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A deep dive into what's causing wholesale electricity prices to soar and manufacturers curtail production

A deep dive into what's causing wholesale electricity prices to soar and manufacturers curtail production

Low lake levels and constrained gas supply have again pushed wholesale electricity prices up, causing some large manufactures to curtail production.

The Norske Skog Tasman Mill has been stopping and starting production since March, and running at reduced capacity.

New Zealand Steel has also had to cut production at a time demand for steel within New Zealand is at a record high.

Electricity providers are watching closely. Transpower, which owns and operates the national electricity grid, is issuing daily security of supply reports and will start holding bi-weekly industry briefings. It’s also developing an “outage watchlist” it intends to publish shortly.

The Government has set up an “inter-agency response group” to monitor the situation.

Energy and Resources Minister Megan Woods on April 8 warned the industry she had asked officials to assure her prices were commensurate with the “level of scarcity in the market and risk of a shortage later this year”.

She also said she wanted to know what, if anything, could be done to “moderate wholesale prices without increasing the risk of a power shortage”.

Woods: 'There is no need to panic'

Yet Woods, while being questioned in Parliament by National’s Barbara Kuriger on Thursday (see video at the bottom), reassured the public there was "no need to panic".

She noted, “we are not even at the 1% risk on the curve yet”, meaning there is still just less than a 1% chance of New Zealand facing an extended electricity shortage, according to Transpower.

New Zealand’s hydro storage is half full. This is equivalent to 66% the average level it would normally be at this time of year.

If we don’t get more rain, and the likelihood of a shortage reaches 10% (the black line hits the red line in the graph below), an emergency would be declared and a national electricity conservation campaign would start.

Put another way, if the black line in the graph below reaches the yellow line, that emergency level will likely take eight weeks to reach.

History suggests it’s highly unlikely that emergency level will be hit.

Coming back to the prices, Woods said: “The market is behaving as it is expected, as it did in other dry years. For example, in 2008, wholesale prices were at $475 per megawatt hour, while in 2012 they were at $310. We're currently seeing spikes in excess of $350 per megawatt hour.”

Indeed, the wholesale price peaked at $497/megawatt hour on March 24.

Wholesale electricity

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Woods’ question around whether prices truly reflect scarcity is a fair one.

Back ups limited

Enerlytica director and head of research, John Kidd, said the problem is the vulnerability of the electricity sector.

Low lake levels and outages at the aged Pohokura gas field mean imported coal is keeping the system kicking along (coal is included in the thermal segment of the Transpower graph below).

But should there be a problem at the Huntly Power Station, or should another part of the network falter, we could be in trouble.

Kidd said these risks were being priced into the wholesale electivity market.

Regulatory risk

What’s more, it would appear the Government is yet to regain the energy sector’s trust after banning new offshore oil and gas exploration in 2018.

The system would probably still be under strain if oil and gas companies were still able to get new exploration permits.

If a new permit resulted in a find, the chances of it being commercially viable to move to production are slim. The chances of a decision to move to production resulting in material amounts of additional gas being available quickly are even slimmer.

What’s more, New Zealand was always going to have to work hard to attract big oil money. Existing fields are reaching the end of their life, and investing in infrastructure to extract oil and gas from new fields is costly.

The oil and gas industry is also at a sunset phase. It needs to innovate to prevent investors, increasingly conscious of climate change, walking away and leaving its assets stranded and creditors exposed.

The Government could’ve consulted with the sector and worked on a transition plan, rather than pulling the pin and hoping for the best.

Tiwai Point uncertainty

In addition to the regulatory risk, there’s been uncertainty for some time over the future of New Zealand Aluminium Smelters (NZSA) at Tiwai Point.

However, in January, its majority owner, Rio Tinto, confirmed Meridian Energy had cut it a deal so it would remain operational until the end of 2024. The future of the smelter beyond then is still up in the air.

Woods claimed some major electricity users were being stung by this decision, as they’d betted on NZAS closing (and an excess electricity supply pushing prices down) by increasing their exposures to the spot market.

She said the portion of very large industrial users (excluding NZSA), with some direct exposure to the spot market had increased to around 60%, from 40% in a “normal” year.

Woods was also advised by the Electricity Authority, “some of this demand may be managed by hedge contracts that have not been disclosed” in accordance with Electricity Industry Participation Code obligations.

Households could suffer

Major Electricity Users’ Group chief executive, John Harbord, didn’t buy this explanation, saying most businesses recognised a closure of the smelter would take some time and would only change tack when it comes to their exposure to the spot market once a closure was completely confirmed.

He worried high wholesale electricity prices would eventually flow through to higher retail prices.

