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14 November 2018
Dr Geoff Pritchard, Department of Statistics
Dr Geoff Pritchard, Department of Statistics

There’s been much talk in the media of troubles in the energy market, with the spot prices that retailers pay generators soaring to new heights. Department of Statistics Senior Lecturer Geoff Pritchard is watching with more insight than most – most of his work is to do with New Zealand’s energy industry.

Geoff is a probability specialist, so focuses on modelling the dynamics of the energy market, in this country built on hydro and geothermal power and the fossil fuels coal, oil and gas.  

"I’m currently most interested in modelling hydro-lake inflows and optimising their use,” he says. “In the past, I’ve also studied wind power, another technology with enough of a random component to be of interest to a probability specialist like me.”

One of the techniques Geoff uses in his hydro work is stochastic dual dynamic programming, a method for serial optimisation. He describes this as “Decide what to do this week, bearing in mind an uncertain future, then move on to next week and repeat”.   

On the modelling side, he sees hydro inflows as being various kinds of Markov processes – this describes a random process whose future behaviour cannot be accurately predicted from its past behaviour, and which involves random chance or probability. 

Geoff earned his BSc (Hons) in maths from the University of Auckland in 1991. He gained his PhD with a thesis on probability theory from the University of Wisconsin (Madison) in 1995.

One of the most interesting projects he has worked on involved the equipment at each end of a high-voltage inter-island cable. Transpower, which owns and operates the National Grid, needed to run more than 400 capability tests without shutting the cable down and disrupting the wholesale market. Geoff and his colleagues worked out a stochastic dynamic programming model to minimise disruption given the uncertainty around hydro flows.

As for the current energy market, Geoff says the higher spot prices seem to be a consequence of the two biggest gas-fired power stations, Huntly 5 and part of the Stratford Power Station in Taranaki, being out of the market simultaneously. This, he says, has not created any physical shortages, given that electricity demand is relatively low at this time of year. But the situation has limited competition in the market, allowing the main generation firms to charge higher prices than usual.

 “This kind of thing is called “market power” in respectable academic journals and “rigging the market” in popular media stories,” he says. “It doesn't help that hydro-lake storage is a bit on the low side, but in my view, that’s a minor contributor: it won't really matter for another six months, until next winter, which is much longer than the correlation length of the inflows.

“In other words, there’s plenty of time for the lakes to re-fill over summer, and they probably will.”