Ministerial Statements — Electricity Supply—Power Outages

I wish to make a ministerial statement relating to yesterday’s power outages. Yesterday, an emergency mechanism in the electricity system was triggered by the system operator, Transpower, requesting network companies direct grid connections to reduce load on their networks. Network companies then took action in response to this request, which saw a number of power outages across the North Island between 6 p.m. and 9 p.m. last night. This situation was caused due to insufficient generation being available to meet unprecedented demand on a cold winter’s evening across the country.

Yesterday’s events unfolded as follows: at 6.43 a.m., Transpower issued a low residual notice to participants following their forecast showing a deficit in generation during the forecast evening peak. Transpower requested more generation or less load. At 1.02 p.m. yesterday, Transpower issued a warning that there was insufficient generation coming in for the evening peak, and another warning was issued at 5.07 p.m. At 6.40 p.m., Transpower issued a request for network companies with direct grid connection to shed load by 1 percent. At 7.10 p.m., Transpower issued a grid emergency notice.

From this timeline, three things have become clear to me: the electricity market had clear warnings about the potential for the shortage situation; secondly, there was inadequate communication with the public about the situation; and, thirdly, there is enough capacity in the system. This led me to write to the large generators asking what action they took in response to Transpower’s notice at 6.43 a.m. I also asked them to confirm with officials that they have confidence their companies are doing everything they can to maintain their generating capacity and ensuring security of supply. This is the number one priority for the electricity market. Since my letter this morning, Genesis has explained why it made a commercial decision not to operate one of its plants in response to the forecast shortfall.

Transpower will also apologise for the miscalculation in its demand reduction notice and their communication to the lines companies through the warnings and notices given. I have asked officials to consider what more can be done to better inform the public in the event that a rare grid emergency is likely to occur. I am concerned that the system could not deliver, given there was capacity that could have been brought on, but wasn’t.

It is not uncommon for Transpower to issue requests for generators to bring on more generation to meet demand, but it is unusual for an emergency notice to be issued. But let me be clear, regardless of the mechanisms of the electricity market, New Zealanders rightly expect the lights to be on and the heaters to be running on a cold winter’s night. That’s why the situation that unfolded yesterday was unacceptable. If we’re going to have a market-orientated system providing security of supply, then that market must deliver. The market failed in this respect.

This morning I convened an urgent meeting of senior officials from Transpower, the Electricity Authority, and the Ministry of Business, Innovation and Employment (MBIE). I asked a series of questions and sought assurances about the ongoing operations of the market to maintain security of supply. I have also asked that a coordination group be established by MBIE to lead the response and commence a review of what has occurred. While we cannot undo what happened yesterday, we can thoroughly investigate the cause and take steps to minimise the risk of it happening again. I will add that this Government has taken numerous steps towards ensuring the electricity market is working as it should, including a range of responses to recommendations from the electricity price review. The recent spike in high electricity prices as a result of the dry hydrological year and a short-term gas supply issue led me to seek analysis on this from the Electricity Authority. Yesterday’s events have prompted further questions on whether the system is fit for purpose.

Mr Speaker, thank you. Firstly, I want to say that the National Party’s thoughts are with all of those people up and down the country who last night expected to be home and be able to turn the heater on and, instead, had to face a dark, cold winter’s night—particularly to our elderly and those medically dependent who had to rush to hospital in those circumstances. My first question to the Minister is when was she first informed of the risk of a power outage, and what measures did she take to inform vulnerable members of the public?

I was first informed that there was an issue around 8.30 p.m. last night. One of the first actions I took was to call Alison Andrew, the chief executive of Transpower, to get a situation report to find out what had been happening and what steps were in place.

Has the Minister received any briefings from officials over the last six months suggesting that power outages were possible, and, if so, what did she do in response to any advice she received?

In the last six months, I’ve received a range of advice. As the member will be well aware, earlier in the year there was a concern that there could be issues due to the dry hydrological year—that the lake levels were wrong. But, as the member will also be aware, that issue has resolved and the South Island hydro system is now at around 103 percent of historical capacity for this time of the year. In answer to the question of had I received advice that the situation that occurred last evening could occur, the answer is no.

I am aware, Minister, of the fact that the hydro lakes have filled. My next question to you: is there a significant risk of further outages tonight, and, if so, what steps is she taking to mitigate the risk?