Harbord said competition among electricity retailers were keeping prices down. But this could change if some retailers couldn’t remain competitive and were forced to close.

In the meantime, some industrial users are struggling.

A spokesman for Norske Skog Tasman Mill said: “The current power prices mean that running a business like ours is problematic. We need certainty around our key inputs so we can take orders and deliver on commitments to our customers.

“Large scale manufacturing is a complex operation. You can’t just flick a switch, turn off the incoming raw materials and send everyone home. Everything we do requires detailed planning.

“The current situation is clearly not sustainable, not just for us but for the broader New Zealand economy”.

NZAS on a good wicket

Meanwhile, at $35/MWh, the deal NZAS struck with Meridian is seeing it pay about a tenth of what some other industrial users exposed to the spot market are paying.

Yet if the hydro storage situation gets much worse, Meridian will be able to curtail NZAS’s usual draw by the equivalent of 250 GWh over a period of 130 days.

Kidd said: “The reduction equates to 14% of NZAS’s usual draw and will increase liquidity into the market by the equivalent of 1.9% of total demand.

“While at least something, its extent is unlikely to assuage those industrials that are already responding to price stress by curtailing production, particularly given that the price NZAS will continue to pay for more than 85% of its normal load will not change.”

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131 Comments

I don't really understand why the prices go up so much when we aren't even at the 1% or 2% risk levels. The market has acted like this since about 2017 or so.

12
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Maybe increasing the money supply causes an increase in prices?

Neoliberalist policies and a broken market

10
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The reason is quite simple. In 2017, there was plenty of gas. So when the wind stopped blowing, they could just increase the generation at the gas fired plants. They were producing 1000MW at time. Now with gas in short supply, they have to burn coal and Huntly or even diesel at Whirinaki. The cost of generation stack has got a lot steeper. Gas is often only producing 250MW of power and coal 700MW. The coal has high carbon charges so that adds to the cost of running them. Genesis has also to recover all the fixed costs to keep the plant going. It costs $10M or more to overhaul a unit. That is just one of the charges.
There are also transmission lines out in the South Island. The big one is Clyde to Ranfurly.
If just one of the steam turbines gets a fault and goes down, the hydro storage will drop very quickly. Those units produce 40GWh a week. That is more than all the windfarms do.

16
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One reason Tiwai gets a discount is that its load is flat. Steady. Baseload. Predictable.
The wholesale market is really really complex. I don't think that any newbie like Woods has a hope in hell of getting to grips with it unless she was studying it full time for months.
There is the energy market side, the transmission side, the auxiliary services market side, the financial side, the weather side, the restrictions to development side (some of which is political, some of which is public opinion), there is the realtime operations side (eg outages of transmission or generators), the coal and gas side. The list goes on....

Exploration equipment and services have left the room so longer available to maintain production of existing fields.

The other thing Tiwai very well does is reduce their load straight away to match when trips occur at Manapouri so they stabilise the grid.

And then the countdown begins before they absolutely have to have their power back on again!!!!
Sorry about using that unfortunate phrase.

The generation data shows the trips are invariably corrected within five minutes. I guess that they start another unit while they investigate what caused the trip.

Ideology everywhere. Hooray.

Seems like a good decision to me.

The iwi chief's words say it all really. Tyranny of the (itinerant) few backed up by the environment = God. Even the iwi, those I'd have pegged to be among those most opposed due to their deep connections to the natural world, are passionately for it, and that should have said something.

This is the problem!!! We have an abundance of large rivers in mountainous areas that are reasonably close to area of population, But the Enviro Brigade come crying about some snail or other bullshit.
Every thing requires a balance of trade offs. We have more than enough "wilderness areas" that damning a few of them will make absolutely 0 difference to the environment, but a massive difference to NZ's economic sustainability and longevity.
Same thing happened with the Ruataniwha Dam
https://www.google.com/search?q=ruataniwha+dam+decision&ei=56F8YIzWIsaC4...
The kicker here: the land being flooded is of low conservation quality, and there was an offer to exchange more than the area of land affected for some High conservation land further down the road, win win for everyone involved.

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It's interesting that we keep talking about the productivity and business investments when we can't even have access to cheap and reliable energy.

Oil and Gas will never go into sunset- it's just a bush dream. Though I think it's fun imagining taking off on a battery operated plane from Wellington to Wainuiomata.

Do you think it will get that far? The average widebodied planes takes on about 800MWh equivalent of fuel. Think how many batteries that would be and how long it would take to charge. The standard extension cord just wouldn't do. Even if a passenger plane took off, it would be too heavy to land.

Short haul flying can work. Long haul is a problem.

