1. business and industrial
2. energy
3. electricity

About the New Zealand
Electricity Sector
CONTENTS
3
PURPOSE
3
WHAT IS ELECTRICITY?
4
KEY ELEMENTS OF THE ELECTRICITY SECTOR
4
9
9
9
9
Generation
Transmission
Distribution
Retailers
Electricity consumers
12 HOW DOES THE ELECTRICITY SECTOR OPERATE?
12 Power system operation
12 Wholesale electricity market
13 Retail electricity market
14 INDUSTRY STRUCTURE AND PARTICIPANTS
14 Generation
15 Transmission
15 Distribution
17 Retailing
18 ROLE OF ELECTRICITY COMMISSION AND OTHER AGENCIES
20 INDUSTRY FACTS AND FIGURES
21 GLOSSARY
Cover Image.
Wind turbines at Te Apiti wind farm, Tararua Ranges.
2 > ABOUT THE NZ ELECTRICITY SECTOR
> PURPOSE
This document provides an overview of the electricity sector in New Zealand. It looks at the
sector from three different viewpoints – what are the physical components, how does the
system work and who are the main participants.
It ends with a brief description of the Electricity Commission, and other agencies with key
roles in the electricity sector.
> WHAT IS ELECTRICITY?
Electricity is the flow of electrical energy or charge in a conductor such as copper
wire. It is a secondary energy source, which means we get it from the conversion
of other sources of energy such as gas, coal, wind and water.
The flow of electrical charge is known as electrical current. The force that is applied to the
electrons to make them flow is known as voltage. As an analogy, consider water flowing
through a pipe: the current is the rate of water flow, and the voltage is equivalent to the
pressure that is applied to make the water flow through the pipe.
xx Power is the rate at which electrical energy is produced or used
xx Power is measured in Watts (W), or more commonly, kilowatts (kW)
or megawatts (MW)
xx The amount of electricity used over a period of time is measured in kilowatt hours (kWh):
a 1 kW bar heater operating for one hour will use 1 kWh of electricity
xx New Zealand households use an average of about 9,000 kWh of electricity
per year.
Managing the national grid from Transpower’s Wellington control room. Photo courtesy of Transpower New Zealand Limited.
ELECTRICITY COMMISSION > 3
> key elements of
the electricity sector
Figure 1: Key elements of the electricity sECTOR
The electricity system is made up of:
• Generation – the power stations (generators) that produce electricity;
• Transmission – the wires and cables (often called the national grid) that transport electricity at
high voltages from power stations to distribution networks and to the largest industrial users (called
direct consumers);
• Distribution – the local networks that carry electricity from the national grid to residential, commercial
and smaller industrial users. Some power stations (called embedded generators) are connected directly
into a distribution network rather than the national grid;
• Retailers – the participants that buy wholesale electricity and on-sell it to consumers at their individual
premises; and
• Consumers – nearly 2 million purchasers ranging from households to large industrial users.
Generation
New Zealand’s total generation capacity is currently around 9,100 MW, compared with daily peak
demand of about 6,500 MW.
More than half of New Zealand’s electricity is generated from hydro-electric stations. The remainder
comes from thermal, geothermal and wind power, with smaller amounts from other sources as shown
in Figure 2 and 3. Some industrial sites produce heat and electricity for industrial processes, in a process
known as cogeneration. Often excess cogenerated electricity is exported into the distribution network or
national grid.
Because New Zealand’s storage lakes can only hold enough water for a few weeks of winter energy
demand, hydro generation is sensitive to the level of inflows from rainfall and snowmelt. For this
reason, when inflows are low for a sustained period, alternatives such as coal must fill the place of
reduced hydro generation. In 2008, 52 percent of electricity was produced at hydro stations, 24 percent
by gas-fired power stations, 10.5 percent by coal-fired stations, 9.5 percent geothermal, 2.5 percent wind
power and 1.5 percent other sources. Hydro contribution has ranged between 52 percent and 65 percent
over the last five years. Figures 2 and 3 show how the generation mix has changed over time as demand
has increased.
A full list of New Zealand generation plants bigger than 10 MW is provided in Table 1. Figure 4 shows the
locations of the plant.
4 > ABOUT THE NZ ELECTRICITY SECTOR
Figure 2: Electricity Generation by fuel Type
GWh
40,000
35,000
30,000
25,000
Hydro
20,000
Geothermal
15,000
OTHER
OIL
10,000
Coal
5,000
GAS
COGENERATION
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
Source: New Zealand Energy Data File 2009
Figure 3: total Electricity Generation Capacity by Plant Type (10MW or greater)
MW
10,000
9,000
8,000
Hydro
7,000
Geothermal
6,000
other
5,000
FUEL OIL
4,000
DIESEL
3,000
COAL/GAS
2,000
GAS
1,000
Gas/OIL
COGENERATION
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0
Source: New Zealand Energy Data File 2009
There are a number of new generation technologies under development in New Zealand and
internationally. Tidal and wave power are examples of emergent technologies that might become
commercially viable in the future. Tidal power uses the predictable movement of tides to generate
electricity, whereas wave power uses the energy of ocean surface waves.
