Production/spot prices fluctuate after pylon collapse

Though the power price pressure for large industrial users dropped immediately once the Cook Strait cable link was temporarily restored last night, thermal generators are only easing their electricity production back.
Production/spot prices fluctuate after pylon collapse Production/spot prices fluctuate after pylon collapse Production/spot prices fluctuate after pylon collapse Production/spot prices fluctuate after pylon collapse Production/spot prices fluctuate after pylon collapse

Temporary replacement pylons, for the three blown down in high winds north of Hanmer Springs on Friday morning, were last night once again allowing electricity transfer between the North and South Islands, ending the effective splitting asunder of the Kiwi wholesale electricity market of recent days.

Some major North Island industries, particularly pulp and paper makers, were forced to cut production after the Cook St link went down, though Methanex Taranaki methanol production was not affected.

Spot electricity prices in the upper North Island, which had soared from less than $NZ60 to $NZ900 per megawatt hour, fell rapidly, to about $NZ41, once the high voltage DC link was restored yesterday.

However, there was little respite for the North Island generators who had cranked their thermal stations to compensate for there being no cheap South Island hydroelectricity available.

Genesis spokeswoman Carolyn Vavasour told EnergyReview.Net today that the company's 1000MW Huntly gas-coal station was still running at full available capacity, subject to resource consent constraints relating to Waikato River heating.

Contact spokesman Pattrick Smellie could not be contacted, though it is known its Taranaki Combined Cycle, Otahuhu A and New Plymouth are now easing back electricity production levels.

The situation is complicated by a 250MW unit at Huntly being out for scheduled maintenance, as is Contact Energy's 365MW Otahuhu B gas-fired station in Auckland and the nearby Mighty River Power 123MW Southdown cogeneration plant.

Also, the wildly fluctuating spot market has caused some concern, with Major Electricity Users Group chairman Terrence Currie saying the price volatility of the past few days indicates an unstable market.

However, market operator M-Co says the market is working well, with price hikes signalling that cheap power was no longer available to big North Island electricity users.

Currie said it needed to be determined if the price volatility was because of inherent flaws in the market, or the behaviour of the big power generators. "It is completely unrealistic to expect end users, or for that matter prospective new entrant generators or retailers, to operate in such an unstable wholesale market," he is reported as saying.

Currie believed energy intensive industries had lost confidence in the ability of the sector to provide secure supplies of electricity at competitive prices and said there was not enough competition in the market, which is dominated by five big generator-retailers, three of which are government-owned.

However, M-Co acting market operations manager Shane Dinnan is reported as saying the wholesale spot market behaved as expected _ signalling a shortage of low-priced generation when the link went down, along with the Otahuhu, Southdown and Huntly maintenance outages.

There was no shortage of electricity, just less "baseload capacity" available, Dinnan said, adding that only consumers with significant spot-price contracts would have been affected by the wholesale price spikes, not those on fixed price contracts or with sufficient hedge contracts.

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