System Operator Launches Review Of Electricity Risk Forecasting Framework

Transpower is seeking views on whether the rules governing how it prepares and publishes information in its system operator role to help the electricity sector manage security of supply risks are fit for purpose.

The review of the System Operator Security of Supply Forecasting and Information Policy (SOSFIP) has been started in agreement with the Electricity Authority, which must approve any changes.

Transpower Chief Executive James Kilty said the last review was in 2022 and it is timely to again seek views from industry given changes in power system dynamics in recent years.

“With the transition to a more highly renewable and intermittent power system coming at the same time as constraints in gas supply and the potential retirement of thermal plant, security of supply considerations are changing rapidly,” he said.

“This is a good time to talk to stakeholders about what changes might be needed to better support security of supply in the years ahead.”

The review comes after Transpower last year used the limited discretion it has under the SOSFIP framework to bring forward hydro generators’ access to additional hydro storage to mitigate emerging risk to electricity supply. The affected lakes were Pūkaki (Meridian Energy), Hāwea (Contact Energy) and Tekapo (Genesis Energy).

Mr Kilty said rain arrived before this contingent storage was needed, but Meridian Energy has asked Transpower to review the triggers for when and how generators can access this additional water in future.

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“We have been asked to consider recommending to the Authority that it changes the framework to permanently bring forward generators’ access to this water,” he said.

“We are keen to hear from stakeholders about how any such changes could affect security of supply, particularly given that conservative use of hydro storage is important when conditions are dry, as they are currently.

“At the moment resource consents only allow this water to be used to avoid impacting electricity supply so we want to hear from the relevant resource consent authorities and local communities about potential effects on them.”

The full review will not be completed in time for this winter, with Mr Kilty noting that the careful analysis and consultation that is needed cannot be completed in time.

“Any permanent changes to SOSFIP could alter the risk framework in the market that informs decisions by participants,” he said. “We need to consider these issues carefully if we are to avoid unintended consequences.

“However, given the dry conditions we are contending with, we also want to hear from industry about any shorter-term changes that could be made before this winter to improve security of supply.”

These suggestions could include matters indirectly linked to the security of supply framework or potential actions that other parties may be able to consider.

The issues paper is on Transpower’s website. Submissions are due by 5pm Monday 24 March and then there will be one week for cross-submissions.

Feedback will inform the next steps of the SOSFIP review, including its scope. It will also enable relevant decision makers to progress any short-term actions that can make a difference. Further consultation on a draft SOSFIP amendment proposal will follow later in 2025 before Transpower submits its final proposal to the Authority.

Notes:

The SOSFIP is a system operation document approved by the Electricity Authority and incorporated by reference into the Electricity Industry Participation Code. The SOSFIP describes how Transpower as the system operator prepares and publishes information to assist participants to manage security of supply risks.

The Authority is responsible for over-arching market design under which the SOSFIP sits and must approve any changes to it consistent with its statutory objective. It is the role of Transpower as the system operator to operate the SOSFIP, and the system operator must comply with the SOSFIP that is current at the time. The SOSFIP addresses physical supply risks and does not consider price impacts.

The current SOSFIP can be found on the Authority’s website.

Contingent storage

Transpower has limited discretion in its system operator role to change what is known as the Contingent Storage Release Buffer (CSRB) in the Electricity Risk Curves (ERC). The ERCs are a progressive series of curves corresponding with an increasing level of risk of running out of hydro storage over the next 12 months.

Lifting the CSRB has the effect of bringing forward the ‘alert’ curve (which corresponds with a 4% risk of running out of hydro storage over the next 12 months). When hydro storage drops below this curve, hydro generators are able to access contingent storage under their resource consents.

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