As I’m sure members of this House will expect, I’ve been talking with officials and seeking assurances from across the sector around what is in store for New Zealanders tonight, and I would like to reassure New Zealanders that I have received those assurances from Transpower. I have had an assurance. The latest one is that there’s going to be 540 megawatts of spare capacity in the system tonight so that we’re not looking at a repeat tonight. But given how quickly the situation changed yesterday, this is the situation that I will continue to keep seeking assurances on.

So what would have happened if last night was windless, which it wasn’t, and tonight it’s more likely it will be windless—what factors has the Minister taken into account around that?

One of the issues actually was that the wind did die down last night, so Genesis, in the decision not to fire up the third Rankine at Huntly was based on what it considered to be continued wind that was going to carry through into the evening. That did die down. There was an issue also with one of Genesis’s hydro lakes in the North Island system last night, as well. In terms of the fact that tonight will also be windless, and that is the situation that we are facing, I am assured by Transpower that of that 540 megawatts of spare capacity that we have in the system tonight, only around half of that, roughly, is due to wind generation.

Thank you. I want to note that last night’s increase in demand wasn’t far above what would be expected at this time of the year, particularly during a snowstorm. In fact, we can expect that similar increases in demand will continue to occur next winter and the winter after that, or even potentially again this year.

My next question to the Minister is: what steps is she taking to make sure this doesn’t happen again and that New Zealand can have confidence that when the temperature drops the electricity stays on?

Just to give some context for the peak demand, which was an historical high, that we experienced last night, it was around 7,100 megawatts. We would expect a winter peak in New Zealand, historically, as being around 6,500 to 6,700 megawatts. So this was somewhat larger than we had experienced. None the less, New Zealanders rightly deserve to know that we have an electric system that has enough generation capacity to cover the fact that we will have a winter storm. The assurance that I can give New Zealanders is that we did have the physical capacity last night for more generation; commercial decisions were made not to bring on-stream some of that generation.

A couple more questions for the Minister. The Minister has often talked about a pumped hydro scheme as allowing New Zealand to get to 100 percent renewable and security of supply. The Government, however, banned oil and gas in 2018 and, only after this, sought advice on how to replace gas. Can she confirm that officials have told her a pumped hydro scheme will be at least 10 years away, and, if so, can she also confirm that there will be at least 10 more winters before it is built?

There are several questions in there; I will attempt to answer all of them. In terms of, the member talks about pumped hydro, I think this is a good opportunity to point out that last night the high-voltage direct current cable, which is the cable that transports electricity from the South Island to the North Island, was actually only running at about 50 percent capacity. So there was far more capacity on that cable to transport more hydro power across the strait into the North Island to meet the shortfall.

In terms of the pumped hydro solution, in terms of whether or not that would be a long-term solution, what we saw last night, actually, was the current mix that we have in our system in terms of what our backups are in terms of coal and gas actually not coming and providing that security of supply for New Zealanders. That is why we need to be looking at future solutions, such as this Government has made the commitment around pumped hydro. We have always said that this is a long-term project—

💬 Hon Member: Time line?

—and we’ve been very clear around what the time line of that project is, and, yes, it is around a decade. I think it is a shame that New Zealand had not taken the opportunity a decade ago to start looking at some longer-term solutions for how it is we would have a fit for purpose energy system in New Zealand. I do note that the last time we got into a situation in terms of a similar analogous position was in 2014.

Given the cable was at 50 percent last night, what is the expectation of the Minister of the transmission—what percentage of that cable should have been running, and, given the dam situation—that we now have plenty of water—why was the cable not fully operational?

There were some planned outages that were happening in Clyde last night, but I do note that Meridian made a decision when they received the notice yesterday to bring off stream a planned outage they had on one of their wind farms, that they cancelled that and brought that back on.

Have I still got time? One more question: what percentage of last night’s generation was thermal?

I think you’d probably say not enough, given that the third Rankine wasn’t fired up. We have a system at the moment that does require the fact that we do have both renewables and fossil thermal fuels in our system. What we saw was a commercial decision was made to not bring on the Taranaki Combined Cycle Power Station or the third Rankine at Huntly yesterday. In terms of do we want to change that in the future, absolutely, and that’s why this Government is doing the long-term investments that will get us to that place.

Why did Genesis not put extra load on last night?

I think that’s a question better directed to Genesis.

Thank you Mr Speaker. I thank the Minister for her statement, and I notice that the response from some members to my right is that what we need to do is to explore for more fossil fuels in response to the outage last night, and the idea that future oil and gas—[Interruption]

💬 SPEAKER: Order!

