The Electricity Authority found its lack of access to the gas sector hampered its ability to respond to dry year risk this winter, Marc Daalder reports
The electricity market regulator has laid out a tentative case for it to be granted greater access to information about the availability of fossil gas, in a briefing to Energy and Resources Minister Megan Woods.
In the June 14 update on its review of the wholesale electricity market, the Electricity Authority said the dry year conditions this winter highlighted the importance of gas to the security of power supply and uncertainty around its availability was a “key issue”.
Over the course of March, April and early May, the country veered towards an energy crisis. Hydro lake levels were at less than half of maximum capacity and approached a scenario where there was a 1 percent chance of blackouts.
To make up the difference, gas-fuelled power stations were fired up – and many are still running at maximum capacity even as lake levels begin to recover. However, some generators reported issues with accessing gas in an already-tight market, where outages at the Pohokura gas field in recent years have led to high prices for gas. In fact, according to the authority, some industrial gas users have struggled to purchase it at any price.
The Electricity Authority said lack of clarity about how much gas might be available for generation purposes meant its risk calculations might have been off.
“A key issue throughout the event has been uncertainty about the ability of thermal generators to access gas,” officials wrote to Woods.
“This includes the terms and circumstances in which this would be made available, and the validity of the assumptions about this availability in the system operator’s calculation of energy risk curves (which are triggers for both an official conservation campaign and rolling outages).”
The authority concluded that gas was still “essential to New Zealand’s security of supply” as it transitions to a fully renewable electricity system.
“However, the authority is limited in its ability to require information of a standard that is needed to resolve any ambiguity regarding gas available for thermal generation, unless that information is held by electricity generators. That is, the Authority is entirely reliant on anecdotal information and the good will of gas sector players for information critical to security of supply analysis,” the regulator wrote.
“The authority has legislative tools available to compel electricity participants to provide any information necessary to support its monitoring functions; no such tools exist for the gas sector. As New Zealand transitions to 100 percent renewable generation, information on the gas sector will be increasingly important for the Authority to manage, monitor and understand market impacts and security of supply.”
Andrew Doube, the authority’s general manager of market policy, told Newsroom that the dry year event “identified that there was a need for the Electricity Authority to better understand the availability of thermal fuels for electricity generation, particularly around thermal generators’ contracted supply of gas and ability to secure additional fuel if required.
“That’s why the authority used its powers under section 46(2)(a) of the Electricity Industry Act 2010 to require electricity industry participants to provide information, including commercially sensitive information, so the Authority could carry out its monitoring, compliance and market facilitation functions.”
Doube said the regulator would “welcome any stronger information-gathering powers so we can continue to have confidence in security of supply and ensure that there is fuel – including gas supply – for electricity production”.
John Carnegie, the chief executive of the oil and gas lobby Energy Resources Aotearoa, expressed concern at the idea of new disclosure requirements.
“We agree with the Electricity Authority that natural gas is essential to our electricity system as we transition. Even the Climate Change Commission sees this role continuing past 2050,” he said.
“We can’t see how even more forced disclosure is needed or fair though. The authority can already gather information from generators, who are responsible for generation. Going further down the line to force information from producers seems excessive, especially when this is already highly regulated.”
For her part, Woods said she welcomed the regulator’s plans to review its ability to respond to security of supply concerns.
“I expect that the Gas Industry Company, the industry body that co-regulates the gas industry, and the EA will work together to ensure that security of supply is effectively managed across both our gas and electricity markets,” she said.
Woods added that a report from the gas regulator was expected in the coming weeks as a result of its own review into market and regulatory settings in the gas market that underpin security of electricity supply.