Low carbon energy hours within NZ

In New Zealand today there seems to be a lot of advertising by energy retailers centred around the idea that certain hours of the day, or off peak hours, could have lower carbon emissions than during peak hours. People are encouraged to "load shift", which would mean decreasing their energy consumption at peak times and use more at off peak times. I do appreciate the thought going into helping fight climate change, but with a more full understanding of the New Zealand electric grid does show that its not really this simple to minimise your own carbon footprint.

The first idea that you may have is that when the sun is shining and when the wind is blowing, there would be a lot of solar and wind generation contributing the the grid. This implies that the amount of CO2 generated per kWh is going to be relatively low. So you should crank up your AC? Well not really, because the interesting thing about wind and solar is that it is effectively demand-inelastic. The price of electricity does not change how much is generated. Price of course being correlated to demand. If you own a solar farm, and the price of electricity is one cent per kWh, it is still better for you to sell your excess electricity to the grid instead of not. The same is true for wind farms, though there is a very very small price where its not worth the wear on the machines to have them generating electricity. So this means whatever time of day or whatever electricity price that the grid is buying electricity for, solar and wind farmers will almost always be selling their energy. If you turn on your electric heater, it won't make the sun shine brighter or the wind blow harder, it will just force another source of energy to produce more for you.

Geothermal generation is similar to solar and wind as it is renewable and demand-inelastic. They are designed to run 24/7 so do not increase or decrease with peak or off-peak demand.

This is in contrast to dams. Which are one of the most unique and incredible parts of the NZ electric grid. They are renewable, but vitally they can be turned on and off based on demand. If it is raining today then that rainwater can be used for energy generation tomorrow, or the day after or in a months time. This is the opposite of solar and wind, where the energy produced MUST be consumed in the same instant. The only cost is really the opportunity cost of not selling that water/energy later to the grid when electricity is more expensive. As over 50 percent of the energy is produced from dams, the grid has an incredible ability to shift load from one day to the next with dam operators incentivised to maximise their profits by selling high, leveling out the price when demand is high.

The biggest problem we have in NZ is that its not always possible to use hydro power, there are droughts times of the year with very low rainfall. As the water levels in dams drop the dam operators are more and more likely to turn off electricity production to save water. Even if the prices are high today, they could get even higher in the future, so it makes sense to save water. This is where the time scale of months or years comes into effect, a dam operator can easily save water at night to sell at peak load. But there is simply not the dam capacity to save up in one year to provide for the next. There will be dry months, or dry years that impact the dams' ability to generate energy.

We have finally reached the scenario where thermal energy production, gas and coal, begins to come into effect. When nothing else can meet the demand of the grid, finally Huntly Power Station will spin up to fill in for the dams. At this point it might seem like we need to stop using energy when Huntly is off, and use it when the dams are being used. But this is not going to have your desired effect, using more water just means that Huntly will be turned on slightly sooner. The thing that we need to do is decrease our energy use not shift it to another time.

And if you readthis report on page 4from Genesis you can see that it cost them $159 per MWh to produce energy via thermal generation in Q2 of FY2025 If the energy price costs less than that clearly they would never turn it on. This price as I alluded to before, is not correlated to peak or off peak demands, but far more correlated towards the months of the year or if we are in a wet or a dry year.You can explore the government data to see for yourself here.

This clearly shows that low carbon energy generation is not tightly correlated to peak and off peak hours. But clearly, customers can't load shift their washing from 2025 to 2026. And if we are in a wet time of year, its not very engaging to see that every day is a low carbon day. But customers who want to help fight climate change and retail companies wanting to support this effort combine to create an environment where far more emphasis is placed on hourly demand instead of on the time of year which is what really matters.

If you do care about climate change, which you should, I would recommend that paying attention to the wholesale price of energy is far more important to you than peak or off peak power.