Each generation type has different characteristics, as summarised in Table 2. Because of these
differences, it is desirable to have a mix of plant types rather than rely entirely on one fuel source,
location or technology.
ELECTRICITY COMMISSION > 5
Table 1: Information on Current, GRID-CONNECTED Generating Plants
(10 MW or Greater as at 30 JUNE 2009)1
Fuel Type
Plant Name
Owners/Operators2
BIOMASS
COAL/GAS
DIESEL
GAS
Kinleith
Genesis Energy
40
Huntly steam turbines (Units 1-4)3
Genesis Energy
970
Whirinaki4
Crown (Contact Energy)
155
Edgecumbe cogeneration
Huntly e3p (Unit 5)
Huntly p40 (Unit 6)
Kapuni cogeneration
Kawerau cogeneration
Kiwi Dairy cogeneration (Whareroa)
Otahuhu B
Southdown
Taranaki Combined Cycle (TCC)
Te Rapa cogeneration
Kawerau
Mokai
Ngawha
Ohaaki5
Poihipi Rd
Rotokawa
Wairakei
Aniwhenua
Arapuni
Aratiatia
Atiamuri
Aviemore
Benmore
Clyde
Cobb
Coleridge
Highbank
Kaitawa
Karapiro
Lloyd Mandeno (Kaimai Scheme)
Manapouri6
Mangahao
Maraetai
Matahina
Ohakuri
Ohau A
Ohau B
Ohau C
Paerau
Patea
Piripaua
Rangipo
Roxburgh
Ruahihi (Kaimai Scheme)
Tekapo A
Tekapo B
Teviot
Tokaanu
Tuai
Waipapa
Waipori
Waitaki
Whakamaru
Wheao and Flaxy Scheme
Bay of Plenty Electricity (Todd Energy)
Genesis Energy
Genesis Energy
Bay of Plenty Electricity
Norske Skog Tasman
Todd Energy
Contact Energy
Mighty River Power
Contact Energy
Contact Energy
Mighty River Power
Tuaropaki Power Company (Mighty River Power)
Top Energy
Contact Energy
Contact Energy
Mighty River Power
Contact Energy
Bay of Plenty Electricity (Todd Energy)
Mighty River Power
Mighty River Power
Mighty River Power
Meridian Energy
Meridian Energy
Contact Energy
Trustpower
Trustpower
Trustpower
Genesis Energy
Mighty River Power
Trustpower
Meridian Energy
Todd Energy
Mighty River Power
Trustpower
Mighty River Power
Meridian Energy
Meridian Energy
Meridian Energy
Trustpower
Trustpower
Genesis Energy
Genesis Energy
Contact Energy
Trustpower
Meridian Energy
Meridian Energy
Pioneer Generation (Trustpower)
Genesis Energy
Genesis Energy
Mighty River Power
Trustpower
Meridian Energy
Mighty River Power
Trustpower
10
385
50
25
37
70
380
170
385
44
90
112
10
50
55
33
176
25
197
78
84
220
540
432
32
45
25
36
90
16
840
42
360
72
112
264
212
212
10
31
42
120
320
20
25
160
11
240
60
51
84
105
100
24
Glenbrook
Alinta ENZ
112
Tararua Wind Farm
Te Apiti
West Wind7
White Hill
Trustpower
Meridian Energy
Meridian Energy
Meridian Energy
161
90
143
58
GEOTHERMAL
HYDRO
WASTE HEAT
WIND
1.List includes all stations greater than 10 MW.
2. Company names are listed without the suffixes ‘Limited’,
‘New Zealand Limited’ and ‘Co-operative Group Limited’
where applicable.
3. 1,000 MW is the maximum capacity if running fully on gas. Currently as
coal and gas the capacity is less by up to 40 MW.
6 > ABOUT THE NZ ELECTRICITY SECTOR
Capacity (MW)
4. Whirinaki is operated under direction from the Electricity Commission.
The plant is owned by the Crown with Contact Energy engaged to
operate and maintain the plant.
5.Ohaaki plant capacity has been derated from 104 MW to 50 MW.
6.Manapouri has a maximum capacity of 840 MW but cannot generate
this due to consent limits.
