Unreliable renewables contributes to high prices

Unreliable renewable generation contributes to high spot prices

“The flaws in the policy to ban new thermal power stations are being graphically illustrated by current high electricity spot prices,” said Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG).

“Yesterday provisional spot prices at Haywards averaged 19 c/kWh. These are extremely high prices reflecting relatively tight supply. Yet there was no security of supply risk yesterday, just generators pricing their output to reflect current and possible future scarcity. The existence of unreliable and intermittent renewable generation such as wind did not mitigate the high spot prices.

“The prolonged sequence of extremely high spot prices since the start of the year will flow through to higher financial derivative prices and retail prices. Major power users’ with spot exposure are hurting today. In the near term smaller commercial and household consumers will feel the cost of current high spot prices.

“There are known and predictable reasons affecting supply such as Contact Energy unexpectedly retiring New Plymouth Power Station in December last year and Contact Energy’s TCC plant out of service until early April for planned maintenance.

“Apart from the above known factors, the underlying driver of current high spot prices is that water is relatively short because of low seasonal inflows and wind generation has been unreliable. These are the types of renewables the government puts much faith in to achieve its 90% renewables by 2025 target, assisted by a ban on new thermal power stations.

“Yesterday the Te Apiti wind farm had peak generation of approximately 30 MW. Installed wind turbine capacity at Te Apiti is 90 MW. Average wind generation for the whole day from Te Apiti was approximately 12 MW. Just when we need as much supply as possible to cover known outages and hence put pressure on spot prices, wind has been missing.

“Once again the expensive to run government owned Whirinaki power station burning diesel entered the market yesterday. Whirinaki has been used partly for 13 days over the last 5 weeks. If government dictates more wind generation should be built by banning new cheaper gas fired base load power stations, we will need a lot more Whirinaki type plants around New Zealand. The operating costs of Whirinaki are estimated to be in excess of 30 c/kWh so using diesel plants in the future to cover dry years or windless periods will penalise all consumers of electricity.

“The evidence that relying on more renewables rather than a mix of generation types will lead to extreme spot prices and the need for inefficient peaking thermal plant is happening almost everyday with the current prolonged summer weather. Government needs to heed the signs and urgently rethink the proposed ban on thermal generation” concluded Mr Matthes.

ENDS