Transpower contemplates rise of storage capacity   25 May 2016

Wednesday 25 May 2016 04:59 PM

Transpower contemplates rise of storage capacity in long-term view of NZ power usage

By Jonathan Underhill

May 25 (BusinessDesk) - Transpower, the national grid operator, sees a swift and game-changing transformation of the way electricity is delivered to users by 2040 when it expects to see the widespread uptake of 'extensive storage' batteries that help flatten the daily demand curve and may even reshape seasonal demand.

The long-term view is in Transpower's Transmission Tomorrow report, which contemplates how electricity generation, management, and consumption will evolve in coming decades and how the national grid will remain relevant. The report comes after the Electricity Authority released a final consultation paper this month proposing changes to the transmission pricing methodology for the grid to account for changing usage patterns and to install a regime that is based on actual service and cost.

The report attempts to settle debate that has run for years on whether South Island power generators and consumers pay too much to access the grid, given $2 billion of upgrades over the past five years has bolstered security of supply for North Island customers. A second paper on distributed generation pricing principles recommends replacing what the Authority deems a distortionary system of avoided cost of transmission (ACOT) payments with one that is administered by Transpower and pays out only to distributed generators that reduce transmission costs.

Transpower's report breaks the next quarter-century into three steps. The present day is called the "evolving generation" state where after years of demand growth and investment in generation and grid capacity, electricity demand has flattened. At the same time, there is fundamental uncertainty around the closure of thermal generation facilities, the future of large industrial plants such as the Tiwai smelter and potential changes to transmission prices heralded by the Electricity Authority report.

"While New Zealand has abundant resources to support new generation, investment is commercially fraught in the current environment," Transpower says. "We expect any generation investment to be small and just in time, requiring us to respond rapidly to connection requests. Security margins are likely to tighten, causing heightened concerns and increasing the risk of hasty political intervention."

Transpower calls the next step, starting about 2020, the "changing load" state when it expects to see a maturing and more mainstream adoption of emerging technologies such as electric vehicles, solar power, home and network batteries and automated power management systems for homes and businesses. More consumers may choose to go 'off-grid' although connection will remain "an attractive proposition for the vast majority of people."

"Our key challenge will be to find ways to accommodate growth and sustain the headroom needed to take grid assets out for maintenance or replacement while limiting the need to invest in new grid capacity," it says.

It will be a time of mixed fortunes for distribution companies. Most will have moved away from "current pricing structures that can shift costs among consumers" and will have got their heads around the engineering challenges of new technologies. But some will struggle from failing to adapt or coping with a small or declining economic base, which "may ultimately drive rationalisation and regulatory changes in the distribution sector."

The period from about 2040 onward is dubbed the "extensive storage" state when there is expected to be "economic saturation" of solar photovoltaic and other distributed generation, but where grid-delivered hydro and other renewable generation is still economic, and batteries and other storage have become widespread. By then New Zealanders will be living in a low-carbon economy dealing with the impacts of climate change.

For Transpower, "the big breakthrough comes when distributed storage becomes so extensive, visible and well-coordinated that reliability 'behind the grid' begins to substitute for reliability of the grid," it says. "Our business fundamentally changes from providing 24/7 reliability and real-time balancing to providing a resilient battery-charging service".

"In our long-term horizon, battery or other storage technologies installed within homes and businesses, vehicles, distribution networks and grid substations could fundamentally alter our business by covering short-term imbalance in supply and demand," the state-owned enterprise said.

Transpower says six trends will drive significant change in its business:

* Climate change policy and increasing pressure to find cleaner substitutes for fossil fuels;

* Distributed storage, where storage systems become a viable means of managing demand peaks;

* Energy consumption, where new technologies allow consumers to reduce usage, manage consumption better, produce their own power and embrace products and services ranging from plug-in vehicles to automated energy management in the home and solar power;

* Smart grid, where networked digital devices in homes, businesses and networks allow for more efficient energy use, such as shifting demand from peak times to off-peak;

* Urbanisation - a continuation of the south-to-north electricity and population flow, with growth concentrated in the upper North Island, and Auckland alone expected to account for 60 percent of population growth through 2045;

* Electrification - with electricity accounting for only 25 percent of New Zealand's energy use, Transpower sees an ongoing uptake for heating, powering machinery and driving industrial processes.

(BusinessDesk)

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