On the evening of 2 June 2016, a couple of spikes in wholesale energy prices were observed across the entire country. Prices went from about $40 to $60 per MWh at 5:00pm to around $4,000 - $5,000 per MWh at 5:30pm. This can be seen here on EMI, or in the following plot.
Wholesale energy prices by zone, 2 June 2016
We can use the information available on EMI to drill into this price spike event to develop an understanding of what occurred. There were no major generation or transmission outages that gave rise to these price spikes.
Demand for electricity on 2 June, and in the previous day or two, was up quite a bit on the preceding week or so, due to the colder weather. This can be seen here. However it is interesting to note that the peak demand on 2 June was a little lower than the previous day (this can be seen by changing the ‘Region type’ on the grid demand trends report from Zone to New Zealand). It would appear that demand alone does not explain the wholesale price spike.
So what about the supply side of the market? The cleared energy and offer stack reports on EMI indicate there was no significant change in the amount of offered energy (MW), although some generators priced up their energy offers. Pricing up in this manner is not uncommon in times of expected high demand. This can be seen in the North Island and South Island energy offer stacks. The South Island plot clearly shows some MW being shifted into higher-priced energy bands (the red, orange and yellow bars) and the cleared energy line traverses some of those higher priced MW.
South Island cleared energy and offer stacks, 2 June 2016
A somewhat different story emerges when we examine the reserve market on 2 June 2016. Unlike the energy market where the MW offered barely changed, the amount of reserves offered into the market reduced significantly for both reserve classes – this can be seen in the figure below. The dispatch (and price) of energy and reserves is co-optimised in New Zealand. A generating unit may well be offered into both the energy and reserves markets but its finite capacity can ultimately only be dispatched for one or the other, or some combination of the two. This is the mechanism by which the reserves market can influence the energy market.
North Island cleared reserves and offer stacks, 2 June 2016
Further analysis is required to completely unpack what caused the price spike on 2 June 2016. The insights able to be gleaned from EMI are a good place to start.
