Possible alternative approaches to the dry year problem

Early in Phase 1, an initial long-list of alternative approaches was developed. The long-list was screened against criteria and feedback received through targeted external engagement, and in consultation with the Technical Reference Group.

Alternative technologies were identified as having the technical potential to help manage dry year risk. They were assessed for their ability to provide long-term, large-scale renewable energy storage and their applicability in a New Zealand context.

Only 3 technologies, hydrogen, flexible geothermal generation and bioenergy were found to have potential.

None of these 3 options is likely to solve the dry year problem on its own, as they can’t practically store enough energy to meet the electricity needs during a dry year event. However, they each show potential in contributing to a multi-technology solution, or ‘portfolio approach’. The ‘portfolio approach’ is being further investigated in Phase 2.

‘Portfolio approach’

Investigations are underway as part of Phase 2 to understand if and how these 3 technologies could best be deployed as a multi-technology approach to the dry year.

Findings in the first part of Phase 2 will determine whether a ‘portfolio approach’ warrants advancing to a detailed business case.

The below descriptions offer an example of how these technologies may be used to support a partial dry year solution. At this stage, they provide a baseline for exploring the opportunities, challenges and uncertainties of a multi-technology solution. The descriptions do not necessarily represent the optimal design of the ‘portfolio approach’.

Bioenergy

This involves replacing coal and gas with sustainable alternatives like wood pellets or wood chips to generate electricity. The feasibility of this option depends on other factors such as sourcing enough sustainably managed, low-value timber, transport and storage, and the impact on log exports. Other types of bioenergy – liquid biofuel (ethanol) and biogas – were found to be less suitable than wood products as they cannot provide the same scale. 

Geothermal energy

Unlike solar and wind energy, geothermal energy is continually available. To be used in a dry year, new methods would need to be developed so that geothermal reservoirs could be ‘turned off’ or ‘turned down’, and then ‘turned up’ as needed.

Geothermal energy emits low levels of greenhouse gases and the potential to capture carbon and store it underground is also being considered as part of this option.

Hydrogen

Renewable energy (from hydro, solar or wind) is used to separate water molecules into hydrogen and oxygen. Hydrogen can then be converted to liquid green ammonia (a derivative of hydrogen gas), as it’s easier to store and transport. Ammonia can then be converted back into hydrogen gas to generate electricity when needed. Producing hydrogen uses a lot of electricity, and can potentially be used as a source of demand response. However, this could be beneficial as it means the manufacturing plant can be ‘turned off’ to conserve power nationally.

Demand response

The Project has also explored whether large-scale, planned load reduction, or ‘demand response’, can play a role in addressing the dry year problem. This would involve forming agreements with large electricity consumers to reduce their demand when supply is scarce, such as during a dry year event.

Demand response is primarily used as a short-term solution for periods of low supply, usually for hours or days. In a few instances, it can also provide a longer, more sustained response through dry periods. The project team is considering if there are ways to extend the contribution of demand response in dry years.

Demand response is also being investigated as part of the hydrogen component of the ‘portfolio approach’ (see above).

Overbuilding renewables

Wind, solar and geothermal generation are existing technologies in the New Zealand electricity system. Given their costs and relative maturity, these technologies are expected to see increased investment in coming years. One option for solving the dry year problem in a 100% renewable electricity system is to rely almost exclusively on these technologies to meet increased demand for electricity and replace fossil-fuelled generation.

To solve the dry year problem through overbuilding renewables alone, we would need to build a lot of renewable energy resources to ensure we could maintain supply to consumers despite the deficit in hydro generation that occurs in a dry year. As overbuild would need to cover this deficit – of between 3 and 5 TWh – in years when the lakes are full we would have a lot of wasted energy.

Relying solely on overbuilding renewables is also problematic as a dry year solution because it is not stored energy. The energy from wind, solar and run-of-the-river hydro needs to be used as it’s generated. Solar and wind are susceptible to calm and cloudy periods, which will likely increase the volatility of the electricity market. Also, there may be limited commercial incentives to build generators whose output will often be ‘spilled’ and hence receive no revenue for it.

Large batteries can be used to store some energy generated by renewables, and could play a role in balancing the short-term market, like storing electricity during the day for use at night. To use them for storage across years to solve the dry year problem would be very expensive. Their storage also degrades over time, and so are not appropriate as a long-term solution.