Six solutions to assist with peak demand issues

We are developing a package of six initiatives to support system security and to better coordinate resources during peak demand periods.

New Zealand's electricity system is transforming at a rapid scale and pace as the country electrifies and the mix of generation changes. However, the transition is also creating challenges for security of electricity supply, particularly at times of peak demand.

We consulted on Potential solutions for peak electricity capacity issues in early 2024. Based on submissions and lessons learned from the recent low residual situation on 10 May 2024, we have decided to further develop a range of solutions. We will:

• accelerate demand response participation in the market by actively exploring a full range of regulatory levers
• change market settings for security of supply by updating and consulting on the Security Standards Assumptions Document
• start development of an integrated standby ancillary service in the form of a five-minute variability management tool to provide cover for a sudden reduction from intermittent generation sources
• promote flexibility and competition in the wholesale and ancillary service markets by undertaking work to enhance battery energy storage systems and dispatchable demand participation and remove barriers to entry. This includes building additional value streams for flexibility
• enhance forward price discovery in flexibility markets by developing standardised flexibility financial products with the support of industry co-design
• enhance outage information and coordination by developing potential improvements to the outage coordination process.

We have also decided not to proceed with any of the interim solutions we consulted on:

• contracts for out-of-market resource, including contracts for emergency demand response. These may be well-intentioned but are unlikely to be effective at providing additional resilience in the short term to manage peak capacity issues. They would also be a significant departure from the current market and carry a number of major risks. These risks include chilling investment signals, undermining confidence in the market, and additional and significant costs being passed down to consumers.
• residual payments for participants to commit their resource to market had very little support and there was mixed evidence of their potential effectiveness.

Although we will not implement the interim solutions identified in our consultation paper, we will continue to explore new solutions and improvements to support security of supply.

We believe that the package of solutions that we have decided to develop will better support security of supply over multiple time horizons.

Read our decision paper

About managing peak electricity demand