Keeping the lights on

New Zealand has two key challenges to supplying electricity around the clock all year round. One is having enough ‘generation capacity’ during periods of peak demand, and another is having enough fuel to generate electricity during a ‘dry year’.

Generation capacity

Winter sees the highest demand for electricity, usually during cold evenings or on frosty mornings when people ramp up their heating. Also, in autumn or spring, if there's a cold snap.

If there is no wind or sun, then wind farms and solar panels can't make as much electricity. This leaves hydro, geothermal and thermal generation to provide more electricity during periods of high electricity demand.

Geothermal generation already runs at near full capacity, so only thermal and hydro can ramp up and down to make up the difference and keep the lights on. Hydro units can get running quickly, but thermal units can take a long time to start up. So the trick is making sure there are enough hydro and thermal units running to meet everyone's needs when electricity demand is at its highest.

Dry year risk

New Zealand relies a lot on hydro power (using water from lakes to make electricity). When there's less rain than usual for an extended period, the lakes get low which is called a 'dry year'. This can occur during any season, but is intensified in winter when electricity demand is highest.

When the lakes are low, the price of hydro power goes up because water is becoming scarce. Thermal power plants need to generate electricity and make up the difference. But the cost of thermal fuels (gas, coal) is more expensive than renewable sources (water, wind, solar) and so this can cause the wholesale price of electricity to go up.

Making sure you have power when you need it is a top priority for the Electricity Authority. We have a lot of work underway to improve New Zealand's power system to make sure you have an efficient, reliable and secure supply of electricity. For example, we're working on:

• Outage coordination enhancements - enabling assets owners and the system operator to more effectively coordinate schedules for planned outages to reduce the risk of too many assets being on outage at the same time

• Updates to scarcity pricing settings - improving price signals during periods of tight supply to assist with resource coordination and to continue to provide robust signals for investment in flexible resources like batteries, fast-start generation and demand response

• Improving the accuracy of intermittent generation forecasts (wind and solar) - to have a positive impact on electricity system costs and improve the risk to overall security during periods of tight supply. For example, if there is over-forecasting of wind capacity, this increases the risk of slow start thermal generation not coming online to meet peak demand because sufficient generation is forecast.

• Updates to the stress test regime - to retailers' risk management and enable them to respond to stress test scenarios when longer-term price risk events occur.

New Zealand's electricity system is evolving at pace to electrify Aotearoa and reach net zero carbon emissions for 2050. Electricity demand is expected to increase by up to 82% by 2050 (baseline 2013).

To meet this additional demand, more electricity generation is being built (like geothermal power plants, wind and solar farms), and new technological advancements are being introduced (like smart grid technologies and smart energy systems).

The future will see households and businesses have more control over their electricity use; widespread use of electric vehicles, battery storage and smart chargers to help stabilise the grid; and communities that can produce and manage their own electricity to be resilient in the face of significant weather events and natural disasters.

As the regulator, we do a lot of monitoring and tracking behind the scenes to understand if the power system can make and move enough electricity to keep the lights on. We pay close attention to:

• Hydro storage and inflows - New Zealand has a highly renewable power system, with hydro generation making up around 60% of our electricity supply. The lakes are relatively shallow – they could go from full to zero water for electricity generation in 6 weeks if there is no rain. So we constantly monitor hydro storage and inflows to identify any risks.

• Wind and solar generation - Wind and solar farms don't produce power consistently eg, when there's no wind or sun. We forecast how much power these sources will produce to help keep the system running smoothly.

• Thermal fuel availability - We monitor the amount of gas, coal and diesel that can be used to generate electricity. These fuels are like backup electricity sources. They are used when usual sources, like water, wind or sun, aren't making enough power.

• New electricity generation - We monitor how many new power plants (wind and solar farms), solar panels and batteries are planned to understand if there will be enough electricity in the future for all New Zealanders.

• Power plant and equipment outages - Power plants and the grid owner need to take equipment out of service to complete necessary maintenance work. This needs to be carefully coordinated to ensure the power system can reliably deliver electricity at all times.