Evaluation of the New Zealand Electricity Generation Expansion in Meeting Dry Year Demands

Abstract

After the commencement of the New Zealand Electricity Market (NZEM) in October 1996, generation expansion was made based on the wholesale electricity prices rather than through coordinated government planning. Since then, the installed generation capacity in New Zealand has been observed to follow a bust and boom pattern, resulting in energy shortages during dry winter years. A System Dynamics (SD) model has been developed to study the bust and boom trend. The model is then extended to evaluate whether the generation expansion proposed by the 2008 Statement of Opportunity (SOO2008) will be able to meet future dry winter year demands under the current market mechanism. The evaluation takes into account New Zealand’s main storage lake cycles and the El Niño-La Niña Southern Oscillation (ENSO) phenomenon. The evaluation shows New Zealand is likely to face future energy shortages during dry years unless mitigation actions are taken.