7. To be completed late 2009.
Figure 4: LOCATION OF ELECTRICITY
GENERATORS IN New Zealand
Ngawha
Te Rapa
Kaimai Scheme
Karapiro
Edgecumbe
Kawerau
Arapuni
Waipapa
Kinleith
Maraetai
Atiamuri
Aniwhenua
Ohakuri
Whakamaru
Southdown
Otahuhu
Matahina
Glenbrook
Huntly
Wheao
Poihipi
Mokai
See Inset
Ohaaki
Rotokawa
Aratiatia
Wairakei
Kaitawa
Tuai
Piripaua
Tokaanu
Rangipo
Taranaki CC
Whirinaki
Kapuni
Whareroa
Patea
Te Apiti
Tararua
Mangahao
Cobb
West Wind
TYPE OF GENERATION
HYDRO
Coleridge
GAS
Highbank
Tekapo B
Ohau A
Ohau B
Tekapo A
Ohau C
Benmore
Aviemore
GEoTHERMAL
COAL
Waitaki
WIND
Clyde
Manapouri
Teviot
Paerau
Roxburgh
Waipori
Whitehill
OTHER
(Biomass/waste heat)
Diesel
ELECTRICITY COMMISSION > 7
Table 2: Generator types
Type of plant
Energy source
Characteristics
Hydro
Water pressure drives a
turbine connected to an
electricity generator
• Expensive to build, but low running cost
• Generation affected by inflows from rainfall/snowmelt
• Some environmental impact due to construction and/or
operation, but no greenhouse gas emissions from operation
• Location dictated by hydro resource availability
Geothermal
(e.g. Wairakei)
Wind
Steam from deep
underground is piped
to the surface to drive a
turbine connected to an
electricity generator
• Relatively high upfront cost but modest running cost
Wind turns a large rotor
which is coupled to an
electricity generator
• Expensive to build but low running cost
• All New Zealand geothermal sources produce some
greenhouse gases
• Must be located near source of underground heat or steam
• Difficult to forecast output accurately and output may vary
from minute to minute, so fast-start generation is needed to
provide backup
• Construction and operation have some environmental impact
• No greenhouse gas emissions during operation
Gas- or coalfired steam
plant
(e.g. Huntly)
A boiler heated by
burning fossil fuel creates
steam, which drives a
turbine connected to an
electricity generator
• Lower upfront cost than renewables, but more costly to run due
to ongoing fuel bill
• Less vulnerable to ‘forces of nature’ in short term – provided
fuel supply is secure
• Less efficient in fuel conversion than newer combined
cycle technology
• Emits greenhouse gases/other pollutants
Combined
cycle gas
turbine
(CCGT) (e.g.
Otahuhu CC)
Open cycle
turbine
(e.g.
Whirinaki)
Burning of gas is used
to drive a turbine which
is connected to an
electricity generator. Heat
from turbine exhaust is
used to create steam,
which is also coupled to
a generator to produce
electricity
• Upfront cost lower than renewables and most steam plant
Burning of gas/distillate
is used to drive a turbine
which is connected to an
electricity generator
• Relatively low upfront cost
• Higher fuel conversion efficiency than steam plant
• Less vulnerable to ‘forces of nature’ in short term – provided
fuel supply is secure
• Relatively small footprint provides locational flexibility
• Emits greenhouse gases
• Relatively low fuel conversion efficiency resulting in higher
variable operating cost
• Flexible to operate – can respond to system changes at
short notice
• Small footprint provides locational flexibility
• Emits greenhouse gases
Biomass
(e.g. Kinleith)
8 > ABOUT THE NZ ELECTRICITY SECTOR
Burning of waste such
as bark/sawdust is
used to create steam,
which drives a turbine
connected to an electricity
generator
• Relatively expensive to build
• Relatively low fuel cost if utilising low value waste (but can
require supplementation from gas/coal etc.)
• Location influenced by availability of fuel source (transport
cost can be significant for waste products)
• Modest greenhouse gas emissions (if main fuel source is
renewable)
Transmission
The national grid has approximately 12,000 km
of high voltage transmission lines. Most of the
grid operates on alternating current (the HVAC
system), although there is a direct current (HVDC)
link for long distance transfer of power between
Benmore in the lower South Island and Haywards
near Wellington. The HVDC link includes the set of
cables running under Cook Strait, and is sometimes
referred to as the ‘Cook Strait cable’. Figure 8
displays the New Zealand Transmission Network.
The national grid transports electricity from over
50 power stations, and connects with distribution
networks or major industrial users at around 200
grid exit points (GXPs) around New Zealand.
Because of New Zealand’s geography, the
transmission grid comprises a long trunk with
smaller side branches serving areas such Westland
and the Hawkes Bay. This structure means that
there are few alternate paths for electricity to flow
from source to destination, in contrast to many
overseas power systems, which provide multiple
paths between generators and demand centres.
This characteristic can be particularly important
when a transmission line outage occurs.
Another effect of New Zealand’s geography is that
there are often long distances between generation
and the main demand centres – especially for
hydro generation in the South Island. This results
in higher electrical losses on transmission lines.
