New Zealand’s ambitions for 100 percent renewable power by 2035 and carbon neutrality by 2050 will mean the biggest change in our electricity system since, well, Edison. For the first time ever, this revolution isn’t just about power stations and pylons. It’s also about New Zealand homes and businesses playing an active role in the power grid.

Most normal mortals don’t know (or probably care) how friggin’ hard it is to keep the lights on.

Long term, you need enough power stations and lines to make and distribute the power to where it’s needed.

Then there’s catering for routine morning and evening demand peaks, and unexpected power spikes when, for example, Auckland gets a cold snap and everyone in our biggest city rushes home and turns on the heating, the jug and the shower.

There’s making sure there’s enough capacity to cater for planned maintenance of power stations or lines. And for unplanned disasters and emergencies, like if a storm brings down lines, or part of a power station stops working

And every few seconds there’s another critical balancing act going on in the power system – something called “frequency keeping”. That’s about making sure supply and demand are in balance so the alternating current (“alternating” because it is constantly changing direction) stays at or around 50 switches per second (known as 50 hertz).

SolarZero CEO Neil Cowie says new technology should be used to help keep the lights on. Photo: Supplied

If electricity demand exceeds supply, frequency falls, and our appliances run slow or our lights dim or go off. If supply exceeds demand, frequency rises, which can cause motors to cook, and lights to burn out.

“Every light you switch on, there’s a power station adjusting slightly to cater for that.”

“Traditionally power stations have been used to keep frequency within a tight band,” says Neil Cowie, chief executive of New Zealand’s largest solar energy services company solarZero. Electricity boffins (or at least their computers) are constantly adjusting the network.

“Every four seconds they do a calculation to work out what’s happening. Every light you switch on, there’s a power station adjusting slightly to cater for that.”

Until recently, varying the output of large power stations has been the main way to control most of the vagaries of our electricity system. We have hydro stations with spare capacity which can start generating very quickly if necessary, and gas-fired plants which sit inactive for most of the day, and just fire up for an hour or so during morning and evening peaks.

Then there are stations like Huntly, which plays a similar role to the gas plants but is less flexible and so is used to cover longer periods of shortage – particularly dry winters. 

It’s complicated, but basically a combination of various power station options has always been the best way to keep the lights on.

Until now. Because like with other industries – telecommunications, for example, or the media – smart technology is changing everything.

Wind and solar are now the cheapest forms of new generation globally. Photo: Getty Images

Economies of scale

It all starts with economies of scale, says John Hancock. Hancock has spent 15 years as a consultant in the electricity sector, including being chair of the Electricity Authority’s Wholesale Advisory Group. These days he heads up the Innovation and Participation Advisory Group, tasked with advising the Electricity Authority on new technologies and business models, and on consumer participation.

Until recently, Hancock says, “it’s always been cheaper to build a big power station, a long way from where the power was going to be used, and to wheel the power down a network”.

What’s different now is the increasing competitiveness of small-scale generation technologies, particularly solar and wind.

Solar power isn’t new; what’s new is its affordability, he says.

“Solar was very famous in the late 1960s because the Eagle lunar lander [the capsule that took Apollo 11 crew Neil Armstrong and Buzz Aldrin onto the moon on July 20, 1969] had solar panels on it.”

The Eagle landed – and used expensive solar power to provide some of its electricity needs.

Hancock hasn’t been able to find out how much each panel cost back then, but he reckons it would have been hundreds of millions of dollars.

“They didn’t have any choice back then, there aren’t any petrol stations on the moon. But what’s happened since then is that the cost per unit of output of a solar panel has basically halved every 18 months.

“It’s gone from millions of dollars per kilowatt to hundreds of thousands to thousands etc and then suddenly it’s within cooee of all these other technologies. In certain circumstances it can be just as cheap as big power stations.”

SolarZero’s Gareth Williams estimates 150,000 household solar panel-battery combinations could produce enough power to replace Huntly. Photo: Supplied

Solar systems, including the storage batteries which significantly improve the efficiency of the panels, and the computing technology which connect them to the grid and to the appliances in someone’s house, are still getting cheaper.

