The Electricity Authority has announced a review of the system failures that caused power cuts for many households on their coldest night of the year.
Genesis Energy has rejected "misguided and unfair" ministerial criticism for not turning on a third coal boiler that might have averted electricity shortages this week.
Chief executive Marc England told Newsroom there were other electricity companies with spare generating capacity too, noting that Contact and Todd Energy also had quick response "gas peakers", and some of the hydro generators probably could have turned on more turbines.
New Zealanders escaped a second night of cold and wintry disruption. Transpower had warned of more overnight outages, saying national residual generation was less than 200MW – but that was averted as ministers and regulators turned up the heat.
Consumers rallied to cut back their usage even in the chill mid-winter. Newsroom reader Alan Peacock got support for his call for households with wetbacks to keep their wood-burners running and turn off their electric hot water cylinders.
And after a public scolding, generating companies stepped up with more power.
Prime Minister Jacinda Ardern and Energy Minister Megan Woods had demanded answers on whether power companies had delivered adequate supply, and particularly questioned why Genesis Energy's third Rankine coal unit wasn't cranked up.
"For me it's important that one generator, Genesis, is not singled out as the cause, which the politicians have done. As a sector I think it's important we don't finger point but that we get together and learn from this, and work out what we can do better." – Marc England, Genesis
"I think it's misguided and unfair," Marc England replied.
"For me it's important that one generator, Genesis, is not singled out as the cause, which the politicians have done. As a sector I think it's important we don't finger point but that we get together and learn from this, and work out what we can do better.
"We're a market of many generators, and I think there's some shared accountability here as an electricity sector, for the customers who had to have their power turned off, which was very disappointing. We need to share that accountability – there isn't just one party here."
England said Genesis had a 50MW gas peaker running at maximum output at Huntly, as part of its day-to-day baseload power generation, and asked whether others had turned on similar units.
"One thing that does seem clear is that there needs to be a better way of communicating outages like this to everyone who might be affected, especially consumers." – Paul Ford, Contact Energy
Contact Energy spokesman Paul Ford said all the company's available generation had been in the market on Monday night, to answer Transpower's pleas. This included its Clutha hydro scheme, central North Island geothermal, and thermal at Te Rapa, Whirinaki and the gas peakers at Stratford.
"One thing that does seem clear is that there needs to be a better way of communicating outages like this to everyone who might be affected, especially consumers," he said.
Todd Generation owns and operates two 100MW peakers both located in Taranaki; each is made up of two 50MW gas turbines. "All our capacity was utilised," said Babu Bahirathan, the chief executive of Todd Corporation's Nova Energy. "All four turbines operated through the peak periods when demand curtailment occurred."
Meridian Energy chief executive Neal Barclay wrote back to Minister Woods, saying the company had cancelled a planned outage at its West Wind farm, to make additional generation available on Monday evening. "The other outages we had in place, which in some cases are scheduled to continue for months, could not be cancelled in the time available," he said.
Marc England did say that if the market settings had been different, Genesis might have had an additional 250MW coal-fired Rankine unit running every day, meeting the baseload requirements of a dry winter and low hydro lakes. Then the 50MW gas peaker could have been kept in reserve to quickly fire up in emergencies like Monday night.
He said that showed the need for the Government to redesign the electricity market so power companies were paid to strategically reserve power for emergencies – for instance, by stockpiling coal or storing gas.
Transpower already buys 6-second and 60-second reserves from power generators; in addition, there is an internal industry market of "swaptions" in which Meridian hedges by buying reserves from Genesis. But some in the industry, like consultant Bryan Leyland, argue for strategic reserves in which consumers pay generators, through levies or their power bills, to hold back power for crises.
“The reserve energy scheme had a number of perverse effects and probably did not improve overall security of supply." – Ministerial Review of the Electricity Market, 2009
According to a paper by Concept Consulting director David Hunt, such targeted mechanisms are used in Australian, the UK, Germany and Sweden.
Hunt, a former Contact Energy chief executive, says they are intended to directly support last resort capacity. But one key issue is that market participants often alter their private investment plans to take allow for the strategic reserve, meaning there is no aggregate increase to capacity.
