Latest news with #SecurityofSupplyAssessment
Scoop
29-06-2025
- Business
- Scoop
Gas Decline Increases Urgency For New Electricity Generation
Declining gas availability means New Zealand has to lift the pace at which it is delivering new electricity generation to reliably meet growing demand over the coming years, a new report from Transpower shows. Electricity generation investment is accelerating but until new plant is delivered, the sector must continue to work together to make the most of existing electricity generation assets through careful maintenance of generation units and ensuring sufficient hydro storage and thermal fuel is available to run them across winter. These are key findings from an assessment of New Zealand's electricity generation and supply outlook for the coming decade that has been released by Transpower following consultation with the electricity sector. The final version incorporates views from industry, but findings remain consistent with the consultation draft. Transpower Executive General Manager Operations Chantelle Bramley said the annual Security of Supply Assessment (SOSA), which covers the decade through to 2034, also highlights a clear solution to these security of supply risks over the medium term. 'New Zealand needs to continue to accelerate the speed at which planned investment is delivered if we are going to stay ahead of growing demand and provide the reliable and affordable electricity New Zealand depends on,' she said. Advertisement - scroll to continue reading 'Any delay in new resources entering the market will put more strain on existing resources, impacting the ability to manage energy and capacity challenges, which will impact the sector's ability to meet growth in demand for electricity across New Zealand.' The report shows that the sector is already responding to the challenge with a 350 MW increase in newly commissioned generation since the last assessment in 2024. This is around 3.5% of existing installed generation capacity, which is enough to power Wellington, the Hutt Valley and Kapiti on the average weekday. The quantity of committed projects has also increased by approximately 1,500 MW since the last assessment, or 15% of current installed capacity, as have planned but unconsented projects every year for the next decade. 'These movements indicate the supply pipeline is being developed and continues to expand,' Ms Bramley said. 'However, with so much of the supply pipeline unconsented, there is risk that these projects could be delayed, deferred or dropped. So, it's essential for New Zealand that we pick up the pace and move planned projects quickly through the financing, consenting, design, build and commissioning phases so that they can start contributing much-needed megawatts. 'That's a challenge for the electricity sector, but it's also a challenge for all of New Zealand. We must all pull together to pave the way for this absolutely critical investment in the country's prosperity.' Sector coordination the solution to tight supply Ms Bramley said that New Zealand currently faces two main risks to electricity supply that need to be carefully managed by the electricity sector in the face of declining gas. 'The first is making sure we have enough energy across the winter if it doesn't rain for an extended period, as happened last year and early in 2025, or if there are faults to key equipment, further declines in gas availability or interruptions to coal supplies,' she said. 'The other is ensuring we can meet demand on the coldest mornings and evenings if the wind isn't blowing, the sun isn't shining, and not all other generation is available, either due to maintenance needs, fuel shortages, or faults. 'The market is well aware of the immediate challenges we face due to the sudden decline of gas and is already acting to manage them. This includes working together to make the most of existing electricity generation assets and ensuring there is enough fuel to run them across winter. 'It is good to see the industry advancing arrangements to extend the life of Genesis Energy's third Rankine unit at Huntly and securing coal reserves at that site to reduce the impact on electricity generation from falling gas availability.' The assessment assumes all three Rankine units at Huntly are fuelled and operational but factors in the planned retirement of Contact Energy's TCC gas plant in Taranaki. If there were a plant failure or retirement of a thermal generator like the third Rankine unit, risk would increase and new generation would need to be built even faster. Firm, flexible resources needed to manage capacity risk The assessment shows that more than 85% of the unconsented pipeline is intermittent wind and solar generation, with most of the rest being battery projects. While wind and solar add much needed renewable energy to the system, they must be supported by firm and flexible power system resources that can kick in when the wind is not blowing and the sun is not shining. Batteries are a part of the solution to these short duration capacity risks. New Zealand's first major battery, WEL Network's Rotohiko battery, was commissioned in 2023, Meridian Energy's 100 MW Ruakākā battery has recently been commissioned, and Contact Energy's 100 MW Glenbrook-Ohurua battery will start commissioning this year. Genesis Energy's 100 MW battery at Huntly is expected to be operational by late 2026. Battery projects account for around 2,500 MW of new capacity in the 2025 SOSA pipeline that is slated to be built over the next decade, compared to just over 1,000 MW in the 2024 SOSA. However, over half of these projects are not yet consented, indicating a higher degree of uncertainty. Other firm, flexible resources include gas or biofuel peaking generators that can be fired up at short notice. Hydro lakes are a high-class firm and flexible resource with hydro generation able to be quickly ramped up to help meet peak demand if not already operating at full capacity. Long duration energy support will need to come from thermal plant for some time yet to meet New Zealand's unique 'dry winter' risks, and the arrangements being advanced in relation to Huntly are a good step forward. Demand response also provides flexibility to the system. This is where industrial customers or electricity retailers working with their customers scale back demand during peak periods, typically in response to higher prices. As part of this, consumer energy resources have a role to play in smarter electricity use, including shifting demand away from peak periods. Notes: Transpower prepares and publishes the Security of Supply Assessment (SOSA) annually in its system operator role as required under the Security of Supply Forecasting and Information Policy (SOSFIP). This assessment provides a ten-year view (2025 to 2034) of the balance between supply and demand in the New Zealand electricity system. Market participants, policy makers and other stakeholders use it to inform risk management and investment decisions, including about development of new generation and transmission infrastructure. The analysis uses electricity demand and supply forecasts to assess whether there will be enough energy and capacity to meet security standards over the coming decade. The Electricity Authority sets these energy and capacity security standards, and these represent an efficient level of reliability—that is, where the expected cost of electricity shortages is equal to the expected cost of new generation. The assessment is based on existing electricity generation as well as planned generation at different stages of the development process. Current and high-quality information from the electricity and other stakeholders on existing and future investment in generation, energy storage and demand response is a critical part of the development process. The final report has regard to feedback on a draft report released for consultation on 9 May. Five submissions were received. These can be found on the consultation page of Transpower's website alongside the final assessment and other key documents.