Hydrogen is showing some promise. It has a higher energy density than aviation fuel. The gear required to store the fuel is heavy though and more than offsets the density. Still, it's in the ballpark. Perhaps a number of shorter hops on smaller planes will be our future.

Hydrogen has a low energy density when done by volume - which is the way storage systems work. . It is only about an eighth that of LPG. You can also use a lot less fuel if it is a pressurised gas than as a liquid as you can't drain the tank.

Good comment but you need to take in AV gas heat loss conversion to energy vs straight electrical efficiency

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We celebrate the sunset of Oil and Gas yet burn boatloads of coal.

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But we generated great publicity for it though

You mean cogen? Huntley mostly runs on gas, coal only really as a backup.

No it doesn't. E3P and the peakers run on gas and currently E3P is out on survey. The 3 x 250MW Rankine steam turbines are using almost exclusively coal to fire their boilers. They are running baseload.

You mean they're running coal at the moment because of the gas shortage, or more generally? My understanding was gas was primary and coal secondary.

More generally. Since the CCGT was commissioned, they generally have been primarily coal on the steam turbines. At most only 125MW gas. The coal burning also gives security for gas pipeline trip

I stand corrected, thanks.

Utter nonsense
That graph is wrong
14 October 2018 wholesale prices $721 MWh
22 November 2018 wholesale prices $696 MWh
And that happens to be only on the days I checked

"exposure to the spot market had increased to around 60%, from 40% in a “normal” year."
Sounds like Woods has a pretty good understanding.
Norsekog “Large scale manufacturing is a complex operation. You can’t just flick a switch, turn off the incoming raw materials and send everyone home. Everything we do requires detailed planning."
So why the exposure to price hikes?
I know the answer will start with "it's complicated" but it's a fair question that should be answered.

Sounds like they can't hedge

They just don't want to pay for the hedge. Would rather just complain when prices go up.

Hedges will be going up as we speak...

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A hedge simply requires someone else to take the risk. It is a zero sum game. And as such it does not alter the fundamentals of supply and demand. Someone has to pay. However, I qualify that by saying that a hedging system would allow big operators to continue operating and thereby blunt behavioural responses to any shortage, thereby increasing the risks associated with that shortage. Nothing is simple when it comes to energy. A key issue is the extent to which long term energy policies might be getting influenced by ideology.
KeithW

" We need certainty around our key inputs "

Then purchase hedge. Yes there's a cost, but it gives you the certainty to due your "detailed planning"

It doesn't magically lower the cost. The hedge will track the wholesale price, but it give them certainty.

Some of these sawmill/fibre processors have cogeneration plants that when prices are favourable the sell back to the grid as well. Norske’s and old plant with minimal investment - though they have now looked at switching to packaging pulp

I have a solar system that sends four times as much out the gate as comes in. (in winter only twice as much) And there is no battery.
With battery, it would send out energy, and none would come in. ie: no demand on the nations system at all, and with a good contribution to it.
What if thousands of households did this?
There are many ways this could be achieved very cheaply for the nation. One would be insisting that individuals be paid properly for their energy.

What if thousands of households.....
Do you really want to know?
The answer is you should be paying for screwing the network.

https://amp.abc.net.au/article/100027514

Households with solar panels that export power to the grid could be slugged a fee under a proposal by the Australian Energy Market Commission (AEMC).

The AEMC said the increasing number of households with solar panels were causing "traffic jams" in some areas of the grid.

It said tariffs would give network operators the option of encouraging people to export energy back into the grid at times it could handle it, while discouraging it at a time when the grid was overwhelmed with supply.

Enough of the illthought energy policy.

Lol Henry. Someone was always going to come up with that 'traffic jam' one. First. What's new. Distribution construction for 100 years plus has all been about traffic jams. So what's your beef about solar. Second. Transpower is spending megabucks locally to deal with Tiwai future changes. Again. How come that's not a problem but you see it for my solar?
Maybe you are blind to the incredible capital cost of big generation because tht's what you are used to.
And remember. Every unit that goes out my gate means a few litres doesn't drain from Pukaki. And it seems to me you will be wanting and using those same litres come August.
Keep warm.

If the NZ Battery Project goes ahead and the government invests in various pumped hydro schemes to ensure security of electricity through dry years then this could boost investment in solar. ATM the problem for solar in NZ is that peak solar production period occurs in summer (more daylight) yet peak electricity demand is in winter. A big pumped hydro scheme such as Onslow could buy excess summer solar production and store it for use in the winter. Both solar and wind power production costs are decreasing. Currently for NZ, wind is the lowest cost electricity producer that has capacity to expand but in the coming decades solar production costs could reduce faster making solar the lowest cost producer.