Losses, which average about 3 percent (but can
be as much as 7 percent) of power transmitted,
occur because transmission lines have resistance,
causing some energy to be lost as heat.
As a remote island nation, New Zealand cannot
import electricity from or export electricity to
other countries, so must be entirely self-sufficient
in meeting its needs. In contrast, many other
countries that are interconnected to other nations
can import power if needed, such as in the event
of a dry hydro situation. They may also export
power, such as when there is excess hydro or wind
generation available which may otherwise
be wasted.
Distribution
There are two types of distribution networks,
local networks that are connected to the grid,
and secondary networks, such as within a
large shopping mall that are connected to a
local network.
Distribution networks transport power to
consumers through a network of overhead wires
and underground cables (generically referred to
as lines). In total, there are over 150,000 km of
distribution lines in New Zealand. The distribution
networks also include substations which convert
electricity to lower voltages.
Almost all consumer premises in New Zealand are
connected to a distribution network. There are also
some generators, known as embedded generators,
which are linked directly to distribution networks.
Retailers
Retailers buy electricity at connection points to
the grid and on-sell it to consumers at individual
customer connection points. The retailer is
responsible for the installation of appropriate
metering, meter reading, billing and payment
collection. The retailer pays distribution
companies for distribution service (which includes
transmission charges paid by distributors to
Transpower), and also buys electricity from the
wholesale electricity market. In most cases, the
consumer is billed only by the retailer.
Electricity consumers
Electricity consumers range from large industrial
sites down to individual households. Total
electricity consumption in New Zealand is about
40,000 gigawatt hours (GWh) per annum.
Electricity consumption has increased at
approximately 2 percent each year in recent years
and is strongly related to economic growth and
population size.
Demand for electricity varies from moment to
moment and supply must change to meet changes
in demand. Consumption follows strong daily
and seasonal patterns. At low demand times
such as a summer night, total demand may be as
low as 2,600 MW, whereas at peak times (winter
evenings) it can exceed 6,500 MW. While electricity
use has historically been highest on cold winter
evenings, some regions now have a summertime
peak demand as a result of increasing use of farm
irrigation and domestic air-conditioning. Figure 5
shows a ‘typical’ demand profile for a domestic
consumer for a 24-hour period during winter.
Power pylons beside Desert Road.
ELECTRICITY COMMISSION > 9
DEMAND (KW)
FIGURE 5: typical RESIDENTIAL DAILY DEMAND PROFILE
00:00
04:00
08:00
12:00
16:00
20:00
TIME OF DAY
Electricity consumption by sector is shown in Figure 6. Industrial and commercial users account for twothirds of total demand, but only slightly more than 25 percent by customer numbers. This is because these
users have higher average consumption per customer. For example, the single largest user (the aluminium
smelter at Bluff) accounts for approximately 14 percent of New Zealand’s total electricity demand.
Figure 6: ELECTRICITY CONSUMPTION BY SECTOR
ESTIMATED ENERGY CONSUMPTION BY SECTOR (GWh)
(38,545 GWh total in year ended Dec 2008)
CUSTOMERS BY SECTOR
(total of 1,930,814 customers in the year ended Dec 2008)
Residential 32%
Residential 86%
Commercial 24%
Commercial 8%
Industrial 44%
Industrial 6%
Source: MED Energy Data File, 2009
Residential users make up about one-third of total consumption, with the majority of residential demand
being for water heating, space heating and lighting as shown in Figure 7.
Technological progress has an impact on electricity consumption as well as generation. There has been
growth in electricity-using technologies over time such as computers and air-conditioning, but there have
also been improvements in efficiency. For example, modern electric lighting, heating appliances and
motors are significantly more efficient than their predecessors. Improved electricity efficiency is expected
to play an increasingly important role in future security of supply and achieving sustainability objectives.
Figure 7: RESIDENTIAL ELECTRICITY USE
Percentage of residential energy consumption by end-use
Heating 19%
Misc 22%
Water heating 26%
Lighting 12%
Refrigeration 8%
Source: KEMA Electricity Efficiency Potentials Study, 2007
10 > ABOUT THE NZ ELECTRICITY SECTOR
Dishwashers 1%
Cooking 7%
Clothes dryer 2%
Towel rack 3%
FIGURE 8: Transmission NETWORK
Otahuhu
Huntly
Whakamaru
Stratford
Bunnythorpe
Kikiwa
Islington
Haywards
LINE CAPACITY
50 kV, 66 kV
110 kV
220 kV
350 kV (HVDC)
Benmore
Substation
Tiwai
Source: Transpower New Zealand Limited
Note: A more detailed transmission map is available at www.gridnewzealand.co.nz/maps
ELECTRICITY COMMISSION > 11
> How does the electricity
sector operate?
