1. National Market for Instantaneous Reserves Design and Scenarios Please note that the scenarios described in this presentation are based on the current solution design which is in the testing phase now and therefore subject to change. Phil Yao A brief description of the main design features for the NMIR project is on our website.on our website

2. Topics Design –Reserve Sharing Constraints –Shared NFRs –Reserve Sharing Limit and Procured Limit –Losses/Effectiveness Factor Scenarios –DCN/DCS –FIR/SIR  Scheduled Quantities  Island Reserve Prices 2https://www.systemoperator.co.nz/sites/default/files/bulk-upload/documents/NMIR%20Design%20Features.pdf

3. Forward/Reverse Sharing Limit ≤ HVDC Control Band - MR Forward Sharing Limit ≤ HVDC max - Energy Transfer - MR Reverse Sharing Limit ≤ Energy Transfer - MR - P min SIR: 5mins cable discharge (BP to MP) FIR: ~4s delay to initiate RP (at 35MW) and establish stable RP operation (at 0MW) HVDC Energy Transfer Reserve Sharing Limit 220 Design 1 - Reserve Sharing Constraints 190 Pmin (for reserve sharing)35MW HVDC Control Band250MW MR (FKC)30MW HVDC Max Limit North1200MW HVDC Max Limit South850MW BP to MP transition190MW RP Exit52.5MW 22.5 3

4. 4 Design 1 - Reserve Sharing Constraints https://www.systemoperator.co.nz/sites/default/files/bulk-upload/documents/NMIR%20Design%20Features.pdf

5. Design 2 – Shared NFRs 1.SharedNFR = 1% x non-risk island load (excluding inertia-less load) 2.SharedNFRs use some of the Sharing Limit (HVDC Control Band – MR) DCN NI Binding 6s AC Risk = (Total Forward Sharing Quantity) received + NI FIR Scheduled SI Binding 6s AC Risk = SI FIR Scheduled ≤Forward Sharing limit (Full or Part of SI FIR Scheduled + SISharedNFR) sent (Full or Part of NI FIR Scheduled + NISharedNFR) sent ≤Reverse Sharing limit NI SI + (Total Reverse Sharing Quantity) received 5

6. Design 3 – Reserve Sharing Limit 1.Sharing Procured Limit = Sharing Limit – SharedNFR 2.FIR: SharedNFR/Sharing Procured Limit 3.SIR: Procured Limit = Sharing Limit MR=30 SharedNFR FIR Sharing Procured Limit MR=30 SIR Sharing Procured Limit HVDC Control Band = 250MW (sent) 6

7. FIR Sharing Procured Limit (DCN) 7

8. FIR Sharing Procured Limit (DCS) 8

9. Design 3 - Losses/Effectiveness Factor https://www.systemoperator.co.nz/sites/default/files/bulk-upload/documents/NMIR%20Design%20Features.pdf Losses/Effectiveness Factor affect both Scheduled Reserve Quantity and Island Reserve Price 9 F-Received = Effectiveness Factor x (F-Sent – Losses) R-Received = Effectiveness Factor x (R-Sent + Losses)

10. Summary of Design SharedNFRs use some of the Reserve Sharing Limit and only apply to FIR Reserve Sharing Procured Limit = HVDC Control Band – MR – SharedNFR and only apply to FIR Losses/Effectiveness Factor affect both Scheduled Reserve Quantity and Island Reserve Price 10

11. 11 NI DCCE 6s 0MW NI DCECE 6s 155MW SI 6s ACCE Risk 110MW NI 6s ACCE Risk 270MW SI FIR Scheduled110MW SI FIR PriceSI $TR4 NI FIR Scheduled270MW NI FIR PriceNI $TR5 Scenario 1 - Island Based Medium DCN NI Price $NI Offered MWNI Cleared MW TR1130 TR290 TR300 TR400 TR522550 Total445270 SI Price $SI Offered MWSI Cleared MW TR100 TR260 TR310 TR44540 TR5300 Total145110 Medium DCN 530MW (Received)

12. NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/AUnconstrained Constrained by HVDC max - MR Unconstrained Reverse Sharing FIR Procured Limit N/AUnconstrained Constrained by P min + MR 0Unconstrained NI FIR Scheduled 270MW SI FIR Scheduled 110MW Forward Sharing Quantity (Received) None Reverse Sharing Quantity (Received) None NI FIR Price NI $TR5 SI FIR Price SI $TR4 12 Island Based vs NMIR Scenarios 12 HVDC North Transfer decreases (S2 Medium - S5 low) DC is the binding risk in the receiving island (S6/S7)

