‘Undesirable Trading Situation’ complaint filed over allegations Genesis & Contact withheld power

Smaller players in electricity market lay formal complaint accusing Genesis and Contact of withholding power and creating an 'Undesirable Trading Situation'

12th Aug 21, 6:44pm by Jenée Tibshraeny

Two small players in the electricity market have made a formal complaint to the Electricity Authority following Monday’s rolling blackouts.

Retailer, Electric Kiwi, and wholesale energy trading firm, Haast Energy Trading, are accusing large gentailers of abusing their market powers by withholding generation capacity.

They say there was an ‘Undesirable Trading Situation’ (UTS) on Monday night when tens of thousands of homes had their power cut.

A UTS is a catch-all type of complaint within electricity regulations that allows for formal allegations of market failure or manipulation to be investigated. It's defined as an extraordinary event which threatens, or may threaten, confidence in, or the integrity of, the wholesale market.

Electric Kiwi and Haast Energy Trading say Genesis and Contact caused this UTS and breached trading conduct rules in the Electricity Participation Code.

Haast Energy Trading managing director Phillip Anderson didn’t buy Genesis CEO Marc England’s line that the blackouts saw Genesis lose money.

He said that looking beyond Monday night, less generation capacity creates scarcity, which ultimately makes wholesale electricity more expensive. What’s more, outages see a risk premium built into the price.

Haast Energy Trading and Electric Kiwi ultimately want the electricity generators to be broken up and the market to be structurally reformed.

In direct response to their formal complaint, they want the Electricity Authority to ensure the wholesale electricity price for Monday night is reset to assume the generation they accuse Genesis and Contact of withholding was offered to the market. This, they believe, would prevent generators from being rewarded for withholding capacity.

Genesis and Contact’s sides of the story

England on Tuesday said the owner and operator of the electricity grid, Transpower, didn’t give Genesis enough time to fire up its big coal-powered Rankine ahead of demand peaking on Monday night.

He noted that the ‘Customer Advice Notice’ issued by Transpower on Monday morning didn’t require Genesis to fire up its Rankine. What’s more, Genesis didn’t think it was necessary.

By the time Transpower started issuing more serious warnings in the afternoon, it was too late, as the plant needs six to 10 hours to get going.

Electric Kiwi CEO, Luke Blincoe, said this wasn’t good enough from an operator of significant national infrastructure.

"Genesis claim that they covered their own customers’ needs, and evidently, they feel they have no responsibility to other Kiwi families and businesses to keep the lights on,” he said.

As for Contact, it said it needed 72 hours to fire up its gas-powered Taranaki Combined Cycle plant, which was last used in July.

Blincoe was again sceptical, believing Contact would only need 72 hours if it needed to source gas to fuel the plant. He believed Contact had the gas, so could’ve fired it up more quickly.

Transpower’s mistake left at least 16,379 homes unnecessarily out of power

Energy and Resources Minister Megan Woods likewise took aim at the gentailers for not making more generation capacity available.

She refused to apologise for singling out Genesis, whose CEO said her comments were “misguided”.

She also said she had received an apology from Transpower for making mistakes.

Transpower concedes it overstated how much load some retailer had to shed when the electricity system came under pressure on Monday night.

WEL Networks claims it cut power to a whopping 16,379 homes, which it didn’t need to, due to Transpower’s miscalculations.

It said it was asked to reduce load by more than 20%, well above the national average.

“It should be noted there is regulation that requires Transpower to undertake best endeavours to reduce load evenly across all its customers,” WEL Networks said.

Transpower also left Woods in the dark

What’s more, Transpower didn’t notify Woods’ office of the “New Zealand wide emergency” until 7:51pm on Monday; two-and-half hours after it issued its first ‘Grid Emergency Report’.

Woods has directed the Ministry of Business, Innovation and Employment to investigate the situation.

She said the focus of the review would include communications with industry, stakeholders, and the public; escalation communications; whether Transpower's alert system is fit for purpose; Transpower's modelling tool; whether other generation could have been brought online; scheduling and risk margins; and whether there is adequate standby generation or other resources to reduce risk.

