The development of a system dynamics model to evaluate electricity generation expansion in New Zealand

Many countries exhibited cycles of shortfall and overbuilding (bust and boom) of their installed generation capacity after they restructured their electricity industries. A similar pattern has also been observed in New Zealand after its electricity industry was restructured in 1987. This study proposes a system dynamics (SD) model to study the phenomenon. Advantages of this model over other approaches are discussed in this paper. The model is customised to incorporate the market structure and electricity industry in New Zealand. The model is then used to evaluate the projections made in the New Zealand Electricity Commission (EC)´s planning publication, Statement of Opportunity 2008 (SOO2008). Unlike the Generation Expansion Model (GEM) model used by EC, the SD model predicts that some boom and bust cycles may happen in New Zealand in the future under different projected scenarios.