I know it’s a little hard to hear me over the baying masses to the right, but the irony that—or the kind of hole in the thinking that suggests that if there was exploration occurring now for fields that may or may not come on in the late 2020s or early 2030s, that that would somehow have alleviated the situation last night. Particularly given that the head of the International Energy Agency themselves have said that, actually, we cannot bring any more fossil fuels online if we are to stop a climate catastrophe, and, in response to yesterday’s Intergovernmental Panel on Climate Change report, the United Nations Secretary-General said that he thought that this should be the death knell for the fossil fuel industry.

I did want to refer to something that the Minister had said about, I guess, the shame that actually this country hadn’t invested in more renewables in a distributed grid much earlier, and I wanted to ask the Minister about different forms of generation and distribution in the system. Given that there have been a number of reliability issues on the fossil fuels part of the system, that the Huntly Rankine unit last night wasn’t operating, that the Pohokura gasfield outage caused a spike in demand late last year, and, of course, there was the Auckland fuel pipeline rupture before that: what does that say about the reliability of fossil fuels? And what are her plans to increase distributed renewable energy generation and capacity, such as rooftop solar and batteries, to alleviate demand?

Mr Speaker, I thank the member for that contribution. There’s a number of questions in there; I’ll start with the last, on distributed energy and around what the plans are there. This certainly holds a very great potential for New Zealand—that the future of any energy system around the world is not only going to be decarbonised but it will also be distributed and it will be digitised as well. These are the things that we know about future energy systems. With that in mind, this Government has to do at least two things to prepare itself for that. One, that we know that distributed energy systems often rely on more intermittent forms of generation, such as solar and wind, and that we need a way to make sure that we are providing the security of supply into a system that does that. That is why the investment in pumped hydro is such an important part of planning an energy system for the future—we have to be planning for dry-year risk, and we have to be doing that in a renewable way.

In terms of how it is that we’re gathering the data and understanding these distributed systems in a New Zealand context, as the member knows, in our COVID Budget we made an investment around a number of trials looking at a number of distributed systems, largely on our public housing systems and in Māori housing. Some of these are array generation, in terms of solar, some of them are on roofs, some of it’s direct to hot water—we’re seeing where we can get that co-benefit of savings for households as well as generation of electricity.

Given that her view is that it was a commercial decision to withhold generation last night that led to the Rankine unit being offline, would having more oil and gas reserves or more coal reserves available have made any difference to the outage last night?

No, and the Taranaki Combined Cycle Power Station gas turbine wasn’t utilised, either; so there was more capacity in the system that could have been utilised there. I do note that that does take around three days in order to bring that into action, but I also note that the forecast weather front that we saw pass over the country had been in place. So it wasn’t a physical constraint on capacity that we had there. We did have the physical ability to cover all of the electricity generation that was required last night.

And, just out of curiosity, how much demand did electric vehicles place on the grid last night, and was New Zealand’s electric vehicle fleet to blame for the outage?

An excellent question given I’ve seen some reports of this, but what I can report is that last night, if every battery electric vehicle and every hybrid vehicle had been plugged in and charging at the same time that we experienced the peak, between 6 p.m. and 9 p.m. yesterday, it would have required 42 megawatts of electricity. This is equivalent to the power used in a town the size of Mosgiel or a quarter of a standard wind farm.

In response to a question from the ACT Party just a few weeks ago about the risk of energy shortages, the Minister said that she’s considering a range of projects through the New Zealand Battery Project. That’s a project that doesn’t even exist yet. It doesn’t have a business case and the most optimistic outlook for construction starting is 2024. But that probably doesn’t factor in getting consents to build a dam in a UNESCO-level wetland. There’s no way it would be operating before the end of this decade. Yet, in reply to the question from the ACT Party, the Minister said that is one of the options that they’re considering to mitigate the risk of energy shortages in a dry year like we’re having now. We’ve heard the Minister say that fortunately the dams in the South Island are full, yet Lake Taupō, the source of hydroelectricity in the North Island, where most of the users are and where the blackouts occurred, is still at a fraction of its normal levels. So the Minister’s claim that the South Island hydro lakes are somehow full and that we should all be happy about that is, frankly, disingenuous.

This Government is focused on everything except price and energy security. We’ve heard a climate emergency declared. There was a housing crisis declared. They can’t solve those problems, and they sure as on earth can’t solve a problem of electricity security of supply at an affordable price. Now, the lights went out last night and the people of the Waikato were asking, “Why isn’t the Onslow battery project here to save us?” Because that’s what they’d been promised. They are also asking, “How much wind and solar was there at 8.30 p.m. last night when the lights went out?” Well, that is a mystery—how to get wind on a still night and solar in the dark.