Power system operation
The Electricity Commission has a number of
functions to facilitate the effective day-to-day
operation of the power system and markets in
accordance with the Electricity Governance Rules
2003 (the Rules). The Commission appoints a
System Operator (Transpower NZ Ltd) with
responsibility under the Rules to co-ordinate
supply and demand resources to maintain realtime security.
Ensuring real-time security requires the System
Operator to schedule and dispatch electricity so
that a balance between electricity supply and
demand is continuously maintained, and disruption
of supply is avoided. It does this by instructing
generators (dispatch instructions) when and how
much electricity to generate so that injections
of electricity into the system match off-take by
electricity consumers at each moment in time.
If balance is not maintained, power quality will
deteriorate and generators could automatically
disconnect from the power system, causing further
deterioration of power quality, and in extreme
situations, blackouts for consumers.
In addition to its real-time dispatch role, the System
Operator role involves significant investigations
and planning which occur over periods from years
to minutes ahead of real-time. Examples of this
are co-ordination of generation and transmission
outages, facilitating commissioning of new
generating plant and procurement of ancillary
services to support power system operation.
The Electricity Commission has responsibility for
monitoring security of supply. The Commission
carries out an Annual Security Assessment to
update the supply outlook over the next decade.
The Commission assesses factors such as planned
generation, transmission constraints, forecast
growth in demand, and fuel stockpiles to determine
if additional reserve energy is required.
The Commission also routinely monitors shortterm security (the period up to 18 months ahead)
and provides industry with information on factors,
such as risks to hydro lake storage and changes in
electricity consumption patterns.
The Commission’s Riskmeter (http://supplyline.
electricitycommission.govt.nz/) sums up the
overall short-term security assessment, and
other information is regularly published by the
Commission’s service providers – in particular
COMIT Free-to-Air which provides up-to-date
spot prices, hydrological inflows, and fixed price
contract indices.
12 > ABOUT THE NZ ELECTRICITY SECTOR
The Electricity Commission’s Riskmeter sums up assessed risk of
electricity shortages in coming months.
Wholesale electricity market
Generators that are bigger than 30 MW or which
are grid-connected compete in the electricity spot
market for the right to generate electricity to satisfy
demand (subject to transmission capacity). They do
this by submitting ‘offers’ to the System Operator.
Each offer covers a future half-hour period (called
a trading period) and is an offer to generate a
specified quantity at that time in return for a
specified payment.
The System Operator uses this price information to
rank offers in order of price, and selects the lowest
cost combination of resources to satisfy demand.
The highest priced generator actually required for
a given half hour sets the spot price for that trading
period, and all generators are paid the spot price
for their production. Electricity spot prices can vary
significantly across trading periods and locations,
reflecting factors such as changing demand (e.g.
lower prices in summer when demand is subdued)
and supply (e.g. higher prices when hydro lakes
and inflows are below average) and electrical
losses and constraints on the transmission system
(e.g. higher prices in locations further from
generating stations).
In addition to retailers, a small number of
customers, typically large industrial users, also
buy electricity directly from the spot market.
These parties will typically also enter into financial
contracts (often called ‘hedges’) which smooth out
some or all of the volatility in spot prices. The spot
and contracts markets are collectively called the
wholesale electricity market.
Retail electricity market
Most consumers buy their power from an
electricity retailer, rather than in the wholesale
electricity market.
The Commission oversees the operation of the
electricity retail market in order to promote
strong retail competition and fairness for
consumers. The role includes providing
arrangements for protection of consumers, as
well as for administering retail market rules such
as metering arrangements, customer switching
and reconciliation – the process by which the
quantity of electricity purchased by each retailer is
calculated.
The key features of the Rules are that customers
can switch between retailers, and any party can be
an electricity retailer provided they meet minimum
requirements.
While the extent of retail competition varies across
the country, customers have a choice of retailers. In
some parts of New Zealand there are five or more
competing retailers. Furthermore, the switching
process has become easier over time, and can
generally now be done over the phone with the
new electricity retailer.
Consumer New Zealand provides a free
web-based tool to help residential users to
shop around. This tool is available at
www.powerswitch.org.nz and shows the electricity
retailers and tariff options available in each area.
It also allows users to calculate their expected bill
with different suppliers.
Benmore Hydro Station on the Waitaki River. Photo courtesy of Meridian Energy limited.
ELECTRICITY COMMISSION > 13
> INDUSTRY STRUCTURE
AND PARTICIPANTS
Generation
The five major generation companies, listed in Table 3, produce more than 90 percent of
New Zealand’s electricity.
Table 3: Major Generating Companies
Contact Energy is a publicly listed generation and retail company with hydro, gas-fired and geothermal plant.