Hi Brendon, I thought water in the hydro dams that wasn’t needed in the summer due to solar could then be used in the winter... really makes you think doesnt it?

There isn't that much storage in NZ. Its more like weeks not months.

KH, thanks for demonstrating the finer points of Vertual Singaling Economics, in a mind reading personal way to boot.

Apologies for your VSEco view of the world that is not working out, hope you haven't paid too much $$$ so far for panels etc.

Energy Economics, as mentioned in this blog show that
1. residential electricity pricing is majority Network Charges.
2. NZ has massive % of generation fleet renewable already.
3. Renewables, requires an almost 100% equal standby gen fleet of fossil fueled plant to maintain dispatch supply resiliance.

Question: why is the trade in value of electric cars such a low percentage of what was their new vehicle purchase price?

That's virtue Henry. Virtue.
And nothing in your 2.13 reply related to what I have said above.
eg. Electric cars??

Electric cars have batteries
Why would the trade in value of a used EV to plummet? Degradation
What would degrade? The battery
What are you suggesting large numbers of households do? Go and buy a very large battery.
How much is that battery going to be worth in ten years? Not much
How much are you going to get paid for your exported electricity? Not enough to replace the battery.

It's the time of use that matters. If you're generating loads at noon, most of which you're exporting/not using, great! However, the network needs to be able to support your maximum use, which is at the times you're not generating much (when it's dark or cloudy). If you cut ties with grid with batteries that would be great for you. There would be fewer people to pay for less required infrastructure. If you wanted to keep connected to the grid as a backup, you should pay as much as everyone else for that just in case moment.

Yes indeed. I am grid connected and pay my share for those reasons.

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Have a look at the seasonality of the current risk curves. Solar is not the logical solution.

Of course solar is seasonal. Rightsizing an installation should knock off near 4 months of grid-supplied-power at $0.30 cents KWh. That's a 33% saving in the annual power bill. For oversized installations the feed-in-tariff for exported surplus power is about $0.08 cents per KWh. Hardly worthwhile. One thing you won't see is the gentailers increasing the feed-in-tariffs during blackout and brownout conditions

Under existing pricing structures the consumer saving would indeed be about 30c per kw hour. But that is not the value to the overall system. Most of the electricity charges to consumers are to cover distribution infrastructure and the running of the system. And those costs would then be loaded on to electricity tariffs for the other months. At best the system savings from solar on houses, with these system savings being very different to individual savings under current pricing, would be about 8 cents per kw hour.
KeithW

RIGHT-SIZING, as mentioned above, is the key to residential solar.
There is no upside to oversizing and trying to export your solar power, the absolute best approach is to put in just enough Grid-Tie solar panels to meet your typical daytime load and then on a sunny day you pay nothing, ZERO, in c/kWh for your power, and that is where you get your return.

Oversizing means that on those same sunny days you might feed some back to the grid but you will get a pittance for it, usually less than 50% of your kWh rate.

Building a system large enough that it powers your daily load and then also charges a battery bank big enough to run your night load is a road to futility and no return on your funds for 20 years or more, and not at all if you sell in the mean time because you will not get a premium for having it. Also the battery bank will fail in less than 10 years and you will have to re-invest in this loss-maker to keep it running.

The only justification for going beyond my first paragraph is if you are completely off the grid.

There is however one other scenario that might have a dividend, that is to have a battery bank large enough to power your EV charger for one complete car charge, then after a sunny day you can drive for free the next day.

I almost disagreed, then read it again. Well said, that man.

17 years off-grid (this system; 20 years all-up) myself and have never looked back. This was always going to come, and we haven't even discussed entropy yet - think Aurora (word was they were asked, along with all Dunedin City Co's, to forgo maintenance so the books would look good enough for the Stadium to get the green light. It's been a disaster, but the deferred maintenance is biting Central Otago on the bum).

This process will worsen, as our energy-sources further descend the EROEI ladder, commensurate with decay advancing (merely entropy applying to a never-bigger collection of infrastructure). So of course 'prices' were going to rise.

Re: optimisation - Genesis is offering a feed in tarrif of 12c/Kwh which, by my reckoning, is about 33% better that the nearest competition. If you change providers then you usually get a $100 sign on bonus plus various % discounts for going paperless, using automatic payment and having a 1 year contract. Another inexpensive thing you can do is get a power diverter which costs a few hundered and will maximise your self consumption. Batteries are very cool though.

RCD. Rightsizing. ? Yesterday Minister Parker said Onslow was the only way and would cost 4 Billion.
I make that $8K per person or say $20K household. Each and every one. And that's just the storage.
Seems not to be rightsized compared to doing it locally.
What would be your view on a distributed generation system, grid tied, using that 20K in households. Households or small local schemes.

