Stage: 1 (Enquiry) Status: Completed Date commenced: 19 April 2013

The Grid Owner (Transpower) has started commissioning of HVDC pole 3, which involves a number of commissioning tests on the HVDC. Some of these tests require restricted HVDC transfer levels to test its capability. The grid owner is contracting with market participants to facilitate these tests and trying to schedule tests to align with the natural market conditions which, given the current hydrological conditions, is becoming more challenging.

We observed that a number of commissioning tests are having an impact on the wholesale electricity market price. As an example on 03 April 2013, constraints were applied on HVDC pole 2 and pole 3 to constrain the flow on the HVDC as part of the planned HVDC tests. These constraints were applied in the calculation of final prices and affected prices in the South Island.

We estimated that without these commissioning constraints on the HVDC the daily average price at Benmore would have been $82/MWh rather than $104/MWh on this day (22% reduction) affecting purchases and sales in the spot market. In addition to increasing the daily average prices on 03 April 2013, the inclusion of these commissioning constraints increased spot price volatility in the South Island, which if it were to persist, would increase the demand for hedges.

As part of its enquiry, we'll consider the impact of the HVDC commissioning tests on the wholesale electricity market and the incentives of the current commissioning arrangements to minimise the costs associated with asset commissioning.