10 Aug 2021

Power outages: Genesis CEO says Energy Minister scapegoating, but Woods has questions

From Checkpoint, 5:16 pm on 10 August 2021

Energy Minister Megan Woods has blamed Monday's power cuts on commercial decisions made by electricity companies.

Thousands of New Zealanders were left in the dark on one of the coldest nights of the year after their power was intentionally cut to reduce strain on the system.

Woods pointed the finger at Genesis Energy, in particular, for failing to turn on its third generator despite having been warned there would be massive demand.

But Genesis Energy chief executive Marc England told Checkpoint the company was being scapegoated by the minister.

He said it was not a commercial decision to have less supply, but was an operational decision.

"This appears to have been a commercial constraint rather than a physical constraint in terms of generation," Woods said.

"The third rankine at Huntly was not turned on because Genesis made a decision there wasn't going to be that much demand on the system.

"This is obviously something that I'm continuing to ask questions on. This wasn't a physical constraint of generation, we did have the ability to physically generate the amount of electricity that was needed to keep the lights and the heat is on for New Zealanders last night, but commercial decisions were made not to."

Woods said grid operator Transpower also appeared to have over-reacted in how much power it demanded be taken out of the system.

Transpower has apologised over the outages. Its general manager of grid development John Clarke told Checkpoint no system was perfect, but he assured customers electricity will stay on, on Tuesday night.

"Today we've had milder weather and we've also had more work done on making sure there will be generation available tonight."

He said approximately 2500 households, mostly around the lower North Island, were affected between 7pm and 8.30pm.

"What we had last night was a record peak demand, first time we've had a new peak for the demand of electricity for some years."

Clarke said there was not enough power generated to meet the demand. At the same time as the peak demand a generator had an issue which meant it had reduced output.

"We followed what is a process to make sure we continue to balance the power system. The last thing we wanted was a blackout, because the power system could no longer manage the amount of electricity that was coming off it.

"So we asked power companies to reduce demand by around one to two percent.  

"It's not a clear case of responsibility, we will be doing an investigation. There are a number of processes that we worked through.

"One is that we advised the market that we thought that the situation was going to be tight last night. We sent a number of notices and alerts. No power system is perfect. And there are times when due to a range of circumstances we might need to shed demand.

"One of the things we do regret is that one of our key processes failed us and did not work as well as it should. We were targeting production and demand of around one percent, we actually achieved more like two to three percent. That was due to failure in terms of some of the information we provided out to the industry.

"You're trying to balance demand and supply and keep the power system from falling over. So if, as unfortunately happened here you shed a little bit more than you needed, the upside was the power system kept going."

Transpower had issued a notice to generators saying more power was needed.

"In some cases we are aware some of the generation equipment is not available, or certainly not available in a hurry. In other cases, people obviously elected that they weren't able to respond."

Genesis 'absolutely' being scapegoated by energy minister

Woods had hinted at that in saying deciding not to generate more power was a commercial decision, referring to Huntly Power Station, an asset of Genesis Energy.

But Genesis Energy chief executive Marc England said the company is being scapegoated by Woods.

England said the decision to not generate more power from Huntly was operational, not commercial.

He said grid operator Transpower did not ask it for more electricity until just after 5pm on Monday, on the cusp of the evening peak demand.

"We feel this is grossly unfair [for] the minister to single out one company.

"We're a group of companies that keep the lights on across New Zealand every day. It wasn't a commercial decision, it was an operational decision. We looked at our portfolio yesterday and we knew that between all our customer demand and the generation we had online, we could meet our customer demand.

"That's all we can see in the market, we don't get a picture of the whole market. We don't see whether there are supply gaps elsewhere, only Transpower can see that."

When asked if the Genesis was being scapegoated, England said "absolutely".

"We don't have any legal or regulatory accountability for security of supply in New Zealand, our only accountability is to be sure we can supply our customers.

"I do think as a sector we need to sit down and understand this and we'll come up with some lessons learned."

He said he has no idea why Genesis was singled out, and will be meeting with Megan Woods on Wednesday.

"We actually lost a lot of money yesterday … more than a million dollars, on being short in a difficult market. When market conditions materialise like that it's really tough on generators. We don't do it deliberately.

"Two events contrived to happen in exactly the same time. The first was a bunch of weeds - a continuous problem at the Tokaanu power station, in Lake Rotoaia - started to build up, we had really strong gale force southeasterly winds pushing weeds towards our intake gate.

"We'd been working all day to clear it. Normally we manage to clear it… but yesterday the wind was too strong and it pushed too much weed towards the intake gate and we had to downgrade that power unit at that time.

"Almost the same time, a little bit later, the wind in New Zealand dropped to about half, so we had about 500 megawatts of wind blowing, and it dropped to about 260 megawatts quite quickly."

Genesis needed more warning from Transpower that demand was getting high.

"At 6am yesterday morning there was a notice that came out saying there was a risk.

"By about 5.30 in the evening that turned into 'we've got a problem here we need more generation quickly'. For us to fire up that third unit [at Huntly power station] takes about six to 10 hours. It's not a quick thing."

However, in response the energy minister told Checkpoint she was not scapegoating Genesis, but its generator at Huntly was the "critical piece that could have been turned on quickly".

"I think the critical question all New Zealanders wanted answered when they woke up this morning was, was this a physical deficit that we had in terms of generation?

"What I'm interested in is certainly not scapegoating anybody, but actually getting to the bottom of why it is, whether you call it market, you call it commercial, whatever, that an assessment was made, that we were going to need that additional capacity, that extra 240 megawatts, that could have come on with the Huntly rankine that would have got us through last night."

Woods said other options like in Taranaki took about three days to turn on.

"I really want to have a conversation [with the Genesis Energy chief executive] around what information he would need from the system operator, in order to make that decision early enough to turn on that third rankine."