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• Electricity

• Reports

• Review of Auckland Outage
• Costs of Generating Plant
• Power Generation Options
• Wind Energy Integration

• Electricity Demand and Generation
• Load Factors
• Changes Through Time and Discount Factor and Fuel Price Effects

Electricity Demand and Generation

The total load on a power system is seldom constant; rather, it varies widely with hourly, daily, weekly, monthly, or annual changes in the requirements of the area served. It is strongly influenced by seasonal factors. Extremes of temperature contribute to higher demand as heating and air conditioning units consume more power. The difference between day and night demand is even more marked. The minimum system load for a given period is termed the base load. In New Zealand it tends to be supplied from hydro, geothermal and combined cycle plant. Maximum loads, resulting usually from temporary conditions, are called peak loads, and the operation of the generating plants must be closely coordinated with fluctuations in the load. The peaks, usually being of only a few hours' duration are frequently served by gas combustion-turbine or hydro generating units.

The New Zealand electricity market is a deregulated one operating on supply and demand. Periods of peak demand enable generators to command higher prices. Where shortfalls in supply are foreseen, then a generator may choose to install new generation, either as base load plant to displace other plant into a peaking role, or as a specific peaking plant. The price a generator sets for its peaking plant dispatch is whatever the market will bear, but can be reasonably set to ensure that all necessary capital and operating costs are recovered over its short operating period. As all generators receive the same price as the last plant dispatched to meet demand, windfall gains would be possible for all generators. For this reason, to avoid unnecessary benefit to competitors, it is unlikely that dedicated peaking plant will be built for the current market. Demand however is seldom at peak, meaning that plant may at times sit idle, not generating revenue. The general objective is to obtain a mix of "Base Load" plant which covers normal demand, and "Peak Load" plant, which can be relied on at short notice as needed.

Thermal peaking plant is characterised by a lower capital cost than base load plant but expensive to run, allowing cost recovery over a shorter operating period. The plant is designed for rapid start up. With an integrated hydro-based system in New Zealand, the need for specifically designated peaking plant has been minimal. Hydro stations or existing thermal stations can perform this function. Peaking stations such as Otahuhu A, Stratford and Whirinaki have had minimal operation. Load factors can be less than 3%.

Load Factors

Load factors have not been specified for each type of plant. All the plant can achieve high load factors exceeding 90%. Actual load factor will depend on merit order of operation and the nature of fuel contracts. New plant tends to have higher efficiency than existing plant and therefore will tend to generate ahead of older plant and so will operate at the 90% level. They may however be less reliable in the first one to two years as teething problems are sorted out. As more efficient plant or renewables are brought on-line then the load factor may drop. For example, in recent years New Plymouth power station's (33% efficiency) load factor has been at around 25% while Huntly power station's (36% efficiency) load factor has been 40%.

Special contracts may override these efficiency considerations. For instance, the Taranaki Combined Cycle plant has a long-term "take or pay" fuel contract and a "contract for difference" (cfd) arrangement for most of its generation that fixes major expenditure and guarantees necessary income. The cfd allows the plant to be offered at zero price to the market enabling base load operation for the life of the cfd.

To illustrate the effect of load factor on generation cost, the cost of generation in 2012 of the various technologies over a range of plant factors is shown in Chart D1. Gas has been priced at $4/GJ and coal at $2.5/GJ, the plant life is 20 years and a discount rate of 10% has been used.

In this simplified case the advanced gas turbine, gas combined cycle and the advanced gas combined cycle have the lowest annual costs over a wide range of load factors. High capital and O&M costs make coal clearly uncompetitive with these gas-based technologies. Because of the uncertainties associated with each technology it is difficult to predict which type would be best for a particular application. Which plant is best for a peaking or base load would depend upon the specific conditions at the time. In the example the advanced gas turbine appears to be the most economical over the widest plant factor range just losing out to the gas turbine in a peaking role when the load factor is below 30%. In the advanced gas turbine case the low capital cost and good efficiency has economic advantages over the more complex combined cycles with their higher capital costs and higher efficiencies.

Chart D1: Effect of Load Factor on Annual Cost (2012, 10% Discount Factor, 20 Year Life $4/GJ Gas, $2.5/GJ Coal)

Changes Through Time and Discount Factor and Fuel Price Effects

Capital cost repayments and fuel costs tend to be the two largest components of the cost of electricity. To illustrate the effect of changing these components, several scenarios have been constructed. These have discount factors of 5% and 10%, gas prices of $3/GJ, $4/GJ and $5/GJ and coal prices of $2/GJ and $2.5/GJ. The net load factor has been assumed to be 90% and the life of the plant is 20 years. Tables D1 to D18 show these costs for 2001, 2012 and 2025.

Table D1: 2001 Electricity Costs with a 5% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D2: 2001 Electricity Costs with a 5% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D3: 2001 Electricity Costs with a 5% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life

Table D4: 2001 Electricity Costs with a 10% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D5: 2001 Electricity Costs with a 10% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D6: 2001 Electricity Costs with a 10% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life

Table D7: 2012 Electricity Costs with a 5% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D8: 2012 Electricity Costs with a 5% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D9: 2012 Electricity Costs with a 5% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life

Table D10: 2012 Electricity Costs with a 10% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D11: 2012 Electricity Costs with a 10% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D12: 2012 Electricity Costs with a 10% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life

Table D13: 2025 Electricity Costs with a 5% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D14: 2025 Electricity Costs with a 5% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D15: 2025 Electricity Costs with a 5% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life

Table D16: 2025 Electricity Costs with a 10% Discount Rate, Gas $3/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D17: 2025 Electricity Costs with a 10% Discount Rate, Gas $4/GJ, Coal $2/GJ, 90% Load Factor, 20 Year Life

Table D18: 2025 Electricity Costs with a 10% Discount Rate, Gas $5/GJ, Coal $2.5/GJ, 90% Load Factor, 20 Year Life