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47 Comments

by JimboJones | 12th Aug 21, 7:32pm 1628753538

Breaking up the generators sounds like a great idea. The only way a market approach will work is if there are too many suppliers to collude.

by dictator | 13th Aug 21, 7:33am 1628796819

I think a requirement to add an amount of excess capacity would help too. With a margin of extra capacity there are less excuses for maintenance shutdowns and deliberately moving slow to pump up the power price.

by totara | 14th Aug 21, 8:03pm 1628928193

So a few factors put pressure on the system and when they quickly "lost" over 200MW of windgenerated power, emergency!! Could such a loss of wind generated power happen again?

by Uninterested | 15th Aug 21, 6:45am 1628966728

I totally 100% disagree. Coordination is required not even more parties flying blind. Ahhhhhh Reminiscing for the good old: Electricity Division, Ministry of Energy days....

by Foxglove. | 12th Aug 21, 7:52pm 1628754759

Max Bradford, where are you? Or am I getting confused with Maxwell Smart, agent of control. Apart from layer after layer of bureaucracy, fat cat hierarchy and Chairman’s, directors to burn, what in heaven’s name did those blasted so called reforms achieve?

by Brock Landers | 13th Aug 21, 9:43am 1628804586

Money moved into somebody else's pocket.

by WestieAJ | 13th Aug 21, 9:45am 1628804715

A shadow tax on the citizenry that built the Cullen Fund.

by blobbles | 13th Aug 21, 10:53am 1628808788

Pretty simple: More money in the government coffers. Energy poverty for NZers.

by waymad | 12th Aug 21, 8:07pm 1628755665

Or perhaps, just maybe, the ire should be directed to Transpower. They appear not to have understood the notion of 'lead time' for various modes of generation, took a bid of Wind power as certain when Blind Freddy can recall instances of wind gusting,, stopping, or failing to show up at all, and not allowing for contingencies such as the Tokaanu trip-out. And TP is a Gubmint-owned monopoly......

Their responses at the time seem to have been lethargic, then morphed into intense CYA mode as the magnitude of the fustercluck dawned on them....

by Noncents | 12th Aug 21, 9:30pm 1628760633

You can't give lead time when there are emergency shutdowns, etc...

The problem is that commerical priorities are taking prescedence over network integrity. "Lead time" is essentially saying expect the price to peak so be ready to make some cash.

We should have some form of generation capability on permanent standby, but we don't because the individual generator on standby loses money.

by pacifica | 13th Aug 21, 1:04am 1628773457

Er no, lead time is determined by the laws of physics. You cannot just magic a generator start up to full power or even a switch to batteries at full power or even a major transition of power supply across our fragile transmission network in a short period. God no wonder our science education stats are bottoming out. Here iis some fun news for you. Even backup power for a single residential home is not magical. Useful, yes if you rely on pumps and medical equipment but magical in handling the entire household power switch straight away no (and that is with it located within the same exact place of relatively small power demand). Yes the government needed to invest and allow more power network investment in transmission network upgrades and construction but the government are the ones blocking most construction of solutions and operation of less emitting resources. Essentially the govt are the ones directing the purchase of offshore coal and then wondering why our backup power needs keep increasing when population numbers explode and power companies proposals for alternatives keep getting blocked and stymied or shipped overseas and shortchanged for shareholder (i.e. govt profit based) decisions. With power needs rapidly growing more than we can build our way out of currently of course events like this happen; like the thousands without power in major cities the year before and the year before that. Did you miss the fact people are dying because the power transmission network has become more deadly through govt complacency as a major shareholder and decision maker. So yeah when the network is this crap the lead time is the least of our worries. Be more concerned what happens when networks crumble because maintenance costs leap over fuel taxes and logistic shipping costs, shortchanges happen even more and we loose our resiliency inc. more ready backup power options that have less emissions are dropped because they are not green enough (but overwhelmingly greener than overseas mined and shipped coal), and key engineers, scientists and educators leave for overseas for better jobs and more long term living options. It is not company profit that is the problem here when the govt dictates what can and cannot be built and what can and cannot be resourced in NZ.

by waymad | 13th Aug 21, 6:32am 1628793130

Exactly, Pacifica. Our previous abode had a 5kW roof array, and a 10kWh battery. Assuming a full battery and a discharge to safe level of 20%, the battery would support one hour of a 6kW oven plus another 2kWh of assorted draw. That's not gonna carry a busy household through an extended mains outage. And the battery was $15k, life 10-12 years tops.

The immediate response from gentailers seems to be - oh well, let's build more wind and solar....both non-dispatchable.

Sigh.....

by dictator | 13th Aug 21, 7:39am 1628797178

More wind and solar instead of more hydro and geothermal, or even some extra gas plants (and perhaps importing the gas seeing the government won't allow it to be extracted at sea). Many countries seem to be developing energy storage systems based on storing potential energy so be released at peak times, but there's no progressive thinking here for grid security. It's as if breaking up the power supply, infrastructure and retail just added profit margin to each stage at the expense of supplying cheap clean power to make our economy competitive.

I have 3.2kW of solar myself but it is grid tied so it can't help if there is a blackout, and it doesn't help when the grid emergencies are in the morning or night outside of any solar output.

by Uninterested | 15th Aug 21, 7:03am 1628967800

About 13 yrs ago Genesis was almost there with consents to import gas into New Plymouth. That all came to nothing of course. Murray Jackson and David Parker did not see eye to eye about the necessity of quick startup thermals. Goodbye Murray Jackson.... Welcome to Alby who planned a thermal near Helensville that came to nothing because the gas pipes were too expensive to upgrade. A big windfarm was consented without any thoughts of the required power line connection to the grid... Brilliant. Not.
All power companies were working on their own separate portfolios. Completely uncoordinated waste(s) of money. Its first mover advantage. Once one big new one goes in in an area, the price of power in that part of the grid drops dramatically due to transmission constraints. Amy other projects planned in that area go into the waste basket. This uncoordinated market is way more complicated and wasteful than has been portrayed in the media. Not to mention the waste associated with all the analysts within these companies and also the external financial analysts.

by Noncents | 13th Aug 21, 8:49am 1628801375

I don't think you have understood hat I have said as I agree with all of what you have written.

Lead time is of course dependent on the laws of physics, but you can keep generators etc in a state of readiness/standyby so that the lead time is significantly decreased. i.e. 3 days to 1 hour. However we do not do that due to commercial reasons.

by AKLCrusader | 13th Aug 21, 12:57pm 1628816223

Cost reasons.
The cost would be borne by the party asking for the readiness. I.e. the customer or the governemnt.
Trnaspowe ris supposed to avoid this by forecasting and magaing demand.
Where did our ripple control disappear to, and why don't we consider taking city street lights off before house power? Cars have self powering headlights.

by Galloleous | 13th Aug 21, 3:03pm 1628823790

This is where mining Bitcoin would come in. You have your hydro dam or Nuclear reactor constantly producing a high level of output. Bitcoin miners set up in close proximity to the source and use the excess power to produce Bitcoin, providing a constant level of demand, and a passive income.
In times of high demand, you can immediately switch off the miners, or who ever is buying the contracted power can shut down their miners and sell their purchased electricity back to the grid.

by mfd | 13th Aug 21, 3:47pm 1628826429

If you want something a bit more useful, you build a hydrogen plant like Meridian and Contact want to do to soak up Manapouri's excess power after the smelter is gone.

by Takere | 12th Aug 21, 8:31pm 1628757084

Well, I guess the majority shareholder, the government, is obligated firstly to its 51% shareholders, the NZ public ay?

by PonziKiwi | 12th Aug 21, 9:09pm 1628759397

This is going to be pounded by the msm and jacinda for months. I maintain their goal is to nationalize the power industry and Co share it with iwi. Just like the 3 waters deal.

by imhenry | 13th Aug 21, 7:30am 1628796656

Any excuse to do so

by Squishy | 13th Aug 21, 6:50am 1628794222

Normally I'd be happy to blame Gentailers but in this case the error seem to rest with Transpower forecasting. It probably doesn't help that we are running so close to capacity and Genesis are really taking it in the neck from everyone about running Huntley on coal, just to to keep the lights on, when it should have been decommissioned years ago.

