An Integrated Energy and Reserve Market for New Zealand

Abstract

The history and structure of the New Zealand electricity sector are discussed by [Culy, Read and Wright (1996)], and also by [Read (1997)], from which the summary given below is drawn. Since the former paper was completed, there has been significant change in the sector, with the introduction of a spot market to coordinate production and consumption of electricity on a half-hourly basis. That market is, at this stage, unique in that it implements a "full nodal pricing regime" in which there is a different energy price for each of several hundred nodes in the system, as recommended by a number of authors dating from [Schweppe et al. (1988)]. However, it goes further in that it also includes reserve constraints and reserve prices in the market. After a brief summary of the background, this paper focuses on the philosophy behind that aspect of the market and comments on initial experience. The full formulation employed has been described by [Alvey, Goodwin, Ma, Streiffert and Sun (1997)], while [Drayton-Bright (1997)] describes the representation of generator reserve offers in greater mathematical detail.