EA - Wind offer arrangements

The Electricity Authority (EA) consulted in September 2017 on proposed changes to how wind farm owners offer their generation into the market.

Following the withdrawal of 80MW of wind generation in 2014 the Electricity Authority (EA) has been considering market rules around wind offer arrangements. The EA recently issued a consultation paper to allow wind farm owners to offer their generation into the market in five price bands similar to other generators to address two identified issues:

  • Wind generators offering production even when market prices are below the short run marginal cost.
  • Wind generators occasionally withdrawing generation without signalling this intention.

The authority has proposed a mechanism that would restrict wind generators from withdrawing more than 30 MW of signalled volume from the market without notifying the system operator. There would be an agreed range of circumstances where it would be acceptable to reduce production by a greater output production in reasonably unforeseen circumstances such as if wind conditions did not allow higher operating rates.

The EA has recognised that there is a short run marginal cost to wind production and that remaining a price taker with a one cent offer price disadvantages wind generation.

NZWEA and its members, in their individual submissions, have all supported the change on the basis that it enables wind farms to be dispatched at an efficient level and to withdraw in a co-ordinated manner when it is uneconomic to operate consistent with other forms of generation.

The key point of difference in member submissions relates to the unsignalled generation withdrawal limit of 30MW. As several submissions note an absolute MW level does not create a level playing field given wind farm sizes vary. Moving to a percentage of wind farm nameplate capacity is an option that has merit and warrants further consideration.

Overall the proposed changes are a positive move in affording wind generation the same flexibility as other forms of generation to submit offers based on factors such as SRMC while being subject to relevant rules about withdrawing generation.

NZWEA’s submission can be viewed here: