Energy and Resources Minister Megan Woods said this morning's power shortage arose when a Contact Energy gas peaker at Taranaki failed to start.

Addressing Parliament's economic development, science and innovation committee, Woods said 105 megawatts of electricity wasn't added to the network as a result.

The issue was compounded by a unit at Huntly dropping its offer to add electricity to the network due to a technical issue.

Woods said electricity distributors responded using "ripple control" - cutting power to hot water cylinders for a short time to remove demand from the system.

She said this was deployed "a whole lot more" than in August last year.

Woods was assured there was 440 megawatts of residual electricity in the system for tonight – an amount she characterised as a "good buffer".

She said the situation showed coal and gas aren't as "fail-safe" as some people assume.

"What this actually shows me is that there are fragilities in the system, and most of those fragilities have actually been because of the failure of our fossil assets to spring into action to provide that stability to the grid that we need," she said.

Woods said the Government is putting $100 million towards investigating storing renewable energy in a battery form.

Transpower this morning issued a nationwide warning notice - revealing there was a risk of insufficient power generation and reserve to meet the country's demand - as Kiwis woke to a bitterly cold day.

The state-owned enterprise issued the warning as the first big winter chill hit this week, with Kiwis most likely pumping their heaters.

"This is a New Zealand-wide emergency," says the notice, which was issued at 7.58am today.

"The System Operator advises there is a risk of insufficient generation and
reserve offers to meet demand and provide N-1 security for a contingent event."

A spokesperson for Transpower said that generation issues this morning meant it had to act quickly to restore residual generation.

According to the Electricity Authority, N-1 means that the system is planned such that, with all transmission facilities in service, the system is in a secure state, and for any one credible contingency event, the system moves to a satisfactory state.

The notice stated that if participants insufficiently respond to the emergency warning then the system operator will have to manage demand to alleviate the Grid Emergency.

"The system operator may instruct the grid owner to disconnect feeders without further notice to connected parties."

Participants were requested to increase energy offers, to increase instantaneous reserve offers and to decrease demand by using controllable load, that is not offered as instantaneous reserve, and increasing distributed generation.

Spot electricity prices were at about $200 per megawatt hour - roughly the same as yesterday.

In April, the Electricity Authority completed its final review of the August 9, 2021 power cuts which left 34,000 customers without electricity on one of the coldest nights of the year.

The review confirmed earlier findings, and a ministerial investigation, that Transpower's coordination and communication failures meant consumers were disconnected unnecessarily on August 9.

Jarden director of equity research, Grant Swanepoel, said today's problem arose from various pieces of kit not being available to the system.

"They [Transpower] obviously don't want the same thing happening as it did last time.

"We do have a fairly tight market going into this winter with hydro levels being still lowish, so we need a bit more water.

"It's a pretty tight market but wholesale prices are not reacting."