A cool concept with an unsexy name

The technical name for the small-scale generation and storage technologies Hancock is talking about – what some people are calling the “biggest revolution since Edison” – is ‘distributed energy resources’.

The concept of distributed energy resources, or DER, is “distributing” more small-scale generation, storage and smart electricity technology out at the customer end of the grid.

Homes in Kapiti with rooftop solar. Photo: solarZero

At the beginning, DER mostly involved solar panels on someone’s roof feeding a bit of power into the network, and small wind turbines supplying a local community. There were also co-generation projects at industrial sites making power for a particular business, but feeding anything extra into the grid.

However, DER is changing. Increasingly there’s the potential for technology to optimise the use of the grid, bring prices down for customers, and reduce the need for expensive investment in electricity infrastructure.

Technology includes batteries which fill up using solar or off-peak electricity and then sell it back into the grid when demand is high. Or smart household-level electricity systems where customers get money off their power bill for allowing their heat pump, their electric vehicle charger, their pool pump, even their smart fridge to be turned off for a while to save power.

Your country needs your electricity

As the size of the distributed energy market grows, so it needs to be fully integrated into the whole electricity market – including all the mechanisms that keep the lights on, says solarZero chief technology officer Gareth Williams.

DER systems, including solar panels, batteries, and smart energy controls, can react quickly to put electricity into the network at peak times, or if there’s a breakdown somewhere else in the system, he says.

In the future, EV batteries could potentially supply power into the grid to flatten peaks, says solarZero CTO Gareth Williams. Photo: Supplied

But the technology can also be used to control demand at these times, automatically turning off appliances like heat pumps, or electric vehicle chargers, or adjusting the temperature of everyone’s fridge to save power over the duration of a problem.

‘Demand response’ – reducing people’s power use, often without them even realising it – isn’t new. Since the 1950s, power companies have been switching off the heating elements on people’s hot water cylinders at peak times to reduce the load on the system, in return for a cheaper electricity tariff.

Some electricity companies offer deals to farmers who only irrigate using off-peak electricity. Photo: Lynn Grieveson

Some industrial users and farmers are also incentivised to turn off electricity-hungry equipment or irrigators as needed.

In the US, Google’s smart home system Nest offers “rush hour rewards” to customers who allow their electricity provider to turn their heating or air conditioning down or up (respectively) during peak periods.

In New Zealand too, DER is starting to play a role. But the electricity network is complex and some key rules governing how it works are outdated, Williams says.

That needs to change to make the best use of new technology in the network, he says.

(Listen to Newsroom’s podcast about the boring black box at the heart of change in the electricity sector.

“The rules around providing grid services never contemplated a technology like a battery, for example, which can both be a load on the network when it’s charging, but can also be a generator, and send electricity back into the network when needed.”

Take the situation of an emergency which takes out power in one part of the network. A generator trips out or a pylon falls over.

At the moment, the main remedy is for certain designated hydro power stations with earmarked emergency capacity to ramp up to deal with the crisis.

The power companies are paid to perform that role.

Hydro-specific rules

In theory, it doesn’t just have to be a hydro power station responding to the problem, Williams says. SolarZero would like its systems to form part of that crisis response mechanism – adding electricity into the network or dropping demand.

But at the moment the rules don’t allow it.

“All the rules are specifically written around hydro, because at the time they were written that was the only solution. It’s about adapting the rules to recognise there are new technologies that are able to provide, we would argue, a better service in some situations.”

John Hancock and historical energy technology enthusiast Steve Batstone visiting Bullendale, the first hydro generator in the Southern Hemisphere. Photo: Supplied

No one says it’s easy. None more so than John Hancock, who has been looking at how to facilitate the introduction of new technologies into the electricity network.

The Electricity Authority is still at an early stage of implementing any of the 35 recommendations in the IPAG ‘Equal Access’ report, despite it being finished in early 2019.