Otago Daily Times
15-05-2025
- Business
- Otago Daily Times
Warning of higher blackout risk next winter
By Eloise Gibson of RNZ Transpower is warning of higher risks of electricity outages starting in winter 2026. The national grid operator's draft Security of Supply Assessment predicts an elevated risk of shortages will arrive four years earlier than thought as recently as a year ago. It found solar, wind and battery storage isn't coming online fast enough to make up for dwindling supplies in the country's gas fields. The assessment found, if every electricity generation project in the pipeline was built, supply would be much more reliable, but Transpower said there was a risk of some proposed solar, wind and battery projects falling over. Previously, Transpower thought its lower security standard - a measure of the safety margin between expected demand and supply - would be met until 2030. Now, it says that will be breached in 2026, much earlier than expected. "It doesn't mean there will actually be outages, but it does signal an increased risk," Transpower chief executive James Kilty said. "It is telling us things are getting tighter and next year is looking tight." He said companies in the electricity market could challenge the draft assessment, which said, if all potential solar, wind and battery projects in the development pipeline were built, the country would be in a much more secure position, but many projects didn't have consent yet. The main factor behind the changed outlook was worse-than-expected results from gas producers. Not only have yields from the country's gasfields dropped faster than expected, independent experts have also downgraded the size of estimated gas reserves in existing fields since the previous assessment a year ago. Transpower now expects lower demand from industrial users than previously forecast, with more electricity generation projects committed to being built than a year ago. Commercial rooftop solar has also helped alleviate some pressure, but while those factors improved the buffer, they weren't enough, the assessment found. Need for certainty for planned projects Transpower says, to get the reliable supply the country needs, more renewable generation projects need to progress from possible to locked-in. "The more speculative part of the supply pipeline... has increased," the assessment says. "However, with so much of the supply pipeline unconsented, there is risk that these projects could be delayed, deferred or dropped." The risk of shortfall out to 2034 can't be met by coal and gas, even at their maximum levels. "Even with the highest plausible energy contribution from thermal [coal and gas], we require a rapid and sustained build of new generation, exceeding the large amount currently consented, to maintain energy margins above the security standards over the full ten-year horizon," the assessment said. Eighty-five percent of planned new generation is solar and wind, with most of the rest battery projects. Batteries can be used to store solar or wind power, and switched on and off to boost supply at stretched times, taking some pressure off the nation's hydro dams. Octopus Energy's Margaret Cooney said the risks could be alleviated before next winter, if the government acted quickly. "What the report's saying is actually, yes, that risk of outages is increasing," she said. "We do have opportunities to take action now that could reduce that, so more batteries more quickly, more demand response - both of those could help solve that situation and avoid the blackouts." "We're not getting enough new generation coming in fast enough to compensate for the fact that we've lost the firmness or certainty you've had with gas. The government really needs to focus on making sure more supply is coming into the market as soon as possible." Cooney said the government could take steps now that would make a difference within a year. One of those was changing the market, so companies could be paid to lower their demand at peak times, helping the country survive the short-term risk of outages. Octopus' UK arm made those payments in the United Kingdom and the company also wants to offer it here. "I'm not talking about shutting down plants for whole seasons, it's literally just to manage the supply imbalance that happens for a few hours," Cooney said. "When you look at markets abroad, they have incentive payments... so in those situations, where you're approaching peak scenarios, they get called on and if they reduce their usage at that time, they get paid. "It's something Fonterra and other major energy users have highlighted they are open to doing, but the current market structure doesn't support it. "There is potential to quickly spin up a solution and examples in other markets we could replicate quite quickly." Cooney said overall productivity need not be impacted. "They could time maintenance over the peak period, but ultimately not impact their own production." The country's biggest electricity user, Rio Tinto, has agreed to reduce its electricity use during tight winters, but in that case, the hiatus impacts production of aluminum. Likewise, the country's biggest gas user, Methanex, has committed to selling its gas to electricity generators this winter, if needed, to shore up dwindling gas supplies during a potentially dry winter for the hydro power lakes. Methanex has agreed to forfeit production of methanol for export for the second year in a row, because it was considered more profitable to onsell its gas supply to the likes of Contact and Genesis Energy. Managing director Stuart McCall told RNZ that its core business remained methanol production and it intended to get back to it. "Recent gas sales to New Zealand's electricity sector reflect targeted support during a period of energy supply stress, not a shift away from our core business," he said. "Our priority remains manufacturing methanol, a key ingredient in everyday products such as mobile phones, pharmaceuticals, construction materials, wind turbines, solar panels and an increasingly important lower-emissions fuel for the global shipping industry." Kilty said the hydro lakes looked a little fuller than feared going into winter 2024, and deals struck with Rio Tinto and Methanex also helped lower the risk of shortages this winter, but the sector needed to respond again to lower the risks in 2026. The draft assessment looks ahead 10 years and forecasts fossil fuel supplies, new power stations, new build of factories and demand sources, and assesses how much buffer there may be in the electricity supply. "We need to keep working hard to bring new electricity to market as soon as possible and make sure existing stations are well-fuelled going into next winter," he said.