OK either you have no battery and export, in which case you need onslow as a grid connected battery.
OR you have a battery and in that case it's you have to spend that money every 10 years or so on a new battery, whereas onslow would last forever.

Not clear which you intend for 20K. Seems like that's either a large solar only install, or a small install with a small battery. Enough to power the house if you have a non-electric heating source.

A larger house with electric heatpump heating your looking at 30K just for 2 powerwalls

KH you are just sponging off the grid as you need it to give frequency and voltage support. The distribution system still has to be paid for so the people without solar are subsidising you. If your solar is so good, you should be off grid.

That was rude Chris. Sponging ? I pay my share for the grid like everybody else.

Hate to say it but...Crypto currencies may have something to do with it.

How Bitcoin's vast energy use could burst its bubble
https://www.bbc.com/news/science-environment-56215787

How much BTC is done in NZ..bugger all. But yes you could be right also BTC is making men go bald too.

The weekend is seeing some impressive volatility in the crypto space. Undoubtedly a few longs will be getting the shoulder tap and requests for funds.

Hahah man you drunk too much central bank kool aid

Here’s what, oh, the Reserve Bank of New Zealand (RBNZ) has to say about LSAP effectiveness:

When we buy assets, this increases their price and so reduces their yield. That means the interest rate, in this case on government bonds, fall. This has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more. It also reduces the cost of borrowing for households and businesses…

LSAP programmes have been conducted in the euro area, Japan, Sweden, the United Kingdom and United States.

The evidence shows LSAP proved effective in providing much needed support, lowering long-term interest rates and exchange rates, and underpinning economic growth and inflation.

Studies found the government bond purchases worth 10 percent of GDP have, on average, lowered 10-year government bond yields by around 50 basis points.Link

In March 2017, former Treasury and Federal Reserve (Fed) official, Peter R. Fisher, delivered a speech at the Grant’s Interest Rate Observer Spring Conference entitled Undoing Extraordinary Monetary Policy.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.

There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?

There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.

Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.

The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.

When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures. [emphasis added]

But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.

But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.
https://www.grantspub.com/files/presentations/FISHERGRANTSREMARKS15MAR17...

This has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more. It also reduces the cost of borrowing for households and businesses…

This simplistic, narrow definition of the 'good' attached to lower long term interest rates has disastrous implications elsewhere in the community.

But what does that have to do with the price of fish? A bit subtle dude.

Should make interesting reading for those who were noisily advocating shutting Huntly ASAP. Need to have a viable plan to keep the lights on without it.

Personally I’d like to see major new investment in geothermal. Baseload, favourable geography, no seasonality problems like solar. What’s not to like?

NZ will never get big dams like in the past built now. Too much red tape and eco this, eco that.

Yes. And we have so much hydro already that more dry season risk doesn't seem particularly desirable anyhow. Unless maybe you're talking about pumped hydro.

The Greens will have something to say about Onslow. Just wait!!!

Was up there the other weekend talking to some of the batch owners. The dam they are proposing is going to be massive and flood quite an area, so much so they have to put in other dams to stop the water leaking out!

Can't see it making any economic sense, the losses are too high. Windfarms in far off places sending power to Onslow pumps (say a 20% lines loss), which pumps water up (say a 20% loss in energy from pumps and pipe friction), just so that it can run a turbine at 90% efficiency, then export the power to be used with 20% line loss again. You are probably talking about getting less than 50% of the power back from what you put in. Seems like madness to me unless you can put the generator for the pump right next to it.

I like to think of pumped storage as a parasite. The first thing it does is make things worse. Before it makes things better.
And as you say, there are significant losses.

Pumped hydro is uneconomic to all except inept Ministers. You can do the numbers as fag packet maths. It can't generate, only act as an inefficient battery for previous generation. The total cost will be an order of magnitude higher than quoted as they need to overbuild generation and build a new double circuit line from Clyde to Whakamaru. And how long will even just the consents for that take?

It is an inefficient battery Chris, but it's also a cheap one in terms of $/Whr surely?
If you agree that we need to stop or seriously reduce emitting carbon then what would you build to achieve this?
(other than nuclear which is probably not a bad option but I can't see that happening here anytime soon).

Whether it is worthwhile in inefficiency losses or cost surely depends on how you value the ability to feed it with renewables rather than rely on gas. There just aren't other options for storage (battery) on this scale, at least not yet.

Isn't the point that the pumps will run when the spot price is super low (i.e. only when must-run generation is doing base load) and generate when the spot price is super high?

