Options chosen to better manage peak electricity demand this winter

The Electricity Authority has decided what options it will progress to better manage potential supply issues during periods of peak electricity demand this winter and beyond.

Late last year, the Authority released a consultation paper that put forward 11 possible options in response to information that tight peak supply conditions may be more prevalent in winter 2023 than previously indicated.

These potential tight supply situations are a characteristic of a power system that is in transition with intermittent renewable generation playing a greater role than in the past.

Following consideration of submissions and further technical work by the system operator, the Authority is implementing one option now and is developing four other improvements for potential implementation by winter 2023. A decision on whether to implement any of these other options is expected to be made later this month.

Five other initiatives will also be progressed, but these will not be ready in time for winter 2023.

One option, to procure additional resource outside the spot market, will not be progressed by the Authority and neither will any of the additional options put forward by submitters.

"We’re working right now to improve information available on potential tight supply situations to reduce uncertainty and improve decision-making to efficiently manage situations well ahead of time.

"We are also progressing four other options to further assist with managing potential tight supply situations during peak winter demand.

"We are confident that these initiatives can be in place in time for the coming winter, while five other longer term options will also be advanced, but not in time for this winter.

"It is important to note that the issue is one of ensuring the electricity supply can manage peak demand over short periods during winter. There is enough installed generation to meet peak demand but a tight supply situation is a short duration period, such as a morning or evening demand peak, when there may not be enough supply offered into the market to meet forecast demand.

"The proposed options were evaluated against criteria and with regard to the Authority’s statutory objectives which include promoting reliable supply by the electricity industry for the long-term benefit of consumers.

"A proposal put forward by the CEO Forum (a working group of the CEOs of the six larger generators, four largest distributors and Transpower) will not be progressed. It did not satisfy the criteria we used to evaluate the options proposed. We had concerns it could have the unintended consequence of incentivising the withholding or withdrawal of resource from the spot market, be difficult to modify or remove once in place and was unlikely to be in place in time for winter 2023.

"As we noted when launching consultation, as a regulator we want to provide the appropriate incentives to balance supply and demand, but any option must be in the long-term interests of consumers," said Ms Gillies.