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Opinion: One-in-three year event complicates looming power crisis

By Melanie Carroll of NZPA

Friday 30th May 2008

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A power crisis may be influenced by a one-in-three year event as well as a one-in-60 -- there are concerns that the looming election is complicating how the threat to the nation's electricity supply is being handled.

The southern hydro lakes -- which fuel much of the country's hydro power, which in turn accounts for around two-thirds of electricity production -- contain only three weeks' worth of water. And what precipitation is forecast is likely to fall as snow.

A winter dry enough to put the country's power supply at risk is supposed to be rare, although there are also other complications constricting thermal supply and power transmission around the country.

While people are being warned about the situation, Transpower has not started a concerted public power conservation drive, which would only be effective for a limited time.

With hydro storage around 58 percent of average, thermal power plants are being used as much as possible to reduce demand on the hydro lakes.

Large industry has cut production to save power, and Contact Energy is firing up a generator at the New Plymouth power station which was mothballed last year over asbestos concerns.

The last time there was a serious power shortage was in 1992, but the public have been asked to save power in 2001, 2003 and 2006 because of low lake levels. Fortunately, rain arrived in time to avert serious problems.

Among measures taken in 1992, a power company paid large customers to use LPG and diesel, and Comalco shut down part of its operation -- creating a 5 percent national saving. The crisis was estimated to have cost 0.6 percent of GDP.

Electricity Corporation (ECNZ) bought back power and retailers were incentivised to run campaigns, with some of them making large savings and a lot of money.

No one was denied power, although hot water heating was turned off at times.

But with hydro storage capacity still well above the 1992 levels, is it scaremongering to mention a crisis? One market commentator thinks not.

"If we ran out of fuel, ie hydro fuel, it wouldn't happen overnight," he said.

"The situation we have in '08 is that the probability that we don't have enough is changing before our very eyes."

Sixteen years ago, the parties involved were the Government, generator ECNZ, and distributor/retailers.

In 2008, the parties are generator/retailers, separated lines businesses, and the Electricity Commission which was set up to deal with security and supply issues.

The Government aims to ensure electricity demand can be met in very dry years -- formerly considered one year in 60, and now expressed as a margin between forecast supply and demand -- without emergency conservation campaigns or distortions to the electricity market.

It is an understatement, the commentator said, to say Energy Minister David Parker is downplaying anything that might cause problems with an election just months away.

But behind closed doors for some time now, representatives of the main players have been meeting, sometimes in the minister's office.

"Whilst the minister may not have an ability to directly say `you can do this and you can't do that', I understand he will have had plenty of opportunities to express his satisfaction or displeasure over judgments being made," the commentator said.

He was not concerned with lake levels, but worried the minister was projecting a view without letting the systems do their work.

"It means that he should sail through any winter saying `I've got this nailed'. The fact that he wants to jump up and down and get animated suggests that he doesn't have faith in the underlying arrangements."

The market was working well, with prices rising and systems responding as they ought to.

But it was also an understatement to say things could be worse than we're being told, he said.

"Why are they treating the electorate like idiots? Why aren't they just taking people along and saying `here's the situation, no need to panic, you've just got to do this'?"

Spot, or wholesale, energy prices were "absolutely unprecedented", but they had been high before.

"(Companies) would have learnt from those years to manage their affairs, so they shouldn't be hurting. If they're hurting, it means they haven't been managing their affairs appropriately."

Before a conservation campaign, what little spare power there was would be bought back from the industrials prepared to sell. Then there is the possibility of brownouts, where residential hot water systems are closed off.

It would be easy enough to coordinate a conservation campaign with the handful of national retailers.

"But if you were to get to the brownout stage you'd still require the cooperation of 27 or 29 independent lines companies, and you would have to ask them to do rolling brownouts, and you wouldn't be able to buy (power) back from them because they're lines companies and they're not integrated retailer/distributors," he said.

Which complicates things a lot.

Separating the lines and retail businesses in 1998 "was one of the stupidest things that any government ever did", he said.

However, the systems in place were working, and the lack of energy was another issue.

"For people to start meddling with the institutional arrangements when we run out of water, they're missing the point. Changing the arrangement's not going to create any more water."

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