Authority to explore long-term resilience and security of electricity supply
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The Authority has commenced a project looking at how to ensure the electricity system remains secure and resilient over the coming decades. This project forms part of the Authority’s response to the Government’s Electricity Price Review, in particular recommendation G2, to examine the security and resilience of electricity supply. The project forms part of a range of work underway by the Authority to address the transition to a low-emissions energy system.
The project supports New Zealand’s commitment to achieving net zero emissions by 2050, and the Government’s aspiration to achieve 100% renewable electricity by 2030. Achieving these goals will likely require a material increase in renewables, such as wind and solar generation, presenting new challenges to the operation of and investment in the electricity system, and to maintaining a secure, reliable and resilient electricity supply.
The Authority has commissioned advice from Transpower as the system operator and this work will take place in three phases. The system operator will deliver a report on future security and resilience challenges and opportunities based on current understanding by the end of 2021, and a prioritised plan for monitoring and addressing these challenges and opportunities by 31 March 2022. The final phase will include a multi-year programme of studies and solutions to address the challenges and opportunities identified. Delivery will include direct engagement with the sector, which is likely to take place using a phased approach in late 2021 and early 2022.
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Public consultation on proposed TPM still to come
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Transpower has released its proposed TPM which it submitted to the Electricity Authority on 30 June 2021. While the Authority appreciates the significant work Transpower has done to date, the Authority does not consider the proposed TPM ready for review by stakeholders or for public consultation as it is still being assessed.
Once the assessment process is complete, the Authority’s Board will decide on and publish a proposed TPM for public consultation. The Authority is targeting consultation to start from October 2021.
Part of the release by Transpower includes the Authority’s request for Transpower to reconsider six aspects of the proposed TPM. These include resolving the first mover disadvantage for connecting parties, ensuring batteries and similar storage systems are on a level playing field with other generation, the allocation of overhead costs, setting the residual charge for a new entrant, and the prudent discount policy.
After considering our feedback, Transpower will decide whether to revise its proposed TPM. The Authority is also still assessing aspects of the proposed TPM that relate to benefit-based charges.
The package released by Transpower includes newly calculated indicative pricing – what each customer’s charges would be if the proposed TPM applied in 2021/22. These are different to the indicative charges released by the Authority in 2020.
Transpower’s new indicative pricing reflects how charges would be calculated under its proposed TPM and uses updated data on the price cap. Some of the matters we referred back to Transpower will affect indicative charges under the proposed TPM, for example, how overheads are recovered.
Due to material differences in the way the charges are presented, Transpower’s indicative charges are not directly comparable with the Authority’s 2020 estimated charges. For example, in the Authority’s 2020 estimates, connection charges were mainly excluded and charges were presented after applying loss and constraint excess (LCE) rebates.
The Authority is aiming for any new transmission pricing to come into effect on 1 April 2023, but there are still several steps remaining in the process which could impact on this. Any new charges will be different to the indicative charges released for a number of reasons, including needing to take account of any new transmission investments, any new customers, and of any customers that have shut down their operations (such as Norske Skog’s Tasman Mill).
We appreciate the industry needs certainty on transmission pricing and we expect these reforms will ultimately deliver that certainty. We encourage interested parties to focus on the proposed TPM that will be released by the Authority during the public consultation period.
The Authority will continue to regularly communicate with interested parties over the next period to ensure it is clear when the public consultation process begins, and how documents released fit into the TPM reform process.
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2019 UTS Actions to Correct: Final decision release date
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The Authority’s Board has decided on the actions to correct the 2019 undesirable trading situation (UTS).
The Authority intends to publish the final decision paper on its website on Tuesday, 17 August 2021.
Thank you to everyone who has made submissions.
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System operator consultation on a revised ancillary services procurement plan
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The system operator has published a revised draft ancillary services procurement plan for comment, as required by clause 8.42A(3) of the Code. The procurement plan:
• specifies the principles to be applied in assessing what, and how much, ancillary services to procure
• contains a methodology for making that assessment
• outlines the process for procurement of ancillary services
• specifies the administrative costs for ancillary services procurement
• outlines the technical requirements and key contracting terms the system operator will apply when entering into contracts for ancillary services.
The revised draft procurement plan will be of particular interest to parties that have followed the Authority’s recent decision to approve a draft Code amendment that, in conjunction with a complementary procurement plan amendment, is a step towards enabling owners of battery energy storage systems to offer instantaneous reserve while charging or discharging. The decision paper provides further detail and is available here.
The system operator’s consultation document is available here.
The system operator’s webpage advises that submissions close at 5pm on Friday, 27 August 2021.
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Stress test scenarios unchanged for the October-December quarter of 2021
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The stress test scenarios previously published on the Authority's website will apply for the October-December quarter of 2021. There is no change from the previous quarter.
The stress-testing regime requires certain participants in the wholesale electricity market to apply a set of standard stress tests to their market position, and report the results to their Board and to the NZX as the independent registrar appointed by the Authority.
Stress test scenarios are hypothetical and are not forecasts. They are designed to ensure disclosing participants have considered spot price volatility. The stress test regime is one of a range of risk management tools available to participants.
Questions about the stress tests can be directed to marketoperations@ea.govt.nz. Please include 'stress test' in the subject line.
Previously published stress test scenarios are available here and stress test results can be found here. Visit our website for further information.
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Annual reports of the IPAG and MDAG are now published
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This reporting year the Market Development Advisory Group (MDAG) successfully delivered advice on reforming the trading conduct rules to the Authority this year. The Authority accepted the advice and has now implemented the recommendations.
The Innovation and Participation Advisory Group (IPAG) focusses on issues specifically related to new technologies and business models and consumer participation. This reporting year the group completed their review of the Transpower Demand Response programme.
IPAG's annual report and MDAG's annual report for the reporting period of July 2020 to June 2021 are now available to view.
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Improving the framework for the Authority's information gathering
Ending: 24/8/2021 5pm
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Draft determination of the causer of the 2 May 2021 under-frequency event
Ending: 24/8/2021 5pm
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Updating the regulatory settings for distribution networks
Ending: 14/9/2021 5pm
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Level 7, Harbour Tower, 2 Hunter Street, PO Box 10041, Wellington 6143, New Zealand
Tel: + 64 4 460 8860 Email: communications@ea.govt.nz
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