New Zealand’s Electricity System is about to be Disrupted

The NZ Electricity system is complex. Generally, it is based on large hydro generators in the South Island transmitting electricity via the Transpower Grid to North Island consumers. Geothermal and lately wind farms have been added but still rely heavily on the high voltage grid which transmits electricity to a network of monopoly lines companies that convert it to lower voltages before distributing to our homes.

1) Ideally electricity should be generated instantaneously to meet demand. The old system of large, centralised generators with overcapacity idling, waiting to transmit over long distances was adequate but wasteful and had grid stability issues. The clunkers cannot respond instantaneously.

2) Ideally generators should be located close to consumers. Transmission systems are a feature of the old centralised system adding 30% to delivered electricity prices.

Distributed Energy Resources (DER), Demand Response and smart software is now available to disrupt the old system to the benefit of NZ.

Distributed Energy Resources that apply to NZ are wind turbines, solar PV, and batteries aggregated into Virtual Power Plants (see introduction to VPP here). Using market driven software, they can respond instantaneously to meet real time demand. These VPPs can be located close to consumers minimising transmission costs.

Residential consumers (voters) represent 30% of consumption yet have little input into the decision-making processes due to the complexities involved so “The System” is dominated by large corporates who have vested interests and have paid staff capable of “gaming” the system.

The politicians are dependent on “good” advice to appreciate the minutiae, but paid lobby groups can easily muddy the waters. Recent political announcements to spend $30M on investigating the Lake Onslow storage proposal and advocating “no subsidies for Tiwai” are evidence of behind-the-scenes activities.

The Lake Onslow battery is a great energy storage idea to meet winter and hydro dry-year shortcomings of the legacy system. But, inappropriate for NZ when DER is considered. Located in the lower South Island it relies on the decaying grid. The time to commission, 2030, is too long. Wind and solar farms can be commissioned within 3 years using the $2B price tag, producing electricity close to consumers thus avoiding transmission costs.

Aluminium is not a twilight industry. Decades ago China recognised it as an important future mineral. They overbuilt smelters (possibly unintended) which has since depressed the market. Most of those plants are fossil fuel dependent, due for retirement and some will close bringing more aluminium market stability and making Tiwai “RenewAl” more valuable.

We are too isolated to transmit surplus electricity in undersea cables. If NZ introduces a 200% renewable energy policy to take advantage of our natural renewable electricity opportunities, we will need wealth creating plants such as Tiwai to sell our “cheap” renewable electricity, built into manufactured products.

Hydrogen, silicon mined in Southland, Glenbrook steel manufactured via a hydrogen reduction process are further wealth creation projects (versus infrastructure) NZ Inc. need to progress.

Electrification of NZ using renewables needs to be accelerated if we are true to the recently announced Climate Emergency.

2 GW of wind farms are already consented but awaiting electricity demand before proceeding. Government owned Huntly must be shut immediately to provide that demand and coincidently meet emission reductions.

Electrification of the rail system. If Kiwi Rail include the emissions externalities into their costings, then a fair comparison of economics occurs.

This emphasises the immediate need for emission costs be included in all our activities.

Transport emission standards – we do not have any!

We need vehicle emissions standards tapering to effectively make Electric Vehicles (EV) the only vehicles capable of meeting the target by 2030. This would be more effective than the divisive Feebate Scheme at transitioning to EVs.

3.8M Internal Combustion Engined (ICE) vehicles are powered by $5B of imported fuel annually. Consider the amount of farm products exported to pay for this cost. Due to inefficiencies of ICE only 17% of that fuel is converted to moving these vehicles.

Subsidy is a dirty word and can be avoided in the Electric Vehicle space.

There are less divisive financial incentives to convert to EVs without taxpayer funding.

Immediately introduce time of use (TOU) charging. EV owners can charge their vehicles off peak at reduced rates.

EV’s are “demand response” capable, so can be further rewarded providing a service to grid stability.

Accelerate the disruption to VPP’s so vehicle owners can arbitrage their 75 kWh of EV battery storage into the grid (V2G). Because these vehicles (batteries) are in urban garages close to demand they are ideal candidates to receive Frequency Control and Auxiliary Service (FCAS) payments thus further stabilising the grid and minimising transmission charges. Another financial incentive offsetting the current high purchase cost of an EV.

A bonus for a new smart Electricity System Operator is these EV batteries are located all over the country free of transmission constraints providing grid stability and instantaneous reserve.

Provided the regulations are adjusted to allow lines companies to reward EV owners for services rendered, no taxpayer funds need be spent offsetting the high initial cost of EVs.

NZ needs an Electricity Transition Minister to give urgency and teeth to the Electricity Authority and Commerce Commission.

Tasked with:

  1. Urgent Electrification of NZ
  2. Removal of fossil fuel subsidies
  3. Transition to a smart, real time System Operator (SO) embracing innovative technologies. See how a hierarchy of smart interconnected VPPs become a SO here.
  4. Reconfiguring of fossil fuel plants (New Plymouth, Marsden Point) and their workforces (families) to wealth creating renewable industries.
  5. Transition the ICE vehicle industry and their workforces to wealth creating renewable industries.
  6. Scale back bulk transmission over long distances. Immediate introduction of “Beneficiary Pays” transmission charging making DER built close to consumers compelling. This mitigates existing grid congestion points and the risks relying on a worn-out Grid infrastructure.
  7. Reconfigure the Natural Gas Network to transport green hydrogen and biogas generated from farm effluent ponds, town wastewater plants and landfill.
  8. Remove transmission subsidies (fixed rates) to a beneficiary pays charging methodology. This will encourage high energy users away from Auckland thus relieving its urban infrastructure pressures and housing shortages, boosting provincial growth.
  9. Coordinate the hydro dry-year solution. Possibly green hydrogen plants consuming overbuilt renewable electricity generators until unpredictable climate events occur preventing hydro generation. Hydrogen production can be turned down in favour of the wind, solar and geothermal plants to fill the temporary hydro shortage gap.
  10. Allow democratization of electricity. Replacement of the Code and Transmission Pricing Methodologies that were designed for another age. Retailers may disappear and distribution companies will need to change their business models.

What can we do in the Eastern Bay of Plenty?

  • Electrify the forest products and farming industries. Add more symbiotic processes instead of exporting unprocessed logs and low value milk and meat products. Employing the skilled workforces presently working in fossil fuel industries.
  • Build a biofuel (jet fuel) plant processing forest residue using green hydrogen and catalytic cracking technology. We have experience of this at New Plymouth and Marsden Point.
  • Focus our farms on less volume, high value meat and dairy to reduce emissions and fertiliser use. Return to 100% pure. Produce heme meat at Fonterra Edgecumbe.
  • Generate 250% renewable electricity from geothermal and solar energy. Exporting excess via the grid and by producing energy intensive products.
  • Use our sunshine. Introduce solar farms into the mix (wind is better suited to other areas) using a combination of Matahina and EV batteries to balance the intermittency issue.
  • Ground mounted community (iwi) solar farms are cheaper to install than rooftop solar PV.
  • By overbuilding renewable generation, we can meet the hydro dry-year issue but will need process plants capable of being turned up or down to balance the fluctuating loads.
  • Electrify the Murupara to Tauranga rail line.