A report for the Government on the power cuts that left 34,000 households without electricity on one of the coldest nights of the year has found there was no need for any disconnections.
Energy and Resources Minister Megan Woods on Thursday released the report of the Investigation into electricity supply interruptions of 9 August 2021, headed by former Cabinet Minister Pete Hodgson and assisted by specialist technical advisor Erik Westergaard.
"The investigation sets out a number of key findings - crucially that turning off the power for more than 34,000 households for up to two hours, simply need not have happened, and there was enough discretionary load to keep the lights on," Woods said.
"The report also found that Transpower, as the electricity system operator, had inadequate visibility of the extent of that discretionary load and that the Electricity Authority must review and strengthen its oversight of the system operator."
The report states that "forced disconnection" of household electricity "was entirely avoidable".
"...Turning off any householder’s electricity, apart from their hot water cylinder, simply need not have happened," the report says.
"...Importantly, we make the finding that no household need have suffered a power cut even if the system operator had not deployed the demand allocation notice. We find that there was no need to issue that notice, and that the system operator did so in order to further honour an equity rule embedded in the electricity code. We find that rule to be ill-conceived, and in need of prompt revision."
Specifically, rule 7 in Schedule 8.3, Technical Code B of the Code states: “To the extent practicable, the system operator must use reasonable endeavours when instructing the electrical disconnection of demand to ensure equity between connected asset owners.”
The report says that In practice this means that Transpower as system operator ought not ask a particular electricity distribution business (EDB) to do more than its fair share.
"However, during the grid emergency some EDBs had spare discretionary load available to offer (typically hot water cylinders that could be turned off using ripple control), and whereas others had none."
Woods said she was writing to the chairs of Transpower and the Electricity Authority requesting they consider the recommendations in the report that relate to them and provide her with quarterly updates on progress.
“I do not want households to be put in this situation again. Kiwis deserve more. By implementing the report’s 18 recommendations I believe we will be better placed in future.
“It is also clear that the market requires much greater demand side participation if greater electrification and decarbonisation is to happen. In future better use of hot water control, known as ripple control, and other technologies are likely to be key to this.
“The investigation’s other findings included praise for the way system operator staff acted during a challenging evening, and for the responsiveness of electricity distribution businesses to the event.
“I would like to thank the investigation team for its comprehensive report. It drew on and analysed data and information from Transpower, the Electricity Authority, and other key information."
As part of the investigation more than 25 interviews were conducted with a range of market participants and key stakeholders.
Here are the key findings in the report:
Our findings are summarised as: 1. We find that forced disconnection of household electricity was entirely avoidable. We find that the demand side had enough discretionary load to maintain the system, but that the system operator had inadequate visibility or up to date awareness of that resource. Turning off any householder’s electricity, apart from their hot water cylinder, simply need not have happened. Ensuring that the system operator has accurate real time awareness of the size of each electricity distribution businesses’ discretionary load is a central recommendation.
2. Importantly, we make the finding that no household need have suffered a power cut even if the system operator had not deployed the demand allocation notice. We find that there was no need to issue that notice, and that the system operator did so in order to further honour an equity rule embedded in the electricity code. We find that rule to be ill-conceived, and in need of prompt revision.
3. The demand allocation notice was remarkably faulty. It required electricity distribution businesses (EDBs) to limit their load illogically. Its issuance caused considerable confusion. Transpower apologised in the days that followed. Trust between EDBs and Transpower has been damaged and will need to be restored.
4. We nonetheless find that the system operator staff acted capably and professionally during a challenging evening. They got us through, notwithstanding inadequate information and a faulty allocation tool. Their skill and commitment avoided the next stage of system defence, known as Automatic Under Frequency Load Shedding (AUFLS), which would have seen 16 per cent of New Zealand’s electricity load shed, automatically.
5. EDBs were also for the most part very responsive and engaged throughout the evening. Generators maximised their output where practicable. There was a lot of cooperation and goodwill evident throughout the system, and throughout the event, though we identify a touch of complacency too.
6. Transpower was criticised for inaccurately under-forecasting what turned out to be a record load. We do not support that conclusion, noting that competing forecasters were even less accurate. Nor do we place any importance on 9 August being a new record level of demand; it was the second such record this winter. We do however propose a rule change regarding wind energy estimation.