Contact Energy was created from the first split of ECNZ in 1996. www.contactenergy.co.nz
Genesis Energy is a state owned generation and retail company. Generation assets include hydro,
coal- and gas-fired and wind power. Genesis was created from the second split of ECNZ in 1998.
www.genesisenergy.co.nz
Meridian Energy is a state owned generation and retail company, which owns primarily hydro and wind
generation assets. Meridian was created from the second split of ECNZ in 1998.
www.meridianenergy.co.nz
Mighty River Power is a state owned generation and retail company with hydro, geothermal and cogeneration
plant. Mighty River Power was created from the second split of ECNZ in 1998.
www.mightyriverpower.co.nz
TrustPower is a publicly listed generation and retail company with hydro and wind generation plant.
www.trustpower.co.nz
The installed generation capacities of the five major generation companies, and the type of generating
plant they own (as at 2009) are shown in Figure 10.
Figure 10: GENERATION CAPACITY AND TYPE, BY GENERATING COMPANY (Largest fiVe only)
MW installed capacity
0
500
1,000
1,500
2,000
2,500
3,000
TrustPower
Coal/Gas
Mighty River Power
Meridian Energy
Diesel
Gas
Gas/Wood/Coal
Genesis Power
Contact Energy
Geothermal
Hydro
Wind
Source: MED Energy Data File 2009
In addition to the major generating companies, some electricity is generated by independently owned
hydro, geothermal, wind and cogeneration stations. Most generation injects directly into the national
grid; others, typically smaller stations, connect into distribution networks. A full list of grid-connected
generating stations over 10 MW in size is provided in Table 1.
14 > ABOUT THE NZ ELECTRICITY SECTOR
Transmission
The national grid is owned by Transpower, a state owned enterprise (www.transpower.co.nz).
In addition to managing the existing transmission system, Transpower plans and builds new grid
investments. These grid investments are first reviewed and approved by the Electricity Commission.
Transpower is responsible for all transmission development processes; for example, resource consents,
access rights and construction.
Distribution
The distribution companies that own the local distribution networks throughout New Zealand, are shown
in Figure 11. Although some of the largest distribution companies are publicly listed, most companies are
owned by local trusts or other local bodies.
Figure 11: New Zealand
distribution networks
1
Company
2
1
Top Energy
2
Northpower
3
United Networks
4
Vector
5
Horizon Energy Distribution
6
Counties Power
7
WEL Networks
8
Waipa Networks
9
The Lines Company
10
Powerco
11
Eastland Networks
12
Unison Networks
13
Centralines
14
Scanpower
15
Electra
16
Nelson Electricity
17
Marlborough Lines
18
Network Tasman
3
4
6
8
5
11
9
12
10
13
14
15
16
29
19
18
21
20
22
23
24
25
28
27
26
10
7
25
17
19
Buller Electricity
20
Westpower
21
Mainpower
22
Orion
23
Electricity Ashburton
24
Alpine Energy
25
Aurora Energy
26
The Power Company/ Electricity
Invercargill JV
27
OtagoNet
28
Network Waitaki
29
Wellington Electricity Lines Limited
26
ELECTRICITY COMMISSION > 15
Lines companies range from very big to very small. One company, Vector, makes up about 26 percent
of the sector (by number of connections), and the four largest companies (Vector, Powerco, Wellington
Electricity Lines Limited and Orion) account for about 60 percent of connections.
Figure 12: NUMBER OF CONNECTIONS BY DISTRIBUTION COMPANY (OCTOBER 2008)
Vector
Powerco
Orion
Wellington Electricity Lines
Unison Networks
WEL Networks
Aurora Energy
Northpower
Electra
Counties Power
DISTRIBUTION COMPANY
Network Tasman
The Power Company
Mainpower NZ
Alpine Energy
Top Energy
Eastland Networks
Horizon Energy Distribution
Marlborough Lines
The Lines Company
Waipa Networks
Electricity Invercargill
Electricity Ashburton
OtagoNet
Westpower
Network Waitaki
Nelson Electricity
Centralines
Scanpower
Buller Electricity
0
50
100
150
200
250
300
350
400
NUMBER OF CONNECTIONS (000)
Source: Electricity Commission
Cycling through the Tararua Wind Farm on North Range Road.
16 > ABOUT THE NZ ELECTRICITY SECTOR
450
500
550
600
Efficiency initiatives, such as the Electricity Commission’s RightLight programme, help reduce electricity bills for consumers and the need for more generation.
Retailing
All of the main generation companies in New Zealand are also electricity retailers. In addition, there are a
number of smaller independent electricity retail companies. The approximate market shares of retailers with
more than 10,000 customers are shown in Figure 13.
