
With the next factor, generation and transmission capacity, we look at:
the maximum power each generator can produce,
the rating of each line, and
the total HVDC capacity.
All of this tells us the maximum capacity, but we do need to be realistic about what is actually available,
which leads us to the next risk factor, which is our generation and transmission availability.
There will always be outages and constraints in the power system.
These are entirely normal and occur for a variety of reasons.
There may be planned outages for plant upgrades, maintenance, or temporary grid re-configurations.
There are also unplanned outages as a result of faults or damage.
Another influence can be resource consent limitations,
for example, a thermal generator may have river heating limits that can affect how much it can produce.
Not all outages negatively impact risk.
For example,
sometimes circuit outages can be used to temporarily boost transmission capacity for transfer south.
Communicating the effect of not having plant available allows market participants to make informed decisions.
For example, whether to postpone their planned outages, or moderate their market behaviour.
Ultimately, Security of Supply is in the hands of market participants.
Market behaviour is closely linked to the other factors we've covered.
This model shows how market behaviour can influence the other factors, and vice versa.
The area of this shape roughly represents energy supply risk.
As you can see, the risk meter is currently indicating this shape is normal.
Let’s see how this can change.
You can see how wet years typically mean lower risk.
There is room for less contracted fuel, more outages and less conservative market behaviour -
all without compromising security of supply.
Notice how capacity hasn’t changed in our example.
This is because generation and transmission design capacity is more or less static and any major changes are planned so are no real surprise.
The challenge for market participants is recognising whether they’re in a ‘wet year’, or a ‘dry year’, or something in between.
For instance, it's March and things are looking dry.
Generators contract for more fuel, and then it rains for several weeks on end.
This could lead to some generators losing money, for example, by water spilling over their dams.
Generators must make the best commercial use of their assets.
They must balance the risk of being too conservative and losing money,
or being less conservative and inadvertently causing power shortages.
To help provide commercial incentives to avoid power shortages
retailers are required to compensate their customers during an official conservation campaign.
As you have seen, supply risk is dynamic and ever changing,
and the role of Security of Supply is to continually assess and communicate information.
Let's look at some of the key reports published on System Operator's website,
and the inputs and concepts behind them.