Analysis: Low lake levels have raised alarm at Transpower, but promising signs indicate we may have veered away from a crisis, Marc Daalder reports
New Zealand may have avoided the worst of an energy crisis, as the risk of blackouts this winter has dropped from concerning levels in recent weeks. However, the national lines company Transpower warns we're not completely out of the woods yet.
For much of the year so far, lake levels at hydroelectric stations across the country have been dangerously low, out of the 10th to 90th percentile range they customarily sit within.
As of Monday afternoon, New Zealand's hydro stations were generating just 2.5 gigawatts – less than half of their maximum 5.5 gigawatt capacity.
Given we usually generate at least 55 percent of our electricity from hydroelectric power, the low lake levels have raised alarm in the energy sector over security of supply.
Lake levels low
Currently, less than half of our electricity is being sourced from hydro stations.
"We've just come through what is seasonally our driest period," Phil Gibson, the general manager portfolio for Mercury Energy, told Newsroom. Mercury runs the Waikato Hydro Scheme.
"As you head into May/June, we're a winter-fed catchment so this is when we start to expect inflows to come up. Since November last year, we've had the second percentile inflow, sort of the second-worst ever. It's a similar number for the South Island and the two of those correlating at the same time isn't usual."
Across the country, lake levels are 49 percent below max capacity and 33 percent below the historic average for this time of year.
To replace that lost generation, more gas and coal turbines at the Huntly Power Station have been fired up. Thermal energy - the burning of fossil fuels - traditionally makes up less than a fifth of our generation, but on Monday afternoon was responsible for 27 percent of the country's electricity.
Models increasingly optimistic
As the chances of blackouts rose and approached the 1 percent threshold, Transpower earlier this year began to report five days a week on the security of the country's supply.
It also began to run models simulating the risk of an energy crisis on a fortnightly basis. These models are based on records of 89 prior years of rainfall, to determine what the likelihood is that new inflows might raise lake levels.
The model run on April 19 found that 25 of 89 scenarios would cross the 1 percent risk threshold, in which there is a 1-in-100 chance that the country runs out of hydro storage. These models also factor in an energy conservation campaign that would come into place if the situation got bad enough.
That April 19 model also simulated one scenario (out of 89) in which the situation crossed the 4 percent threshold.
The most recent model, run on April 30, is more optimistic. Just seven trajectories cross the 1 percent threshold and none pass the 4 percent curve.
Transpower's market and security of supply manager David Katz told an industry briefing on Monday that this was due to lower demand over the previous week. Reduced electricity usage over Anzac weekend meant that lake levels remained flat (termed "moving sideways") over the prior seven days, instead of falling.
Getting through winter
The near-term outlook is also less dire. While significant rainfall isn't expected in the next few days, above-average temperatures could see demand fall below expected levels for this time of year.
"Our storage continued to move sideways, which is a good thing," Katz said.
"I wouldn't be surprised if we start to see a bit of a downward trend just as we jump into May. But obviously May is a long month and there's plenty of opportunity for rain and inflows in the right places."
Models run against Transpower's status curves were similarly optimistic. Just one of the 89 pathways crossed into "Alert" territory, which would mean storage would be on track to cross the 10 percent threshold in three weeks' time.
"It's all about getting storage up and over and through winter. So when we go sideways, we're pushing closer and closer to when the risk curve starts to decline on the back of falling demand on the other side of winter and reliable spring inflows," Katz said.
"I think we're a fair way from the risk curves that would see you moving into a conservation campaign," Gibson told Newsroom.
The dry year problem
Increased supply of coal and a deal between the Tiwai Point aluminium smelter and Meridian Energy to flex the facility's electricity usage provided further cause for optimism. Still, the situation has shone a light on the stress points of New Zealand's energy system.
"I think it highlights our dependence on gas and coal generation for periods of really low inflows like we have experienced," Gibson said.
"We've got some stress in our gas market at the moment which is exacerbating that. While that is challenging for the market, it is probably really useful for having a good hard look at the three legs of the trilemma of affordability, renewability and reliability of our electricity system."
The Government is aware of this dry year problem as well. Last year, it announced a $30 million business case for a solution to the dry year problem.
New details about the proposal were revealed at the Downstream energy conference in March. Philippa Fox, the general manager for energy and resource markets at the Ministry of Business, Innovation and Employment, presented updated timelines for the project.
This came after Newsroom reported earlier that month that the timelines for the project had been extended significantly. Now, the initial business case will assess the Government's preferred option of a massive pumped hydro scheme at Lake Onslow, as well as the viability of pumped hydro elsewhere in the country and other comparators which could renewably store energy for dry years.
Construction of the eventual project is only expected to begin in 2024 at the earliest.