13. Scenario 2 – NMIR Medium DCN 545 13 208 189 Medium DCN 545MW Sent MW SISharedNFR = 1%(SILD - inertialess load) 12MW Estimated Free Load Response from SI can be shared to cover NI AC type risks NISharedNFR = 1%(NILD - inertialess load) 31MW Estimated Free Load Response from NI can be shared to cover SI AC type risks Loss Ratio 0.05676 when DCN is transferring between 451 and 700MW Effectiveness Factor 0.8

14. 14 NI DCCE 6s0MW NI DCECE 6s155MW SI 6s ACCE Risk110MW NI 6s ACCE Risk270MW NI Price $NI Offered MWNI Cleared MW TR1130 TR290 TR300 TR400 TR52250 Total445220 SI Price $SI Offered MWSI Cleared MW TR100 TR26054 TR3100 TR4450 TR5300 Total14554 NI $TRs = SI $TRs Scenario 2 – NMIR Medium DCN Medium DCN545MWSent MW NI FIR Scheduled 220MW Cleared 155MW in NI due to non-zero DCECE risk Cleared all NI TR2 first due to losses and effectiveness (vs. SI) Enough to cover SI ACCE (reverse sharing) but need more to cover NI ACCE Need to receive 50MW (Risk270 - Scheduled220) from SI NI FIR Price SI $TR2 adjusted by the losses and effectiveness factor SI FIR Scheduled 54MW 50 = (SI Scheduled + SI SharedNFR) adjusted by losses and effectiveness SI FIR Price Marginal - SI @ $TR2

15. 15 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW Unconstrained Constrained by HVDC max - MR Unconstrained Reverse Sharing FIR Procured Limit N/A189MW Constrained by P min + MR 0Unconstrained NI FIR Scheduled 270MW220MW SI FIR Scheduled 110MW54MW Forward Sharing Quantity (Received) None50MW Reverse Sharing Quantity (Received) None56MW NI FIR Price NI $TR5 SI $TR2 adjusted by the losses and effectiveness factor SI FIR Price SI $TR4SI $TR2

16. 16 NI DCECE 6s155MW SI 6s ACCE Risk 110MW NI 6s ACCE Risk 270MW NI Price $NI Offered MWNI Cleared MW TR100 TR290 TR300 TR400 TR522565 Total315155 SI Price $SI Offered MWSI Cleared MW TR1130 TR26010 TR3100 TR4450 TR5300 Total275140 Medium DCN 545MW Sent MW Multiple Binding Risks NI FIR Scheduled 155MW Cleared 155MW in NI due to non- zero DCECE risk NI FIR Price NI $TR5 SI FIR Scheduled 140MW 115 = (SI Scheduled + SI SharedNFR) adjusted by losses and effectiveness SI Scheduled > SI ACCE SI FIR PriceSI $TR2 S2 – Medium DCN (> 1 Binding Risk) NMIR - Reserves are procured from the receiving island only for DCCE/DCECE

17. S3 – NMIR Low DCN FIR Sharing Procured Limit 220-NISharedNFR 220-SISharedNFR DCN 117022.5 121 17 208 25 Low DCN 120MW Received MW 121MW Sent MW Reverse Sharing Procured Limit ≤ Energy Transfer - MR – Pmin – NISharedNFR

18. 18 NI DCCE 6s 0MW NI DCECE 6s 0MW SI 6s ACCE Risk110MW NI 6s ACCE Risk270MW NI Price $NI Offered MWNI Cleared MW TR1130 TR29079 TR300 TR400 TR52250 Total445209 SI Price $SI Offered MWSI Cleared MW TR100 TR260 TR3105 TR4450 TR5300 Total14565 Low DCN 121MW Sent MW S3 – NMIR Low DCN NI FIR Scheduled 209MW Max Reverse Sharing = (NI SharedNFR + Reverse sharing procured Limit) adjusted by losses and effectiveness NI FIR Price NI $TR2 Reverse Sharing FIR procured limit 25MW Reverse limit reduced means buy more in SI to cover SI ACCE SI FIR Scheduled 65MW Required to procure in SI total = SI risk – Max Reverse Sharing More scheduled in SI hence more can be shared to NI (less scheduled in NI) SI FIR Price SI $TR3

19. 19 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW Unconstrained Constrained by HVDC max - MR Unconstrained Reverse Sharing FIR Procured Limit N/A189MW 25 MW0Unconstrained NI FIR Scheduled 270MW220MW 209MW (↓) SI FIR Scheduled 110MW54MW 65MW (↑) Forward Sharing Quantity (Received) None50MW 61MW Reverse Sharing Quantity (Received) None56MW 45MW NI FIR Price NI $TR5 SI $TR2 adjusted by the losses and effectiveness factor NI $TR2 SI FIR Price SI $TR4SI $TR2 SI $TR3