Now, when this Government announced a ban on oil and gas exploration in 2018, there was no backup plan to ensure that New Zealand had a secure and affordable energy supply. But even without the ban on oil and gas exploration, New Zealand faces increasing demand for electricity and energy. The Government has forecast it. The Climate Commission has forecast it. Industry has forecast it, and every householder who’s installed a heat pump in the last few years knows how much electricity that uses and how much that costs. So there is a real risk that at peak times, even when the weather is certain, we will continue to need a wide variety of energy supplies, including natural gas and geothermal energy—energy systems which do not depend on the vagaries of wind and sun and rain.

Now the Government is carrying out a $30 million feasibility study into the Onslow pumped hydro project. That would be New Zealand’s largest hydro dam—and, yes, flood a UNESCO-level wetland in the South Island. Storing water reserves for a dry-year risk in hydro dams does have merit, but that must be close to where the people who need the electricity live. That water can sometimes be held for years without generating any power or any revenue for the dam operator, and that’s why electricity generators are waiting for the results of this Government’s business case investigation before deciding whether to invest in further renewable or other backup generation. They’re asking, “Why would the private sector invest in new electricity supplies when this Government might build an enormous dam and put them out of business and strand their new assets?” So what New Zealand families and businesses are asking for now is affordable, secure, reliable electricity. That’s why the ACT Party asks the Minister, what actions should or could have been taken to avoid these blackouts? What actions will the Government take to ensure that electricity supplies are secure and these blackouts don’t happen again? And how on earth will the Onslow project bring more electricity closer to where it is needed, Minister?

I’ll answer the couple of questions that were in there. In terms of what actions should or could have been taken to avoid the occurrence that happened yesterday, I think I outlined that in my initial statement that there are a number of things that need to be looked at. We did have more generation that could have been brought on stream, but it wasn’t, and that is the piece of work now that needs to be looked at: how do we assure that it’s not market decisions that are the limiting factor in terms of whether New Zealanders have their lights on and the ability to turn their heater on?

In terms of Onslow and its ability to bring on more capacity and more generation, actually, providing that dry-year storage is absolutely critical to unlocking the potential of north of Taupō intermittent generation—wind and solar—which would have covered some of the earlier in the day, so it is part of a network that is absolutely critical.

In terms of one of the assumptions that the member made, I’d just like to correct him in terms of the bringing on of new generation. In the last three years we’ve seen 1.4 gigawatts of new generation brought on, with $2 billion worth of investment. Some of that is, of course, non-fossil baseload generation in the form of geothermal, which is a very important part of our system.

💬 Simon Court: Mr Speaker—

💬 SPEAKER: No, the member’s time is expired.

Thank you, Mr Speaker. Up to 20,000 households lost power and, in some cases, were left without heating after high winds brought down powerlines and cold weather saw power use surge beyond generation capacity. For such widespread failures to occur proves that our system is under serious pressure. This is unacceptable at any time, let alone in the evening in the middle of winter. Our communities deserve more.

It is evident that these failures are a consequence of decades of under-investment in our infrastructure, including our national electricity grid. Using even more fossil fuels is simply not an option, nor are further blackouts. What’s needed is to ramp up our investment in renewable energy so that we reach 100 percent renewable electricity production urgently. That means more solar, more wind, more tidal, more geothermal. Te Paati Māori has pushed strongly for significantly higher levels of investment in transition to renewable energy and clean technology. The irony is not lost on us that this national widespread power shortage occurred on the same day the Intergovernmental Panel on Climate Change released their latest report showing we are on a collision course with climate catastrophe.

Energy resilience is going to be more and more important. The Government must prioritise this alongside strengthening our response to the climate crisis through aggressive action on reducing our emissions. My question is to the Minister: so when can we see a full commitment by this Government to move to 100 percent renewable electricity, what are the time frames, and will Māori and iwi be consulted and/or part of the decision making?

I thank that member for his contribution. Of course, this Government does have a commitment around 100 percent renewable electricity. In terms of how it is that we ensure that Māori and iwi are brought into that, that is a piece of work that is ongoing. I am working with a number of colleagues—I talked in one of my previous answers in terms of what we’re doing in terms of trials on Māori housing, in terms of distributed energy and what the future might look like there. So that is a critical part of the Government’s work programme.

How does the Government fare in terms of that consultation, when it comes to water rights with Māori?

That is a separate piece of work that is not part of the energy portfolio.

We’re also getting slightly wide of the—