Stephen Batstone THE NZ ELECTRICITY MARKET: TEETERING ON THE EDGE OF TRANSFORMATION?
RETAIL In a sleepy corner of the South Pacific DIRECT CONNECTS GENERATOR TRANSMISSION DISTRIBUTION CUSTOMER WHOLESALE BUYER WHOLESALE SELLER WHOLESALE MARKET WHOLESALE BUYER RETAILER HEDGE MARKET
It s just clearing supply and demand? Price Responsive Demand Demand = 3,020MW Forecast demand Generators make capacity available at a price that reflects their willingness to generate Clear the market! 3
Electricity markets are the most designed market in the world A vital, ubiquitous service for society with few substitutes (heat) Need almost absolute assurance that supply and demand balances in real time If it doesn t, blackouts occur Historically (and today) storage isn t economic The consumers have been disengaged (technology limitations, but also The transportation problem is driven by hard physical laws An enormous, complex optimisation problem with extremely little room for error New Zealand globally isolated, with a weather-driven system in the Roaring 40s with a world leading market design 4
It s just clearing supply and demand Price Responsive Demand Demand = 3,020MW Market is cleared every half hour (solved 5 minutes). At ~250 locations to optimise transmission losses and recognising transmission limitations. Simultaneously optimising supply of electricity with two types of standby reserves. Produces market clearing prices at every location, for three products 5
A volatile price series Wholesale Price (c/kwh) 70c/kWh 60c/kWh 50c/kWh 40c/kWh 30c/kWh 20c/kWh 10c/kWh 0c/kWh 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6
Questions What sorts of long-term decisions are emerging from this market? How will it handle increasing renewables? What about the changes on the demand side? 7
Questions What sorts of long-term decisions are emerging from this market? How will it handle increasing renewables? What about the changes on the demand side? 8
Reliable growth. 45,000 NZ Electricity Demand, 1920-2015 GWh per annum 40,000 35,000 30,000 25,000 20,000 15,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 Generation in NZ - 2007 Other stuff Wind Coal Geothermal Gas 10,000 5,000 10,000 5,000 0 Hydro - 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 9
Demand 2007-2016 8,000 Demand 6,000 GWh change since 2007 4,000 2,000 - -2,000-4,000-6,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Demand 10
And we built 8,000 Demand + Investment 6,000 GWh change since 2007 4,000 2,000 - -2,000 (mostly) low SRMC renewables -4,000-6,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Investment Demand 11
Wholesale market Renewable vs Demand Against % Renewable 8000 90% 6000 4000 2000 0-2000 -4000-6000 80% 70% 60% 50% 40% 30% 20% 10% -8000 2008 2009 2010 2011 2012 2013 2014 2015 1H 2016 Hydro Other Renewable Demand & Losses Renewable Share (%) 0% 12
Then we un-built 8,000 Demand + Investment + Decommissioning 6,000 GWh change since 2007 4,000 2,000 - -2,000 (mostly) low SRMC renewables (exclusively) moderate SRMC thermal -4,000-6,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Investment Decommissioning Demand Net Supply - Demand 13
Questions What sorts of long-term decisions are emerging from this market? How will it handle increasing renewables? What about the changes on the demand side? 14
Can the market handle a low-emissions electricity sector? 100,000 Generation by fuel, emissions 2050 7.00 90,000 80,000 70,000 6.00 5.00 GWh per annum 60,000 50,000 40,000 4.00 3.00 Mt CO2-e pa 30,000 20,000 10,000 2.00 1.00 - Today (2014) BEC Kayak 2050 Vivid OffTrack 2050 MBIE Mixed Renew 2050 MBIE Disruptive BEC Waka 2050 Vivid Innovative 2050 0.00 Coal Coal + CCS Gas Hydro Geothermal Solar Wind Biogas Wood Emissions pa 15
How do we know if we have adequate energy resources? 7000 NZ Electricity Demand 30 minute resolution SYSTEM PEAK Resource Adequacy is the ability to reliably meet demand at every point in time. 6000 5000 1. The system must have enough reliable capacity to meet the system peak MW 4000 3000 2000 1000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2. The system must have enough available fuel (wind, rain, geo fluids, coal, gas etc) to meet total demand over any period (area under the curve) and under different fuel scenarios 16
Intermittent Renewables Wind and Solar Wind output during top 10% of demand periods 7000 600 MW National Demand 6000 5000 4000 3000 2000 1000 0 0 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Demand Wind Peakers, hydro storage and soon battery storage and demand response can smooth this 500 400 300 200 100 MW wind output 800 700 600 500 400 300 200 100 0 Daily Solar profile 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 17
NZ hydro an unfortunate correlation 4000 Average National Inflows vs National Electricity Demand 3500 3000 GWh per month 2500 2000 1500 1000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec National Demand National Inflows 6000 Annual Expected Solar Profile 5000 4000 Batteries? Demand Response? 3000 2000 1000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Hydro uncertainty 19
Managing between years The concept of shifting power through time (flexibility) is relevant to every system But in a hydro dominated system happens over long periods Currently done through fuel contracts + storage With a high renewables future, flexibility will be the coin of the realm 20
Questions What sorts of long-term decisions are emerging from this market? How will it handle increasing renewables? What about the changes on the demand side? 21
Switching and new retailers 30 25 20 15 10 5 0 Number of Retailers Dec 2003 May 2004 Oct 2004 Mar 2005 Aug 2005 Jan 2006 Jun 2006 Nov 2006 Apr 2007 Sep 2007 Feb 2008 Jul 2008 Dec 2008 May 2009 Oct 2009 Mar 2010 Aug 2010 Jan 2011 Jun 2011 Nov 2011 Apr 2012 Sep 2012 Feb 2013 Jul 2013 Dec 2013 May 2014 Oct 2014 Mar 2015 Aug 2015 Jan 2016 Jun 2016 Nov 2016 45,000 40,000 35,000 National Switching Statistics Switches oer month 30,000 25,000 20,000 15,000 10,000 5,000 0 Jan 04 Aug 04 Mar 05 Oct 05 May 06 Dec 06 Jul 07 Feb 08 Sep 08 Apr 09 Nov 09 Jun 10 Jan 11 Aug 11 Mar 12 Oct 12 May 13 Dec 13 Jul 14 Feb 15 Sep 15 Apr 16 Nov 16 22
Technology Disruption? WEATHER STATION SMOKE DETECTOR LIGHTING SECURITY HEATING & COOLING ENERGY MONITORING 23
Don t forget about efficiency - the quiet competitor 24
Or even just.
A new dynamic? GWh per annum 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - NZ Electricity Demand, 1920-2015 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Meeting this demand used to be about competition between large generation investments Now it s also about competing with customer investments: efficiency, irrational distributed generation, behaviour change. BUT we could also see the electrification of process heat, transport 26
It s just clearing supply and demand Price Responsive Demand Demand = 3,020MW So how does the new consumer participate in a half hourly market? How do we coordinate (optimise) the flexibility and uncertainty of distributed energy resources? 27
www.whiteboardenergy.co.nz/powering-nz 28
QUESTIONS? 29