Price Separation Report 6 Dec 2016
DUE TO NATIONAL INSTANTANEOUS RESERVE MARKET FORWARD
RESERVE SHARING LIMIT
System Operator
Transpower New Zealand Limited
December 2016
IMPORTANT
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TRANSPOWER REPORT: PRICE SEPARATION REPORT 6 DEC 2016
SUMMARY
Modest price separation between islands – a difference in nodal prices greater than that attributable to
transmission losses1 – occurred in the morning of Tuesday 6 December, as shown in the table below.
Trading
Period
Hay Price
Ben Price
% Price
difference
17
$68/MWh
$44/MWh
55%
18
$57/MWh
$39/MWh
46%
The cause of separation was Fast Instantaneous Reserve (FIR) from the South Island (SI) being
restricted from sharing to the North Island (NI) by post-event HVDC response being limited. The preevent head room – the difference between HVDC transfer and the HVDC limit - was low as reactive
equipment outages reduced the HVDC limit to 700 MW from its 1200 MW maximum.
To supply marginal NI load with SI generation would increase DC transfer, reducing the amount of SI
FIR which could cover the NI AC FIR risk, therefore increasing the amount of NI FIR required. A
relatively high marginal cost of NI FIR, in excess of $200/MW, meant it was cheaper to supply
marginal NI load with NI generation instead of cheaper SI generation.
The forward sharing limit is binding if it equals reserve cleared in the sending island plus shared Net
Free Reserves (NFRs)2.
In mathematical terms, (FIR or SIR) forward reserve sharing limit =
min {220 MW, HVDC limit - (HVDC transfer plus modulation risk3)}.
Price separation will occur if the forward reserve sharing limit equals HVDC limit less the (HVDC
transfer plus modulation risk) and it is binding.
Additional transfer will mean sending island reserve needs to be replaced by reserve from the
receiving island. Additional transfer will therefore occur up to the point where to supply marginal
receiving island load,
A. the marginal cost of receiving island energy <
B. the marginal cost of sending island energy + receiving island reserve - sending island reserve
The price separation will be the difference between A and B.
The table below shows how the FIR forward sharing limit was binding for trading periods 17 and 18.
HVDC limit
-
HVDC north
transfer
-
Modulation
risk
=
Forward
sharing limit
=
Shared
SI NFR
+
Cleared
SI FIR
701 MW
-
600 MW
-
30
=
71
=
12
+
59
700 MW
-
596 MW
-
30
=
74
=
11
+
63
1
The maximum price difference between Haywards and Benmore attributable to losses is 18%.
Shared NFRs are the load response from one island to an AC event the other island via the HVDC,
which reduces the reserve requirement for that AC event.
3 Modulation risk is extra HVDC transfer modelled in the market system to account for deviations of
the HVDC from its scheduled amount in response to frequency variations.
2
3