20. S4 – NMIR No Reverse Sharing DCN FIR Sharing Procured Limit 220-NISharedNFR 220-SISharedNFR DCN 11701170-SISharedNFR22.5 51 20 208 0 No Reverse Sharing DCN 50MW Received MW 51MW Sent MW

21. 21 NI DCCE 6s 0MW NI DCECE 6s 0MW SI 6s ACCE Risk110MW NI 6s ACCE Risk270MW NI Price $NI Offered MWNI Cleared MW TR1130 TR29043 TR300 TR400 TR52250 Total445173 SI Price $SI Offered MWSI Cleared MW TR100 TR260 TR310 TR44540 TR5300 Total145110 No Reverse Sharing DCN 51MW Sent MW NI FIR Scheduled 173MW (SI Scheduled + SI SharedNFR)sent can be shared to NI More scheduled in SI hence more can be shared to NI (less scheduled in NI) NI FIR Price NI $TR2 Reverse Sharing FIR procured limit 0MW Reverse limit is ZERO means buy all SI FIR in SI to cover SI ACCE SI FIR Scheduled 110MW SI FIR scheduled = SI RISK SI FIR Price SI $TR4 S4 – NMIR No Reverse Sharing DCN

22. 22 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW Unconstrained Constrained by HVDC max - MR Unconstrained Reverse Sharing FIR Procured Limit N/A189MW 25 MW0MWUnconstrained NI FIR Scheduled 270MW220MW 209MW (↓)173MW (↓) SI FIR Scheduled 110MW54MW 65MW (↑)110MW (↑) Forward Sharing Quantity (Received) None50MW 61MW97MW Reverse Sharing Quantity (Received) None56MW 45MW0MW NI FIR Price NI $TR5 SI $TR2 adjusted by the losses and effectiveness factor NI $TR2 SI FIR Price SI $TR4SI $TR2 SI $TR3SI $TR4

23. S5 – NMIR RP DCN FIR Sharing Procured Limit 220-NISharedNFR 220-SISharedNFR DCN 117022.5 11 23 208 189 RP DCN 10MW Received MW 11MW Sent MW

24. 24 NI DCCE 6s 0MW NI DCECE 6s 0MW SI 6s ACCE Risk110MW NI 6s ACCE Risk270MW NI Price $NI Offered MWNI Cleared MW TR1130 TR290 TR300 TR400 TR52250 Total445220 SI Price $SI Offered MWSI Cleared MW TR100 TR26051 TR3100 TR4450 TR5300 Total14551 NI FIR Scheduled 220MW NI FIR Price SI $TR2 adjusted by the losses and effectiveness factor SI FIR Scheduled 51MWThe difference is caused by the different losses (vs. S2) SI FIR PriceMarginal - SI @ $TR2 S5 – NMIR RP DCN RP DCN11MWSent MW

25. 25 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW Constrained by HVDC max - MR Unconstrained Reverse Sharing FIR Procured Limit N/A189MW 25 MW0MW189MWUnconstrained NI FIR Scheduled 270MW220MW 209MW (↓)173MW (↓)220MW SI FIR Scheduled 110MW54MW 65MW (↑)110MW (↑)51MW (↓) Forward Sharing Quantity (Received) None50MW 61MW97MW50MW Reverse Sharing Quantity (Received) None56MW 45MW0MW59MW NI FIR Price NI $TR5 SI $TR2 adjusted by the losses and effectiveness factor NI $TR2 SI $TR2 adjusted by the losses and effectiveness factor SI FIR Price SI $TR4SI $TR2 SI $TR3SI $TR4 SI $TR2

26. S6 – NMIR High DCN FIR Sharing Procured Limit 220-NISharedNFR 220-SISharedNFR DCN 117022.5 980 26 189 178 High DCN 925MW Received MW 980MW Sent MW Forward Sharing Procured Limit ≤ HVDCmax - Energy Transfer – MR - SISharedNFR

27. 27 NI DCCE 6s 342MW NI DCECE 6s 440MW SI 6s ACCE Risk110MW NI 6s ACCE Risk270MW NI Price $NI Offered MWNI Cleared MW TR1130 TR290 TR300 TR400 TR5225220 Total445440 SI Price $SI Offered MWSI Cleared MW TR100 TR2600 TR3100 TR4450 TR5300 Total1450 SI FIR Scheduled 0MW No FIR required in SI as covered by Reverse sharing SI FIR Price 0 High DCN980MWSent MW S6 – NMIR High DCN NI FIR Scheduled 440MW Cleared 440MW in NI due to DCECE risk NI FIR Price NI $TR5

