In this issue:
- Spot Market Overview
- The HVDC Link
- Energy Industry News
- Renewable Resources Generation Up
- Trustpower Seeks Consent for Tararua Stage 3 Wind Farm
- Consent Granted for Meridian's White Hill Wind Farm
- Consent Granted for Geotherm's Poihipi Road Geothermal Power Station
- Mighty River Power's Mokai Geothermal Station Output to Increase
- Increase in Meridian's Te Apiti Wind Farm Capacity
- Government Discloses Some Details of the Underwriting of Genesis' E3P
Spot Market Overview
The stability of spot market prices in September continued throughout the first two months of the quarter. However, an unseasonably cold December contributed to some volatility during the last month. National storage levels fluctuated below historic averages in the quarter due to low inflows into the South Island hydro catchment areas.
During October the high voltage direct current link (HVDC), connecting the North and South Island networks, continued to be constrained to a maximum capacity of 886MW (this constraint began in July). However prices remained stable and trended lower on average. At the end of the month the national hydro storage situation was 88% of its historic average. Whilst the North Island storage was above average seasonal levels, the much larger South Island hydro lakes were below average for this time of year. Lower than average inflows contributed to the South Island situation.
The HVDC constraint continued through November but with minimal effect on prices. The hydro storage situation returned to expected levels with South Island inflows increasing due to both rainfall and snow melt. Spot market prices continued their recent trend with very little price volatility and low average prices. However two spikes were experienced due to a bi-pole outage (a complete HVDC shutdown) where the entire North and South Island link was down for a short period.
The month of December was characterised by higher than expected demand due to unseasonably low temperatures and lower sunshine hours. In fact December was the coldest since 1945. The South Island hydro inflows were below average during the month (68% of normal) leaving South Island storage at 87% of the seasonal average. However, high rainfall caused a significant inflow event over the New Year holiday break and saw storage levels return to the historic average. The fluctuations in storage and inflows over the last few months highlight how exposed the New Zealand electricity system is to weather and climate volatility. Price spikes were experienced on the third and sixth of December due to outages on the HVDC link. The HVDC link is not expected to return to full capacity until April.
January saw the South Island inflows sitting above the seasonal average lifting South Island storage up to 99% of normal. North Island storage remained healthy, although this represents only about 15 percent of national storage. Prices through January in the most part stayed within the recent 3.00 c/kWh to 5.00 c/kWh band, with 82% of prices lower than 5.00 c/kWh. A notable price spike in the North Island resulted from an unplanned outage on the HVDC that occurred on the 16th January between 4pm and 6pm.
New Zealand is currently experiencing a weak El Niño weather pattern which usually brings volatile weather and is often characterised by increased south westerly flows over the country. This implies wetter than normal conditions on the South West Coast of the South Island and dry conditions on the East Coast of both Islands. January temperatures were below historical averages and NIWA says that February and March are likely to be equal to or just below historical seasonal temperatures.
As such, all eyes will be on the South Island storage levels as we near the end of February as an indicator of this winter's dry year risk.
Below are recent quarterly averages across the three main reference nodes:
The HVDC Link
The HVDC (High Voltage Direct Current) is the electrical link between the North and South Islands and facilitates the transport of large volumes of hydro generation from the South Island to the main load centres in the North Island.
New Zealand's dependency on the HVDC has been demonstrated many times in recent years, most notably last January when high winds caused the collapse of several overland towers in the Blenheim region. When the link is not available demand must be met from generation within the same island, essentially producing two separate markets with very different characteristics. The result is a surplus of supply and low prices in the South Island, where generation is high and demand is low. In the North Island low generation and high demand pushes prices higher. Over the past six months the HVDC has been subject to continual constraints to allow maintenance to various elements. The HVDC is currently constrained to a maximum of 886MW compared to its regular operating capacity of 1040MW. The HVDC was commissioned 39 years ago and it is likely that major capital investment will continue to be required to provide security of supply in the near future.
The HVDC is usually thought of as the submarine cable under Cook Straight but in fact it runs 575 km from Benmore in the South Island to Haywards (Wellington) in the North Island - only the final 40 km of the HVDC is a submarine cable.
