Flick Energy Ltd

Feedback on EA spot market review discussion paper

(12 February 2015)
Question Answer / Feedback
1
Do you agree with the choice of high level spot market design issues
weve considered? If not, what other issues should be evaluated and
why?
Yes. Flick is comfortable with the issues being considered. However, Flick
notes that whilst the adopted approach of comparing NZ to other similar
markets is valid it may have excluded other options that have not been
considered in those markets.
2

Do you agree that the authority should explore real time pricing options
in 2015/16? Please explain your reasoning.
Yes, Flick strongly supports the EA exploring real time pricing options. The
current price setting arrangements do not allow customers on spot to reliably
make usage decisions based on the forecast price. As the existing forecast
prices can change due to usage decisions made by end users they cannot be
relied upon for making demand response decisions. This means it is difficult for
consumers exposed to spot prices to manage the risk of fluctuating prices.
Flick agrees that confidence in the competitiveness of the spot market would
improve as a result of introducing real time prices and that it would increase
the willingness of parties to invest in the industry. The EA should strive to find
a market mechanism that locks in prices prior to commencement of each
trading period and resolves the current dilemma caused by 5 minute price
setting versus 30 minute settlement periods.
In a wider context, providing spot price certainty just ahead of real time is a
significant enabler for smart grid technologies. Automated demand response
to price signals is the nirvana of the smart grid; providing a market environment
that encourages the development and adoption of the supporting technology
could put New Zealand in a world market leading position with respect to smart
grid technology.

Do you agree that the Authority should not explore zonal pricing in
2015/16? Please explain your reasoning.
Yes, Flick does not believe that the benefits of zonal pricing out-weight the
downsides that come with the zonal pricing approach. The overheads
associated with managing the current nodal pricing approach are not
prohibitive.
Do you agree that the Authority should explore introducing an ahead
market (and shorter gate closure) in 2015/16? Please explain your
reasoning.
No, now is not the right time to explore introducing an ahead market. Flick
believes it would be a waste of resource to create an entirely new ahead
market with associated costs when there are only likely minor incremental
benefits. Flick believe it makes more sense initially to deliver the planned
enhancements to the existing market, allow these to bed in then review market
performance again prior to considering the benefits of any new market such as

Flick Energy Ltd

PO Box 12-306, Thorndon, Wellington

5 May 2015

an ahead market. It would be prudent to assess this again when real time
pricing is in place and its impact is understood.
Do you agree that the Authority should not explore paid for demand
response programmes in 2015/16? Please explain your reasoning.
Yes, paid for demand response products add additional overheads to
determine the value and cost of demand response and are open to gaming.
The market should be designed in such a way that allows demand response
decisions to be made by participants based on price signals. An exception to
this may be where specific transmission or distribution investments can be
avoided through contracted demand response determined on an economic
basis.
Do you agree that the Authority should not explore mandatory capacity
products in 2015/16? Please explain your reasoning.
Yes, Flick agrees that it is unlikely to offer benefits greater than those that
might be realised by a well-functioning energy only market and competitive
hedge market.

For any questions relating to this feedback, please contact:

Jurjen Geerts
Chief Financial Officer
Flick Energy Ltd
PO Box 12-306
Thorndon
Wellington 6144
Email: jurjen@flickenergy.co.nz

Flick Energy Ltd

PO Box 12-306, Thorndon, Wellington

5 May 2015