New Zealand had such a scheme from 2004 to 2010. It was shut down, Hunt says, in part because it reduced incentives for market participants to manage their own risks, or to invest in peaker plants.
Reinventing such a scheme would be a structural change to the market that would have to be designed by the Government and the Electricity Authority – which this week (coincidentally) announced a project to review the market design, considering the long-term resilience and security of electricity supply.
"Genesis has no regulatory accountability for energy security in New Zealand; our only accountability is to our own customers," Marc England said. "We are not the company that could have been on the block for that, so I think pointing to the finger at Genesis is misguided."
Analysts disagreed over assigning blame for the North Island's black-outs and brown-outs, which network operator Transpower designated as an emergency on Monday night. When it couldn't get generators to step up with enough power, it was forced to cap how much electricity retailers could supply. Some applied targeted blackouts, some lowered the voltage to homes, some applied ripple control and turned off hot water heaters. One, WEL Energy in the Waikato, warned sick customers to turn to their back-up plans or report to Waikato Hospital.
Despite Transpower issuing its first plea for more generation bids at 6.42am on Monday, Contact Energy said it didn't have time to juice up its Taranaki Combined Cycle gas-fired power station at Stratford. That would need 72 hours lead time. Similarly, Meridian said it had long-planned outages that could not be cancelled in the time available. And Genesis said it didn't have sufficient warning to fire up a third coal-powered Rankine unit at Huntly. That would have taken six to 12 hours.
Genesis has said it couldn't anticipate the perfect storm on Monday night: that at the same time as demand hit record levels, the intakes of its Tokaanu hydro plant would get clogged up by weed in gale force winds – yet wind generation at its Waipipi wind farm and throughout the country would drop from 500MW to 280MW.
"It seems to me that someone bet on the third Huntly unit not being needed.... There has to be a market/operational screw-up or political interference on the use of coal." – Geoff Hunt, energy consultant
Energy consultant Geoff Hunt agreed that it took a long time to get one of those big generator units cranking, but questioned why it hadn't already been powered up to deal with the demand of cold days and weeks. "I spent seven years on the construction and commissioning of Huntly," he told Newsroom. "I can’t recall how long it takes to start a boiler from cold but I am guessing 12 hours. These machines are not peakers in the sense that they can be rapidly started.
"However once online, the output can be rapidly increased or decreased.
"Gas turbines are industrial jet engines. Think of how quickly a large aircraft jet engine starts up and develops the power needed for takeoff. It seems to me that someone bet on the third Huntly unit not being needed.
"The excuse that the wind suddenly dropped off doesn’t make sense as that is what wind does. I can’t believe that there was insufficient reserve available to cover Tokaanu tripping. There has to be a market/operational screw up or political interference on the use of coal."
Marc England said he too returned home to a cold shower on Monday evening – but that Transpower had required harsher cuts than were necessary. Indeed, retailers had cut back so much that Transpower had gone back to Genesis and asked it to reduce generation from its Huntly coal boilers by 100MW.
"I'm not saying it's Transpower's fault. They've got a job to do. But there are definitely lessons we can all learn from this."
Transpower network boss Dr Stephen Jay apologised to affected customers on Tuesday morning, but as the threat of further cuts passed late that evening, he walked back that apology a step. He told Newsroom he had been issuing "a humble apology to consumers" on behalf of the whole electricity sector, but was not acknowledging any specific failures on Transpower's part.
He said the network operator had done exactly what it was required to do, giving generators plenty of warning to increase their output and, when they failed to deliver, making the tough decision to order reduced household supply.
Late on Tuesday night the Electricity Authority announced a review of the system failures that caused power cuts.
Chief executive James Stevenson-Wallace said the authority was disappointed some consumers were left without electricity and, as the industry regulator, was concerned about the system response.
"Transpower as the electricity system operator is responsible for managing supply emergencies and providing information on security of supply," Stevenson-Wallace said. "Transpower issued notices and requested action by participants to balance supply and demand.
"This resulted in power cuts for many consumers without warning. The Authority does not consider this acceptable and we will be reviewing the event."