Energy Industry News
Renewable Resources Generation Up
Renewable resources supplied three-quarters of New Zealand's power generation in the year ending September 2004, Statistics New Zealand says. The country's volatile climatic conditions can dramatically affect the generation mix, with greater hydro generation output during wet years. New Zealand suffered a drought during the 2003 year, while 2004 was particularly wet.
Total power generation rose 5.7 per cent to 39,310 gigawatt hours for the year ending September 2004. Hydro and wind generation was 17.8 per cent higher in the year, accounting for 69 per cent of generation during the year compared with 62 per cent the year before.
The 2004 percentage is the highest since 1998 when it was 72 per cent. In the September quarter, hydro and wind generation was 27.4 per cent higher than the September 2003 quarter and was a record for any quarter, exceeding the previous peak in the September 1994 quarter. Hydro and wind supplied 71 per cent of the country's power during the quarter. Thermal generation was up 0.2 per cent on the September 2003 quarter but was 1.2 per cent lower over the September year. (Source: Dominion Post, 7 December 2004).
Trustpower Seeks Consent for Tararua Stage 3 Wind Farm
Trustpower announced plans to build a new 120 MW wind farm, Tararua Stage 3, costing $220m. The generation capacity of the new technology wind turbines is substantially more than previous wind turbines (3MW versus 1.65MW at Meridian's Te Apiti wind farm or 0.660 MW at Tararua 1 and 2).
It is expected that the wind farm will be operational by winter 2006, with annual generation of 420 GWh.
Consent Granted for Meridian's White Hill Wind Farm
Resource consent has been granted for a wind farm at White Hill in Southland.
Meridian Energy announced its plans for a 30-42 turbine wind farm to be located on White Hill, about 9 km southeast of Mossburn. After lodging land use consent applications in October, 99 submissions were received commenting on the proposal. Ninety of the submissions were in support of the wind farm, citing as positives the use of renewable resources for power generation, the aesthetics of the farm, and the potential for employment and tourism benefits for Mossburn. (Source: www.scoop.co.nz).
Construction of the 70 MW station is expected to begin in the first half of 2005 and annual generation is expected to be 240 GWh from 2006.
Consent Granted for Geotherm's Poihipi Road Geothermal Power Station
Geotherm Group has been granted resource consents to establish a new geothermal power station in Poihipi Road near Wairakei. The new power station will be capable of operating 24 hours per day and generating 60 MW of electricity until 2026. The consents are subject to conditions requiring Geotherm to inject the same quantity of fluid back into the Wairakei-Tauhara geothermal field that it extracts - called "zero net depletion". This ensures that there will be no reduction of underground pressure from the station's operation, to ensure that the new station will not contribute to subsidence in urban Taupo. (Source: www.ew.govt.nz).
The proposed commissioning date is March 2007, with annual generation estimated at around 500 GWh.
Mighty River Power's Mokai Geothermal Station Output to Increase
Mighty River Power will increase the output from the Mokai geothermal field by over 60% with a second power plant on the site due to be completed in April 2005. The 40MW plant will utilise both high-pressure steam and brine from the field to generate electricity. It will use 100% geothermal fluid reinjection technology to sustain the reservoir and minimise environmental impacts (Source: www.mightyriverpower.co.nz). The extra generation is estimated at around 330 GWh annually.
Increase in Meridian's Te Apiti Wind Farm Capacity
Te Apiti wind farm in the Tararua ranges became capable of delivering its full 90 megawatt capacity in November 2004. The project has taken just over one year to complete and is now the Southern Hemisphere's largest wind farm (Source: www.meridianenergy.co.nz). Annual generation is estimated at around 360 GWh.
Government Discloses Some Details of the Underwriting of Genesis' E3P
Genesis asked for the government to help share the risk of the new power station, which could be left stranded if new natural gas fields are not discovered soon. Under the agreement, the Crown will compensate Genesis (based on a complex formula) in the event it is unable to secure the gas that it needs.
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