Figure 13: Market shares of major retailers (may 2009)
percent of market share
30
25
20
15
10
5
Powershop NZ
Auckland Gas Company
Bosco Connect
King Country Energy
Bay of Plenty Electricity
Energy Online3
TrustPower
Meridian Energy2
Mercury Energy1
Genesis Energy
Contact Energy
0
retailer
Source: Electricity Commission
1.Mercury Energy is a subsidiary of generator, Mighty River Power.
2. Note: Meridian Energy customer numbers include Comalco,
which accounts for about 14% of national electricity demand.
3. Energy Online is a subsidiary of Genesis Energy.
ELECTRICITY COMMISSION > 17
> Role of Electricity
Commission and other AGENCIES
The Electricity Commission is responsible for
overseeing New Zealand’s wholesale and retail
electricity markets, operating the electricity system,
promoting the efficient use of electricity and
regulating some aspects of electricity transmission.
The Commission is responsible for ensuring the
Rules which govern market and power system
operation remain efficient and relevant. An
example of why Rules may need to be amended
is to allow a new type of generator, e.g. wind, to
participate in the market.
New sources of generation can be developed
in New Zealand without needing any specific
approval from the Commission. The main
regulatory requirements are that new plant
conforms to the relevant technical codes in the
Rules and has the necessary resource consents.
The process for seeking resource consents is
governed by the Resource Management Act, and
is overseen by territorial local authorities.
The Commission monitors the level of investment
in new generation and the rate of demand growth.
It uses this information to compile and publish
projections of future supply and demand. If this
analysis indicates a deficit that is unlikely to be
filled by the normal operation of the market,
the Commission can enter into contracts to buy
reserve energy. These contracts can be for supply
from new or existing stations, or from electricity
users that agree to cut their demand in certain
circumstances (called demand response or
load control).
Substation at Kaiwharawhara, Wellington.
18 > ABOUT THE NZ ELECTRICITY SECTOR
The only reserve energy contract entered into since
the Commission was established in 2003 is for
generation from the diesel-fired Whirinaki station,
which is owned by the Crown.
The Commission promotes electricity efficiency,
including funding electricity efficiency initiatives.
It works closely with the Energy Efficiency and
Conservation Authority on these matters.
The Commission also regulates some aspects of
electricity transmission services. In particular, the
Electricity Commission:
• approves (or not) the grid investments
proposed by the transmission owner – since
transmission customers will be required to pay
for investments approved by the Commission;
• determines the contracting parties for
transmission services – these are currently
Transpower as provider, and generators, direct
consumers and distribution companies as
buyers; and
• approves the transmission pricing methodology
– which determines how total transmission
charges are divided up among the contracting
parties, and the basis for those charges such as
their share of peak usage.
Ohaaki Power Station, near Taupo.
Other government agencies
Several other agencies have important roles in relation to the electricity sector:
Ministry of Economic Development (www.med.govt.nz) MED is the Government’s policy advisor for the
energy sector, including the electricity sector. MED also has ownership responsibilities for the Whirinaki
electricity reserve generation plant. The Minister of Energy sets the Government Policy Statement which
sets out the Government’s expectations of the Electricity Commission.
Commerce Commission (www.comcom.govt.nz) In addition to its role as competition ‘watchdog’, the
Commerce Commission administers the price control regime applying to transmission and distribution
businesses, and enforces the legislation that requires a level of ownership separation between network
activities and generation/retailing.
Energy Efficiency and Conservation Authority (www.eeca.govt.nz) EECA promotes energy
efficiency, energy conservation and renewable energy. The Electricity Commission works closely
with EECA to design and implement programmes to promote and encourage the uptake of electricity
efficiency measures.
Ministry of Consumer Affairs (www.consumeraffairs.govt.nz) Part of the Ministry of Economic
Development, the Electricity Commission is required to consult with the Ministry of Consumer Affairs
on issues that impact small electricity consumers.
Ministry for the Environment (www.mfe.govt.nz) MfE advises and assists the Minister for the
Environment with his or her responsibilities under the Resource Management Act 1991. Existing and
new power stations need to meet the environmental requirements set out in this Act.
ELECTRICITY COMMISSION > 19
> INDUSTRY FACTS
AND FIGURES
9,100 MW
Total generating capacity of the New Zealand electricity system
Over 100
The number of power stations in New Zealand
About 1,400
MW
The capacity of New Zealand’s largest power station, Genesis Energy’s gas- and coalfired station at Huntly
More than
700 MW
The capacity of New Zealand’s largest hydro power plant, Meridian Energy’s
Manapouri power station
Over 450 MW
The expected total capacity of wind farms by the end of 2009.