The spot price isn't low that often and a slight increase in demand often rapidly escalates the price

What Labour Greens need to do in order to bring forward their desire for no fossil fuel generation, particularly coal, is to shutdown Huntly Power Station in the next few months. At one stroke they'll show NZers what it'll be like with just one large power station running on fossil fuel to be taken out and what it'll do to the electricity prices. In all likelihood rolling blackouts as well. People will soon get used adjusting for lower electricity use .Can't say how it'll affect the economy though when a whole lot of industry get caught up as well. Will prepare people for a taste of whats to come in the future under either Labour or Greens or a combo of the two. Not sure the Nats will be any different. Possibly pretend and extend. Pain much later.

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You will never appease the ecofascists. "Why Genghis Khan was good for the planet. Laying waste to land scrubbed 700m tonnes of carbon dioxide from the atmosphere. His murderous Mongol armies were responsible for the massacre of as many as 40 million people. Even today, his name remains a byword for brutality and terror. But boy, was Genghis green.
Genghis Khan, in fact, may have been not just the greatest warrior but the greatest eco-warrior of all time, according to a study by the Carnegie Institution's Department of Global Energy."
https://www.theguardian.com/theguardian/2011/jan/26/genghis-khan-eco-war...

Every time I suggest a NZ population policy, responders suggest it's like old Genghis. Not true. I do have a list sure, but it's very very small.

Wow that's a straw man argument if I ever saw one.

You'll never appease the ecofascists? And then to sort of prove this you say how Genghis Khan killed a lot of people?

That's like me saying "Apples are terrible because all the jandals in the world don't eat apples!"

Strawman? It's just one example of how batshit crazy the ecoloons are. Appease one hairshirt ideologue and there is always another with more chicken little demands in the queue.

The mistake they make is in thinking 'all other things being equal'. That makes them wrong, when they only address Climate, for instance. Thus the advocate EV's, on the assumption that they can party on.

The whole point is they can't - and in that, you are wronger than they.

Yeah, eff the planet, money is all that matters!

> People will soon get used adjusting for lower electricity use

No, people would not get used to using much less power, they would get themselves a different government.

Of all the mucked up [edited] markets in NZ this is up there with housing, follow the money it is not being invested in more production it is lining pockets. We should be 100% renewable by now.

Kuriger made a direct quote of woods platitudes when the exploration was shut down and woods replied "Mr Speaker I would caution that member around repeating lies..." Hahaha good one. The Speaker mallard told woods TWICE to withdraw and apologise.. she came back with a garbled apology

From 5:30 onwards

Good exchange

Wind makes a healthy 5 percent contribution... but is expensive and will be more so soon

When the prices were really high, wind was making about 5% of its rating. We have been generating more burning diesel at Whirinaki at times than all the windfarms in the country. That why wind is useless if you want reliable electricity.

Yeah but we don't if we are smart. Our hydro stations act as big batteries, when the wind is blowing, they don't need to generate as fast. When the wind isn't blowing, the go full bore. Yes, we would need to have a few more turbines and pipes installed to do this and make our generation a bit more planned, but that shouldn't be too hard. I have read 2 or 3 reports written by industry experts saying we could get around 20% of our power from wind, by doing it this way. For instance: https://www.sciencedirect.com/science/article/abs/pii/S0301421513003649

Those reports are written by academics, not power system or station engineers, so they aren't worth much more than kitty litter.
Wind is unreliable even on a two hour ahead level and the windfarms often go up and down together, compounding their variable generation effect. The intermediate lakes have little headroom so store little water, only the headlakes have the storage. It takes real time to get water from one dam to the next. For example on the Waikato it is 12 hours from Aratiatia to Ohakuri. Now what will the wind generation be in 12 hours time? The bottom stations in the river has minimum flow and flow change limits so a lot of water will get spilled all down the river.

This is some good info Chris, thanks.

Do you think we could fix it with a couple of new hydro plants, specifically for the purpose of spinning up fast to counter the unreliability of wind?

Having gone through the Molesworth/Rainbow roads a few times, there are 3 rivers up there that can clearly be dammed which also have the HV lines going through or nearby. The Acheron north of the Acheron Homestead, the Waiau just north of lake Sedgemere and the Clarence all (on the face of it) have real potential to be good locations for new hydro (good natural dams almost exist already, fairly denuded landscapes, good oppourtunity for increased recreation in the areas). If you do them as "overcapacity renewable replacement" plants, they could only come on when the wind stops blowing. Yes you have to maintain over capacity, but at the benefit of being significantly closer to 100% renewable.

Are there hydro plants specifically designed to be spun up within an hour or two?

