4. Recent Developments in New Zealand
4.1 Changes to Market Rules
Leading up to the development of Stage II of the Tararua wind farm and the new Te Apiti wind farm, it was recognised in the NZEM that the market rules for offering generation into the spot market were unworkable for wind energy, otherwise referred to as intermittent generation (IG.)
As a result, the NZEM drafted new rules applying only to IG. These were picked up by the EC in 2004 and included in the EGRs from 1 July 2004. The offering rules previously required firm offers to be submitted 2 hours prior to the half hour they apply to. For example, an offer to generate 100 MW at $10/MWh for the half hour starting at noon would have to be submitted by 10 am on the same day. This rule is known as the "two hour rule" and two hours before the half hour is known as "gate closure."
Offers made at gate closure cannot be revised unless there are extenuating circumstances, typically involving either a safety issue, unplanned plant failure or a grid security warning. Firm offers must reflect the actual capability of generating plant and once dispatched to an offer, a generator is required to generate according to the dispatch instruction. This, of course, is difficult for IG, especially when the offer has to be firm at gate closure.
Hence the new rules for IG provide an alternative which accommodates the variable and relatively unpredictable nature of wind. Wind farms that are required to offer17 must still submit a firm offer at gate closure, but then must revise their offered quantity after gate closure whenever the output they forecast for the half hour to which the offer applies changes by more than the tolerance provided in the rules.18 Forecasts must use the "persistence method" which simply assumes that the wind farm output will remain as it is in the short term at the output level pertaining when the forecast is made.
Under the new IG rules, wind farms must offer their entire output at a price of $0.01/MWh which also happens to be the lowest price which any generator can offer unless they have bid for and won the right to offer at $0/MWh in the market's Must-run Dispatch Auction. In New Zealand, generators" offer prices cannot be negative. Thus wind competes in the base-load sector of the market.
4.2 Reviews by the System Operator
Along with changes to the EGRs, wind farm developments to date have been accompanied by a significant degree of work undertaken either by or in conjunction with the SO. In 2004, Transpower provided19 a review of the issues surrounding connection of the wind farm capacity that could reasonably be anticipated, totalling 400 - 600 MW by the end of 2007, representing "more than 30% of the total load during light load periods." At that time, Transpower concluded that:
- most of the issues associated with grid connection of this amount of wind generation could be managed using improved wind speed forecasting techniques and modern WTGs with efficient power and voltage controllers;
- the economics of wind generation rather than technical and operational considerations would be limiting factors with these amounts of wind generation;
- there would not be problems controlling system frequency, and that current levels of frequency regulation would cover 99% of all deviations expected within the next two years;
- good wind forecasting would resolve most of the issues associated with planning operations and unit commitment of plant in advance.
Subsequently, in February 2005, Transpower published a report on the impact of wind generation in the Manawatu on the operation of the spot market and on grid security.20 This report reviews the impact of the Tararua and Te Apiti wind farms which have combined maximum output of 164 MW. The report states that the following effects were observed:
- the output of the two wind farms have a high correlation over the last two months of 2004 (Te Apiti was finally commissioned late in October 2004 so this period covers the first two months of full operation of both wind farms);
- there were three occasions on which the combined output increased by more than 100 MW in a five minute dispatch period;
- there were two occasions when the combined output increased from near zero to 150 MW in fifteen minutes;
- there is a high degree of error in forecasts of wind farm output21 at Te Apiti;
- the error in the forecasts of wind farm output resulted in an increase in the errors associated with scheduling and dispatching generation plant;
Transpower's report goes on to discuss the implications:
- further wind farm development in the Manawatu is likely to exacerbate the observed effects due to the high correlation between the output of wind farms in this area;
- large swings in the combined output of Manawatu wind farms could have implications for the limits placed on lines from Bunnythorpe north through Tokaanu22 and on southward transfers on the HVDC link;
- increased errors in the generation schedule could potentially increase uncertainty in trading outcomes on the spot market and impact on the ability of the SO to maintain minimum standards of grid security.
The Manawatu report provides the first real indication of the impact that the geographical dispersion (or lack thereof) of wind farms could have on the ultimate penetration and market share of wind energy in New Zealand. It shows that wind farms located in a "cluster" in a small geographical region have the potential for high correlations between their respective outputs, the effect of which is to produce large swings in combined output,23 although not often.
If the Manawatu wind farm cluster continues to grow, it is conceivable that significant changes will need to be made to existing operational processes, or to the grid. A further possibility is that future wind farms may need to have the facility to limit or control the rate of change in their output.
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