National market for instantaneous reserve
Background on instantaneous reserve
1 Mar 2013
Instantaneous reserves are a security product that ensures that electricity demand can continue to be met in the event of unplanned generation or transmission interruptions. Whilst this is a highly necessary function, the cost of procuring and providing instantaneous reserves represents an increase to the cost of production.
Unlike energy, where most participants in the wholesale market can respond to changes in price by altering their supply or demand, security products have a much less dynamic interaction because the same level of security must apply to all market participants. Therefore, optimal efficiency of security products is best achieved by seeking to drive down overall costs and prices, while maintaining appropriate security levels.
Participants supply instantaneous reserves in the New Zealand electricity market separately in each island. Until recently the HVDC link was only capable of transferring a small quantity of reserves between islands, because of physical and control system limitations.
The recent upgrades to the HVDC link and its control system have removed many of the physical barriers to a NIRM, so the Authority has initiated a project to investigate and progress the regulatory changes and market systems changes required.
The Wholesale Advisory group (WAG) considered this project in 2013, and made recommendations to the Authority board.
Since then the Authority, in conjunction with the system operator, has carried out an investigation into the changes required, and the feasibility and costs of making these changes.