To be fair, change has never traditionally needed to be particularly fast in the electricity sector, where technology has always moved relatively slowly, he says. Meanwhile, electricity regulators are also dealing with more urgent problems.

Don’t mess with the engineering

Hancock is also fully aware there are technical issues to be sorted before distributed energy resources can be integrated into the network. He calls it a Jekyll and Hyde problem. On the one hand, DER technologies can be a “very clever way of dealing with grid supply problems”.

On the other, they can cause problems of their own. Potentially quite big problems.

Putting a lot of household solar electricity into the grid has the potential to cause voltage problems. Photo: Lynn Grieveson

For example, electricity networks were built to transport electricity at high voltage at one end and gradually reduce the voltage as the electricity travels towards the customer. Suddenly injecting a whole load of electricity into the customer’s end of the network from solar panels or wind turbines can cause all sorts of trouble.

“You potentially have power going into a line that’s not capable of hosting it,” Hancock says. “The poor old networks just cannot cope… In extreme cases it’s like having a power surge – it fries all your appliances.”

That hasn’t happened in New Zealand – DER is still small-scale.

But it could do so if the regulators don’t get the engineering sorted before they change the rules.

SolarZero is working with network operator Transpower to find technical solutions. Photo: Lynn Grieveson

SolarZero’s Neil Cowie says the company is already working with grid operator Transpower on the specifications necessary to make sure the system works.

“It’s electricity, there have to be rules, there’s got to be process, there’s got to be long-term thinking about how we integrate all this stuff. But we have this wonderful opportunity to innovate and to think about what role distributed energy resources have to play.”

Accelerated electrification

Including DER in the way the grid works is going to be increasingly important over the next 30 years, as New Zealand moves towards its 2050 climate change goals, Cowie says. And that’s because if we are to achieve carbon neutrality, we are going to need more electricity. Possibly a lot more electricity.

The Ministry of Business, Innovation and Employment’s latest ‘Energy in New Zealand’ report, shows while renewables made up 82.4 percent of our total electricity use in 2019, they made up less than 40 percent of our total energy use.

The cars we drive, the way we heat our big buildings, the way we make our milk powder, or dry our timber – that’s mostly done using fossil fuels.

Which isn’t good if we are aiming for Carbon Zero.

Recent reports from the Interim Climate Change Committee, Transpower and the Productivity Commission have all talked about the need for accelerated electrification – replacing our petrol and diesel vehicles with electric vehicles, and our coal, gas and oil heating and industrial processing systems with electricity-fuelled heating.

Transpower’s Whakamana i te Mauri Hiko: Empowering our Energy Future report released in March estimates a 68 percent increase in required electricity generation by 2050.

“This estimate is broadly consistent with the assumptions and modelling from the ICCC, MBIE and Productivity Commission,” the report says.

Huntly will have to go if we are to move to 100 percent renewable generation. Photo: Lynn Grieveson

The old way: Build more power stations

Until recently there was only one way to deal with increased demand for electricity. You built more power stations.

But there’s a problem. To get towards the government’s stated goal of 100 percent renewable electricity generation by 2035, we need to be thinking about getting rid of some of the power stations we have – the ones that use coal, gas and oil.

Source: MBIE’s Energy in New Zealand 2020 report

Three have already been closed – Mercury’s Southdown plant and Contact Energy stations at Otahuhu and New Plymouth. But there are three big ones still working: Huntly, E3P (also at the Huntly site), and Stratford. Unfortunately for our climate change goals, these are also useful to get us out of an electricity hole during a dry spell, like the 2019-2020 drought, which coincided with problems with gas production.

Electricity generation from coal was up 43 percent in 2019.

Source: MBIE’s Energy in New Zealand 2020 report

Of course you can build new renewable power stations, and New Zealand will have to.

But building enough renewable power stations to meet our future electricity needs, and expanding the grid, will be very expensive – which means higher power prices. And big hydro and wind projects can be controversial.

“The great white hope here is that you could double the size of the electricity industry without doubling the size of all the networks that support it.”

Power to the people

Which is where distributed energy resources come in again.