28. 28 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW 178MW Unconstrained Reverse Sharing FIR Procured Limit N/A189MW 25MW0MW189MW Unconstrained NI FIR Scheduled 270MW220MW 209MW (↓)173MW (↓)220MW440MW SI FIR Scheduled 110MW54MW 65MW (↑)110MW (↑)51MW (↓)0MW Forward Sharing Quantity (Received) None50MW 61MW97MW50MW0MW Reverse Sharing Quantity (Received) None56MW 45MW0MW59MW110MW NI FIR Price NI $TR5 SI $TR2 adjusted by the losses and effectiveness factor NI $TR2 SI $TR2 adjusted by the losses and effectiveness factor NI $TR5 SI FIR Price SI $TR4SI $TR2 SI $TR3SI $TR4 SI $TR20

29. DCS FIR Sharing Procured Limit 820820-NISharedNFR22.5 65+SISharedNFR 220-SISharedNFR 220-NISharedNFR Scenario 7 – High DCS 534 29 208 193 High DCS 520MW Received MW 534MW Sent MW

30. 30 SI DCCE 6s 24MW SI DCECE 6s 140MW SI 6s ACCE Risk110MW NI 6s ACCE Risk265MW NI Price $NI Offered MWNI Cleared MW TR1130 TR29017 TR300 TR400 TR52250 Total445147 SI Price $SI Offered MWSI Cleared MW TR100 TR260 TR310 TR445 TR53025 Total145140 SI FIR scheduled 140MW Cleared 140MW in SI due to DCECE risk SI FIR Price SI $TR5 High DCS534MWSent MW Scenario 7 – High DCS NI FIR scheduled 147MW NI scheduled = NI Risk – Reverse Shared NI FIR Price NI $TR2

31. 31 Summary of scenarios comparison NMIR Parameters Island Based NMIR S1 - Medium DCN (545MW) S2 - Medium DCN (545MW) S3 - Low DCN (121MW) S4 - No Reverse Sharing DCN (51MW) S5 - RP DCN (11MW) S6 - High DCN (980MW) S7 - High DCS (543MW) Forward Sharing FIR Procured Limit N/A208MW 178MW 208MW Reverse Sharing FIR Procured Limit N/A189MW 25MW0MW189MW NI FIR Scheduled270MW220MW 209MW (↓) 173MW (↓) 220MW440MW147MW SI FIR Scheduled110MW54MW 65MW (↑) 110MW (↑) 51MW (↓)0MW140MW Forward Sharing Quantity (Received) None50MW 61MW97MW50MW0MW Reverse Sharing Quantity (Received) None56MW 45MW0MW59MW110MW118MW NI FIR PriceNI $TR5 SI $TR2 adjusted by the losses and effectiveness factor NI $TR2 SI $TR2 adjusted by the losses and effectiveness factor NI $TR5 NI $TR2 SI FIR PriceSI $TR4SI $TR2 SI $TR3SI $TR4 SI $TR20 SI $TR5

32. SIR Sharing Procured Limit 220 DCS 82065 Scenario 6 – High DCS (SIR) 190 125 534 MR=30 Forward/Reverse Sharing SIR Procured Limit = 220 32

33. 33 SI DCCE 60s35MW SI DCECE 60s165MW SI 60s ACCE Risk125MW NI 60s ACCE Risk360MW NI Price $NI Offered MWNI Cleared MW TR1145 TR214540 TR300 TR41550 Total445185 SI Price $SI Offered MWSI Cleared MW TR100 TR280 TR350 TR44535 Total175165 SI FIR Scheduled 165MW Cleared 165MW in SI due to DCECE risk SI FIR PriceSI $TR4 High DCS 534MW Sent MW Scenario 7 – High DCS (SIR) NI FIR Scheduled 185MWNI scheduled = NI Risk – Reverse Shared NI FIR PriceNI $TR2

34. The key points 1.Reserves are procured from the receiving island only for DCCE/DCECE 2.Multiple Binding Risks scenario is more likely to happen under national IR market than current 3.Sharing Constraints –FIR Sharing Procured Limit = HVDC Control Band – MR – SharedNFR –SIR Sharing Procured Limit = HVDC Control Band – MR –Forward Sharing is also constrained by HVDC max – MR –Reverse Sharing is also constrained by P min + MR –Forward Sharing ≤ 60 when the Pole with lower rating is in Reduced Voltage –No sharing at low DC transfer when RP Off 4.Losses/Effectiveness Factor affect both Scheduled Reserve Quantity and Island Reserve Price 34