Some hydro dams are paid to provide "spinning reserves" to flatten out spikes in demand. Basically, the turbines are spinning but not generating and can be switched on almost instantaneously.

As whatwillhappen has commented, we already have hydros that can do that. Maraetai Tokaanu and Benmore are the ones most often used. They can start generating in seconds if they have tailrace depression. The problem with a lot of hydro is staging. Where do you get the water from? And resource consents limit the change in flow regime below the bottom dam. Those rivers in North Canterbury South Marlborough don't have much flow, a air bit of head but not many MW. And they would need to be dammed on the Alpine Fault. You can imagine how that would go down.

Wind is variable day on day but very reliable production year on year.
That is an asset, if the nation has the wit to utilise it correctly.

Reserve Banks set out to create inflation so we should hardly surprised electricity is being used as an inflation hedge to park money. Many commodities have increased in price substantially as people start to hedge inflation risk.

RBNZ seemed pretty happy to "look through" inflation, if Government are unhappy with this approach they should have a chat.

Imagine if they looked through house price deflation with the same ease. 10% correction? Meh, we will wait and watch.

This government ban on gas exploration, is CRAZY, gas is a much cleaner fuel than coal and diesel, gasoline , sure there is some emission of carbon monoxide however is very very low compared to the others. Modern industry depends on GAS to operate.
In Singapore, they burn their trash, to produce electricity and clean the smoke, see video below, it will amaze you

https://www.facebook.com/watch/?v=807133122991913
Why Auckland and other cities to this?

The Drilling Ban was a vote winner at the time. Government just need to communicate to the public that the era of abundant cheap energy needs to end to achieve its environmental objectives. That means permanently higher prices or accepting an alternative with negative externalities (e.g. nuclear.)

Voters thought they would be able to continue their current consumption levels at affordable prices. They’re about to find out the hard way

Have you seen the setup costs of these plants ? We cannot afford it.

https://www.iheart.com/podcast/105-stuff-you-should-know-26940277/episod...
If I remember correctly, they mention that a plasma plant only costs $500m? to build.
Havent we allocated 100 billion to proping up the housing market.
The government should have used the money for some massive infrastructure projects.

Don't we have a central bank that is desperately trying to get inflation?

We should be cheering for higher electricity prices ;-)

If only electricity prices were weighted 70% in the CPI. Orr might break a smile

Unintended consequences. We need roadmaps, not off the cuff policy announcements such as the oil/gas ban. How will virtually doubling power demand by phasing out or banning IC vehicles work? I am not against EVs, but want to know how the government is planning to phase them in. Is it worth buying a new IC car now, will there be penalties down the track, how will two million cars, trucks, etc be disposed of. Where will the required power come from, how will fuel excise duty be replaced?

An Average house can use 30 kwh to 50 kwh a day, my EV will drive 100 km using 14 kwh of electricity. Cost of using fossil fuels is going to increase artificially to promote cleaner tech. If you can get a used EV at a good price you are saving money already just hard to find. Transpower have done a lot of research into 100% renewable and supply. The big advantage of leaving gas oil behind is we become energy self sufficient, the gas, oil and processing is predominantly profiting off shore company's. Have to ensure we don't lose our electricity producers.

If we are suddenly so worried about offshore companies making bank in NZ, literally the banks are out biggest problem. They don't even make anything except imagination slavery.

And then there’s trucks, trains, farm and construction machinery, boats, planes, lawnmowers, other machinery...the demand for electricity will be huge. We will need to generate a lot more than we do at present. No problems, but we need a plan. Someone needs to say: “in 2025 we will need XX gigawatts, and here is how we are going to generate that. In 2034, we will need XX more, and here is how we are going to generate that.”
If we go to hydrogen, we will need much more power to electrolyse water, at a net energy loss. The other EV problem of course is the entry level cost. The cheapest, I think, is $50k new. So how is a family of minimum wage workers going to replace their fossil fuel bomb which is probably worth less than $10k? And they will most likely need two vehicles, and of course there won’t be a significant used EV market for some years. All a bit woolly in my view.

There are two recent Transpower reports answering your "Someone needs to say: “in 2025 we will need XX gigawatts, and here is how we are going to generate that. In 2034, we will need XX more, and here is how we are going to generate that.”" question.

"how will fuel excise duty be replaced?"

Yes exactly... the amount generated on the car fleet is roughly 3 billion per annum.

Cant all be paid for by property investors losing tax deductions

RUCs

Thats an excellent theory YDB, will it work in practice? It might for dedicated solely elec cars. But what about for hybrids and plug in hybrids where they still run on 91, only far less fuel. If a 100percent elec have to pay an RUC and hybrids do not, then who apart from govt departments instructed to do so will buy those electric cars to get socked $760 RUC for 10,000kms.

