Wind, rain, fire and sun: towards zero carbon electricity for New Zealand

Abstract We examine different scenarios with large amounts of intermittent generation to achieve close to a 100% renewable electricity market in New Zealand. We use a cost based dispatch model to simulate market prices. Previous modelling has estimated electricity prices using the Long Run Marginal Cost approach. Our study is the first to model market prices explicitly, for scenarios with close to 100% renewable electricity, to see if the “energy only market” revenues are enough for investment cost recovery. Our modelling suggest that large amounts of wind on its own are better than mixed wind and solar scenarios. We also see a collapse in spot prices, as we get very close to 100% renewable. These prices are well below those needed to cover investment costs. We argue that there should be a market design change to a design that includes direct payments for capacity, as well as for electricity output, to ensure investment cost recovery.