Idling industrial capacity gave us a little more breathing room this year but it's only a short term solution, we need more generation capacity by next year. That's where Megan Woods needs to step up.

by Uninterested | 15th Aug 21, 7:07am 1628968057

Its not "idling industrial capacity", its "closing down industrial capacity....."

by GV 27 | 13th Aug 21, 6:51am 1628794265

Good to see our energy minister is so in the loop when it comes to her portfolio that the national infrastructure provider doesn't feel the need to tell her when it's close to over capacity.

by middleman1 | 13th Aug 21, 9:44am 1628804673

And no retraction from Woods on her fingering of Genesis as the key perpetrators, despite Transpower now having done a public mea culpa. The glee from Woods when the story first broke about the likely cause being a 'market failure' was obvious. They of course won't say but to what extent did political pressure to minimise the burning of imported Indonesian coal influence decision makers at Genesis to delay firing up the rankine?

by GV 27 | 13th Aug 21, 9:23am 1628803424

Has a lot to say about 'market failure' but then can't be found when her remarks are proven to be wild of the mark? Yea, that's SOP for this government.Transparent though, apparently.

by middleman1 | 13th Aug 21, 9:56am 1628805400

Ardern was more subtle than Woods but her 'we shall demand answers' serious face number three emphatic nodding head rotation between cameras 1 & 3 routine still revealed that she believed an evil capitalist plot was at work and a hope that providence had delivered her government a pretext to bring the wayward generators back within the bosom of the central soviet.

by ChezD | 13th Aug 21, 4:26pm 1628828811

Neither Woods nor Ardern would know their kW's from their kWh's so there is no surprise they can only understand the problem is somewhere else.

by Uninterested | 15th Aug 21, 7:10am 1628968250

Yep. The government is not diverse enough to have an Engineer in charge of an Engineering portfolio.

by WestieAJ | 13th Aug 21, 9:54am 1628805294

That would mean the war of words between Minister Woods and Marc England is largely fake and the reason they took the 3rd coal fired Rankine offline in July had some political input.

by middleman1 | 13th Aug 21, 10:07am 1628806060

Possibly. What we can safely say is that Woods is under serious fire in the regions for her destruction of NZs extractive industries so it's not drawing too long a bow that this could well have been expressed as leverage being applied to Gensis that England could never publicly acknowledge. Supposition of course. But I've witnessed plenty of similar 'quiet ministerial leaning upon' scenarios and subsequent dead rat swallowing public positioning in my corporate life.

by WestieAJ | 13th Aug 21, 10:51am 1628808695

Extract from Feb 15. New Release on Genesis Web Site.Genesis will make the third Rankine (250MW Unit 2) available from February 22 to September 30, 2021. It is expected that it will be run in a limited capacity alongside Rankine Units 1 and 4, and Gas Units 5 and 6.
So what changed? No subsequent press releases to announce the 3rd Rankine being shut down earlier in July. Considering all of the adverse publicity throughout June and July about the amount of coal being burned. I assumed they would be celebrating the increased supply of renewable energy (some of it their own) that allowed them to shut down the 3rd Rankine early and reduce the coal burn.

by Chris Morris | 15th Aug 21, 7:56am 1628971013

You really don't understand how the grid works do you. Being available does not mean generating or being able to generate at short notice. It is very expensive to keep a coal plant running. They need to be generating at least 80MW a unit to keep it functioning - more than that if it is to cover the cost of fuel (carbon tax is expensive). Thermal plant is the marginal generator. That is why Huntly often shuts down all the units over weekends when there is lower load. They also have to do maintenance which is done during these shutdown.
If you want the coal plants to be running just in case they are needed, how much extra are you prepared to pay on your power bill?

by murray86 | 13th Aug 21, 8:53am 1628801591

Modern latest generation modular nuclear power plants anybody?