They come into force end of this year anyway, whether we like it or not.

https://www.beehive.govt.nz/release/road-user-charges-exemption-electric...

Thanks for sharing...
Reason for the 5 year RUC extension from 2016 "We’re committed to accelerating the uptake of EVs in New Zealand"

AFAIK apart from a few sponsor cars and teslas there has been no acceleration of EV uptake during the last 5 years. This move will definitely not help so I cannot see mass EVs on our roads for a long time to come. Probably never. Hybrids yes, but they will add to the govts fuel excise dilemma

No such thing as a free lunch - EVs included

There's a heap of them on the road now - way more than two or three years ago.

https://www.transport.govt.nz/statistics-and-insights/fleet-statistics/s...

Pacific Steel used to fry the old car bodies and create reinforcing rods (recycling), now they just ground up and shipped overseas. Diesel powered ships... Just another example of the ongoing hollowing out of NZs productive capacity.

Pacific Steel are still making rebar and melting down car bodies. About 5 years ago, they went from Fletchers to BlueScope

Wrong. The steel plant shut down. The steel for the rolling mill now comes from ironsand at Glenbrook.

Thanks for correcting me. I was working off old info

Where is PDK, this should be up his alley. Been quiet since his article

Edit: he has shown up late to the party but already drunk

Maybe it's from all the money pumped into the system?

Nah, can't be that

Max Bradford.
'nuff said.

This. Does our electricity infrastructure run more efficiently and for a lower cost now that we've privatized?

Probably. Crazy things were being considered when it was all ECNZ. Changing to a market-driven model changed investment decisions.

Because the lineman for the county needs to pay off a student loan and a $800,000 house.

Jenee would do a more interesting article if she first questioned the money she cites as one side of the equation.

Money is (was?) a keystroke-issued debt-bet. It always expects stuff to be available in the future (not all transactions can be virtual, sooner or later the home for all 'money' is to be swapped for 'stuff'. That stuff is 'processed resources', and the processing is done with energy. Thus money is dependent on future energy.

Why, then, of why, are we asking why energy is costing more in money? It's the wrong way round. And I can tell you what's happening; energy is taking ever-more energy to obtain. It takes more energy to fracture rock, or drill deep offshore, or turn tar-sands into something burnable, than it once did to tap a pressurised gusher. So there is less surplus energy for doing stuff, to stuff (which is following the same degraded-supply issues). Added to that is the entropy (decay per time) problem, and it is happening to a never-bigger collection of infrastructure.

Plotting ahead, energy will 'price' itself out of the reach of more and more, starting from the poorest. All same housing. The numbers we attribute to it, are really just a way of apportioning access to energy (and resources) - proven by the 'rich' being able to access more. Priced properly, though (taking forward maintenance and fossil energy depletion into account (nobody maintains a grid without using fossil energy) electricity is way, way too 'cheap'.

And the next ten generations (of humans) will agree with me........

I wonder what the $/KWH price needs to reach for Kiwis to suddenly favour Nuclear....

I think they would have to dam all the rivers before nukes were even considered. Even if there were 100MW units that one could get off the shelf. Nuclear also can't easily load follow, same problem geothermal has. What NZ needs is hydrofirming - the dry year reserve - and dispatchable peaking/ two shifting power. Something coal and gas are very good at. All the unreliables, not so.

I hate it when people bang on about hydro dams being renewable. Yea sure apart from it doing major damage to ecosystems up and downstream of them.

Molten salt nuclear now! Notice that Iran isn't pursuing molten salt reactors? That's because they're not after a source of energy that can't have meltdowns with an order of magnitude fewer weapons grade fissile byproducts. Same as the US, which is why they went with the heavy water, uranium-based reactors

My understanding is that hydro supply security relies on inflows rather than storage. I was told once, that if there was zero inflow (unlikely granted) storage would provide only 3 weeks generation.

One major contributing factor is that we stopped building renewable supply in 2016. If we had just kept going at the same rate as the previous decade, prices and emissions would not have risen (more wind -> higher lake levels) Luckily, new construction has now started again, but too late to avoid the present situation. The Turitea wind farm will be finished soon and will do a little bit to help.
See: https://blog.planetaryecology.org/2021/04/18/why-did-new-zealands-co2-em...

Also, the graph of wholesale prices doesn't show the trend clearly, which can't be blamed on a lack of rain:
2011. 6.6c
2012. 8.7c
2013. 7.1c
2014. 8.0c
2015. 7.1c
2016 5.8c
2017 8.1c
2018 11.3c
2019 13.4c
2020 11.1c
2021ytd 22.6c