1. ©The Marketplace Company Limited 1 APEx Conference 2006 Experiences in how to deal with market stress situations – New Zealand Carl Hansen – The Marketplace Company

2. ©The Marketplace Company Limited Outline of presentation Particularities of New Zealand electricity market Vulnerabilities: Case one: hydro shortage Case two: transmission constraints

3. ©The Marketplace Company Limited Particularities of New Zealand electricity market Deregulated market – 5 major players Threat of intervention present Vertically integrated market participants Narrow grid with many bottlenecks – 244 nodes 75% of generation is hydro Small hydro storage capacity

4. ©The Marketplace Company Limited Dunedin Christchurch Wellington Auckland 65% demand in North Island 66% of hydro capacity (39% of NZ capacity) in South Island HVDC Grid Constraint

5. ©The Marketplace Company Limited Case one: Hydro supply vulnerability Maximum storage is 12% of annual demand Inflows at lowest during periods of highest demand Unpredictable inflows

6. ©The Marketplace Company Limited

10. Responses to hydro shortage Market responses: Hydro generators conserve water Industrial load decreases Incentives offered to consumers Government regulatory intervention – Whirinaki Power conservation programmes

11. ©The Marketplace Company Limited Case two: transmission constraints Market responses: Nodal prices provide incentives Government signals commitment to develop grid

12. ©The Marketplace Company Limited

14. Future issues Line upgrade to Auckland What fuel to use for future generation Improving demand response