“The great white hope here is that you could, say, double the size of the electricity industry without doubling the size of all the networks that support it,” Hancock says. “And that’s about trying to use the networks more efficiently. So things like batteries and smart technologies to switch things off and on are all very helpful. This is the sort of thing that will allow you to defer investment, or avoid it completely.”

What needs to happen to make that work?

The most important thing, Hancock says, is that people need to be paid when they agree to allow their resources to be used as part of managing electricity networks – just like people get a cheaper tariff if their lines company is allowed to fiddle with their hot water heating.

“The Equal Access report was very strong about distribution companies needing to pay or offer discounts to anyone who lets them use these ‘flexible resources’.”

“Some of this isn’t about rules, it’s about attitude – changing the way of doing things.” 

What the regulators can do, Hancock says, is make sure lines companies set their prices to encourage the most efficient use of the system. So, for example, if a particular part of a network was getting close to capacity in terms of the amount of electricity it was using, lines companies could look at various different options for meeting the increased need, including DER, rather than simply investing in more infrastructure.

It sounds obvious, but Gareth Williams says that’s a big shift.

“Some of this isn’t about rules, it’s about attitude – changing the way of doing things. Distribution companies have always just built lines and transformers and those sorts of things to provide the capacity they need to support load on their networks.

“But we’ve seen examples from overseas where, in fact, putting in distributed resources, owned by customers or owned by service providers like ourselves, is a cheaper alternative to building new equipment.

Building new infrastructure has mostly been the go-to position to deal with increased demand. Photo: Lynn Grieveson

“If we are looking to build a cost-effective and internationally competitive electricity system, then we have to look to these more cost-effective solutions to traditional problems.”

Which is exactly what Transpower is doing. In September this year, Transpower released a report that explored the potential of distributed generation. The report found there is potential for distributed energy resources to play a significant role in power system management – keeping the lights on.

“New Zealand has an opportunity to transition to a smart grid that uses renewable electricity to meet all our energy needs. This can be achieved by ensuring we extract the full value from the resources we use to generate electricity. This includes solar PV [solar photovoltaics, more commonly known as solar panels], batteries, EV charging and other new technologies that will see our homes and businesses play an active role in the operation of the power system of the future,” the report says.

“It’s great to see Transpower taking a leadership role alongside the likes of the IPAG,” Cowie says.

Increased visibility

However, before the smart grid can happen, Hancock says electricity distributors need to be able to see much more clearly what’s going on at that end of the network – through meters or sensors in the distribution networks.

Next, people need to look at the data to see how any changes in supply and demand are affecting the power system.

And finally, they can start building tools that can remotely control what’s going on.

“And that’s expensive, because [that part of the grid] is sort of everywhere,” Hancock says.

“It’s not like there’s one central thing you can do; you are looking at two million exit points in New Zealand – houses and offices and factories. And there’s a large coordination problem with 27 electricity distribution networks with a variety of owners from local trusts to councils, private investors to Hong Kong-based infrastructure specialists – you name it.”

SolarZero’s Neil Cowie just wants the process to speed up, so his company and other companies in the DER space can get fully integrated into the electricity system, including being paid for keeping the network going.

He says DER technology is available already, and will continue to improve. And as has been proved overseas, it can play a part in reducing the cost of network investment. 

“The more batteries, the more distributed networks we have around the country, the less infrastructure is required, because when you’re building electricity infrastructure you have to meet peak demand, so the network’s always built at a peak.

“The more you take off the peak, the less the requirement to build infrastructure.”

But at the moment development is being held back, partly by the rules, Cowie says.

“All we are asking is for the rules to be changed so as to allow the uptake of new technology and innovation. We have this massive opportunity right now to revisit how we expand our electricity supply. And that ultimately, in our view, will allow New Zealand to move to carbon neutrality and 100 percent renewable electricity, cost effectively.”

This story is written in partnership with solarZero.

Nikki Mandow was Newsroom's business editor and the 2021 Voyager Media Awards Business Journalist of the Year @NikkiMandow.

Leave a comment