Two in the NI, and one in the SI and we are secure

by Hamish | 13th Aug 21, 8:57am 1628801848

What would that do to property prices in the vicinity of these nuclear power plants?
And remember, both Labour and National are against anything to do with curtailing house prices.

by murray86 | 13th Aug 21, 10:41am 1628808116

Seeing as these are likely very safe, for the more rational, not much but for public hysteria lots. But in truth some separation would be easy to establish and manage.

But it will be the public hysteria fed by political ideology that will stop it from happening. So green energy will ever keep us on the precipice of power failures!

by Larry76 | 13th Aug 21, 4:14pm 1628828064

And all thermal is just a 19th century steam engine with nuclear being a fancy steam engine that costs absurd amounts of money. Molten salt and nuscale designs are just imaginary solutions - we need action today.

The future model is clear - hydro, wind & solar during the day with geothermal as a constant, topped up with hydro plus chemical battery storage during the evening and in winter peaks. Hell, we could even pay a capacity charge to keep Huntly open for the dry years.

by Galloleous | 13th Aug 21, 3:04pm 1628823882

Nuclear is the future, as is Bitcoin Murray :P

by Larry76 | 13th Aug 21, 4:08pm 1628827737

And where pray tell can we see these plants anywhere in the world?

by ChezD | 13th Aug 21, 4:23pm 1628828630

Ever worked on a nuclear power plant? Then you will know why not.

by AKLCrusader | 13th Aug 21, 12:52pm 1628815963

Turns out that Woods was telling porkies and the fault lay with Transpower. I noted that Woods did not attend parliament to explain her untruths.

Ardern got in on the act straight away too, to avoid any possible blame coming their way, in fact, it sounds just like the untrue victim blaming they did in the August AKL COVID outbreak.

Blame First, disappear quietly thereafter. Now that's Being Nice!!

by Lanthanide | 13th Aug 21, 1:38pm 1628818685

Transpower messed up and instructed way more houses to be load shed than was necessary.

But the actual fault was still the generators not generating enough to begin with. Even if Transpower had indicated the correct number of houses to be load shed, it would've been about 1,300 houses load shed. Which is still 1,300 too many.

At ~7am when Transpower sent out the first notice to the generators, the predicted power price that evening was $9,000 per megawatt hour. That should have been sufficient impetus for Huntly to start up, given it takes apparently 6-10 hours to start producing power.

by WestieAJ | 13th Aug 21, 2:13pm 1628820812

Transpower could have gone to the media that morning with their prediction of all time record power use and requested the public to help out a bit. I.E don't run your drier,dishwasher,washing machine tonight if you can help it. Then we don't have to burn a mountain of coal to keep the lights on. Everyone doing a little adds up to a lot. But we were all none the wiser.

by totara | 14th Aug 21, 8:05pm 1628928356

I would have switched off my heat pump if I had known. Has Transpower heard of the internet of phone texts in emergencies?

by Uninterested | 15th Aug 21, 7:21am 1628968867

To explain it to the uninitiated Transpower as system operator DOES have the role in organizing things like the load following generator and STANDBY generation. The wind dropping plus the Tokaanu weed thing occuring at the same time must have exceeded what TP calculated. What TP normally calculate is to cover for the largest unit to trip off. Sometimes a 250MW Rankine. Or maybe even the combined cycle 405MW unit at HLY. The wind dropping must have been a doozy. ie TP ballsup clear an simple. NB. This issue going to get worse over time as more wind generation comes on line. Queue higher prices due to more standby being required much of the time.

by nigelh | 13th Aug 21, 6:12pm 1628835128

Transpower's system to manage the load shedding and loss of generation in layman's terms. maybe out of date.
https://www.youtube.com/watch?v=fPmJFfKn4zk&list=PLXUccGn4ptEOiBgyrpEYM…

by Uninterested | 15th Aug 21, 6:41am 1628966503

I think this is a clear case of "An undesirable government situation".