Review of low residual and insufficient generation events

This review found that, despite the increase in the frequency of tight supply situations, in recent years there have been improvements in the handling of such situations.

Since the grid emergency of 9 August 2021, the system operator issued notices earlier than previously, giving participants more time to react, which they did by increasing reserve and energy offers where possible.

The review notes that in both 2022 and 2023 there was only an escalation of events when there were extenuating circumstances, such as equipment failures, despite periods of near-record peak demand in 2023.

We also found a general improvement in wind and demand forecasting accuracy, giving increased certainty for participants and the system operator to help manage events.

We note that despite the improvements in the handling of such situations the increase of intermittent generation in the electricity system and other factors means managing such situations will remain a challenge. The Authority continues to work with participants on system security, forecasting certainty and operations improvements to mitigate these challenges.

Transpower, as the system operator, communicates potential grid issues to electricity market participants through notices that are sent via email and published on its website. From 2021 to August 2023, there was a marked increase in the number of notices forecasting low residual and insufficient generation compared to previous years.

This report investigates how these periods of low residuals or insufficient generation were resolved by looking at participant reactions and the accuracy of forecasts. The review was motivated by the increase in such events, and it aims to provide insights for the future, in particular for winters when these events are more likely to occur.