1914
The year TrustPower’s hydro plant at Coleridge opened. It is the oldest operating
electricity generator in New Zealand
12,000 km
The total length of the high voltage transmission lines that make up Transpower’s
national grid. They are supported by 40,000 supporting towers and poles
150,000 km
The length of lines owned by local distribution companies, which take power from the
grid and deliver it to the end consumer
100,000 MWh
The average amount of electricity New Zealand uses every day
About 40,000
GWh
The approximate amount of electricity New Zealand used in 2008, about the same as
Hong Kong (approximately 7 million people) and only about 1% of the usage of the
United States
6,500 MW
Approximate peak demand for electricity – usually occurs on cold, winter,
weekday evenings
About 2% per
year
The average growth in national electricity consumption over the past decade
9,000 kWh
The amount of electricity an average New Zealand household uses per year.
In 1974 an average household used 7,600 kWh
About 33%
The percentage of total national electricity demand used by residential consumers.
Industrial consumers use about 45% and commercial customers about 22%
About 14%
The percentage of total national electricity demand used by the Tiwai Point
aluminium smelter
63%
The North Island’s share of total national electricity use
1.9 million
The total number of electricity consumers in New Zealand, including householdes
and businesses
$5.5 billion
The amount New Zealanders paid for electricity in 2007, of which about 75 percent
was on energy and about 25 percent on lines costs
20 > ABOUT THE NZ ELECTRICITY SECTOR
> GLOSSARY
Ancillary services – services needed to support the
transmission of electricity from generation plant
to consumer: black start, over-frequency reserve,
frequency-keeping reserve (also known as frequency
regulating service), instantaneous reserve and
voltage support.
Current – the flow (movement) of electric charge.
Demand response – where an electricity user
reduces consumption if supply is scarce, or in
response to a price signal and is rewarded by
a specific payment, or a lower cost of supply.
Direct consumer – an electricity user that takes
supply from the transmission grid (i.e. without using
a local distribution network).
Dispatch Instruction – an instruction from the
System Operator to a generator to generate power.
Distribution Networks – transport power to
end-use consumers through a network of
overhead wires and underground cables. The
distribution networks also include substations,
which convert electricity to lower voltages.
Almost all consumer premises in New Zealand
are connected to a distribution network. There
are two types of distribution networks: local
networks that are connected to the national grid,
and secondary networks (such as within a large
shopping mall) that are connected to a local
network. There are also some generators, known
as embedded generators, which are linked directly
to distribution networks. There are 29 distribution
companies that own the local distribution networks
in New Zealand.
Electricity Governance Rules and Regulations –
the Electricity Governance Regulations 2003 and
the Electricity Governance Rules 2003 (and any
subsequent changes to these) under which the
electricity market has operated since 1 March 2004.
Embedded generator – a generator that is connected
to a local or embedded network rather than to the
national grid.
Generator – a power station connected to
the national transmission grid or a local
distribution network.
HVAC – High Voltage Alternating Current.
HVDC – High Voltage Direct Current.
HVDC link – the high voltage transmission wires and
cables that can transport electricity in both directions
between Haywards in the North Island and Benmore
in the South Island (often referred to as the ‘Cook
Strait cable’).
Megawatt hour (MWh) – the amount of electricity
produced by a 1 MW power station operating for
one hour. There are 1,000 kilowatt hours (kWh) in
a megawatt hour.
National grid – the system of transmission lines,
substations and other works, including the HVDC
link used to connect grid injection points and
grid exit points to convey electricity throughout
New Zealand.
Power – the rate at which electrical energy is
produced or used, measured in watts.
Reserve energy – generation capacity or firm
demand response that can be contracted by the
Electricity Commission, if it considers that normal
market operation will not ensure adequate supply.
Retail market – the market where consumers
interface with industry participants for the delivery
of electricity.
Spot market – the market where electricity
being injected onto, and taken from, the national
grid is bought and sold – it operates in half-hour
trading periods.
Spot price – the price of electricity in the spot
market. Spot prices vary every half hour.
System Operator – the service provider to the
Electricity Commission responsible for scheduling
and dispatching electricity generators in real time
and avoiding fluctuations in frequency or disruption
of supply. Transpower is the System Operator.
Trading period – a period of 30 minutes ending on
each hour or 30 minutes past each hour.
Voltage – the difference in electrical charge between
two points in a circuit (expressed in volts) which
makes electrical charges flow through a closed
circuit.
Wattage values – measure of capacity or demand
Kilowatt kW Megawatt MW
Gigawatt GW = 1,000 W
= 1,000,000 W
= 1,000,000,000 W
Wholesale electricity market – the combination
of the spot market and the associated financial
contracts (hedge) market where buyers and sellers
trade contracts that smooth out some or all of the
volatility in electricity spot prices.
Electricity Commission
Te Komihana Hiko
Level 7, ASB Bank Tower, 2 Hunter Street
PO Box 10041, Wellington 6143, New Zealand
Telephone + 64 4 460 8860
Facsimile + 64 4 460 8879
Electricity Commission
Te Komihana Hiko
www.electricitycommission.govt.nz