7. We investigated whether Genesis’ third Rankine at Huntly or Contact’s Taranaki Combined Cycle plant should have run. Claims of an undesirable trading situation and Code breaches have been lodged, and will be investigated by the Electricity Authority (EA). That scrutiny should be untainted by any detailed findings from us.
8. Accordingly, we have constrained our observations; forecast prices seemed to provide insufficient incentive to restart either plant. Some statements from generators immediately afterward were unhelpful. In coming years slow-start thermal plants will exit the system altogether.
9. We have examined planned generation outages and find nothing exceptional.
10. Some generation plant – Tokaanu and Waipipi – sharply reduced output at crucial times during the evening. Though that was an unusual coincidence, and had a material effect, we do not find the level of failure exceptional.
11. We find that the electricity system’s arrangements for generation shortfalls that may last for part of a day are very much less mature than arrangements for instantaneous and short outages (spinning reserve), and that that immaturity was at play on 9 August. We call this issue ‘managing multi-hour shortfalls’. We think it will become an increasingly important issue to address.
12. We find that while the market has matured steadily over 25 years, it has not yet matured sufficiently or with sufficient alacrity, though we are pleased to acknowledge the change to real time pricing in the market a year from now. Of all the market making or deepening options, we think it is time to revisit a cap market to support risk management.
13. Our review of the demand side was fruitful. Our first finding is our most important. There is significant opportunity to harness the discretionary load under ripple control, which is a long-standing demand side innovation, now at risk of decay. There is also growing need to harness new demand side opportunities – electric vehicles (EV), smart appliances etc.
14. We sense the demand side will shortly develop as a more important, accessible, digitised player, along with battery technology, when it comes to the increasingly important task of shifting load from peak to off-peak. We have some suggestions, principally around one or more ‘multi-hour shortfall’ products. We note a very varied contribution to demand side activity from large directly connected users, and recommend how that too might be addressed.
15. There is some urgency in progressing these things. The likely changes to transmission pricing will reduce the value of ripple control to EDBs, and therefore reduce the case for continued investment. We envisage ripple control and replacement technologies being at the heart of a transition to a richer demand side participation in the market over the next decade. Improved efficiency and improved security are both possible if done innovatively.
16. A widely held view is that the nature and standard of communication in the system is neither modern nor responsive. In particular, Transpower has room for improvement. We acknowledge that improved communication was reportedly very evident in a grid emergency event the following week. Elsewhere in the system, the ownership of customer relationships is contested under conditions of stress. Other analyses of some of these issues have already been made public. We endorse findings to date, and offer some additional ones.
17. Medically dependent customers are a sensitive issue among industry participants, especially retailers. Because all households suffer unplanned electricity outages, the most important thing for a medically dependent customer is a back-up plan, developed with their clinician. The most useful piece of information for a medically dependent customer, and for everyone, is the likely length of the outage. That was mostly unavailable on the night of 9 August.
18. The EA must review and strengthen its oversight of the system operator, and by implication Transpower. We find that self-assessment, whilst informative and useful, is inadequate. A regulator and a statutory monopoly have an unusual relationship, which must be determinedly developed at more than one level. Thus, Transpower must both be challenged to be a fully compliant and responsive player, and also be supported to continue innovation and leadership in our globally unique system.
19. We asked whether our system’s security settings are appropriate or whether they should be strengthened. The context includes the greater electrification of the economy, increased reliance on a continuous electricity supply, more adverse effects from climate change, and more intermittency occasioned from a transition away from fossil fuelled thermal generation towards new renewables. This question requires more analysis than we can command. What we can do is reiterate a key finding of our review, namely, that the market requires much greater demand side participation. We believe that this will be essential if goals of greater electrification and decarbonisation are to be achieved.
20. There is room for improvement in standard setting for appliance monitoring and control. Standards should ensure there is the ability for meters or phones to communicate with appliances, or EVs. We consider that both the EA and the Ministry of Business, Innovation and Employment (MBIE) have a role in proactively identifying opportunities where standard setting would be in the public interest.
21. The future will be characterised by reducing marginal costs for new generation, especially solar, contrary to the inexorably increasing marginal costs of recent decades. Rising social and political demands to progress decarbonising the economy will dominate. Various digital technologies will enable innovation, though only if the regulatory environment is conducive and timely. Accordingly, the considerable policy work already underway within MBIE and the EA assumes significant importance.
22. We have made a number of recommendations to address these findings. These are set out in each section of this report and collated for ease of reference in Annex G.