Correlation analysis on wind and hydro resources with electricity demand and prices in New Zealand Kiti Suomalainen a,⇑ , Geoffrey Pritchard c , Basil Sharp b , Ziqi Yuan b , Golbon Zakeri b,c a The Energy Centre, University of Auckland, Owen G Glenn Building, 6th Floor, 12 Grafton Rd, Auckland 1010, New Zealand b The Energy Centre, University of Auckland, 12 Grafton Rd, Auckland 1010, New Zealand c Electric Power Optimization Centre, University of Auckland, 70 Symonds St., Auckland 1010, New Zealand highlights  We study correlation of wind and hydro with electricity demand and prices.  We discuss the trade-offs of developing wind power in different geographic areas.  Increased wind power may balance price spikes in a hydro-based electricity market.  We separate daily deviations from the expected seasonal value.  For some locations deviations significantly correlate with electricity prices. article info Article history: Received 4 March 2014 Received in revised form 21 August 2014 Accepted 4 October 2014 Available online 19 November 2014 Keywords: Correlation analysis Fourier regression Energy systems planning Wind-hydro resource dynamics abstract In this paper we study the spatial and temporal distribution of the wind and hydro resources, together with electricity demand and prices, with the objective to gain insights on the trade-offs of developing wind power in different parts of the country. It is particularly important to understand the impacts of a high penetration level of wind power on an electricity market that is already highly influenced by sea- sonal hydro power availability. The correlation between the seasonal patterns of wind, hydro, demand and prices has received little attention in the literature. In our approach, we separate daily deviations from the expected seasonal value, and show that for some locations it is the anomalies that have a more significant correlation with electricity prices than the seasonal patterns themselves. This indicates that the correlation results for anomalies from different wind sites can give valuable information on wind resource availability in critical periods of the year, such as dry seasons, and thereby enables identifying sites that can most optimally balance price volatility during these periods while potentially also maximis- ing profits to investors. Even though the numerical results pertain to New Zealand, our methodology is applicable to any electricity system that utilises wind and hydro resources such as Chile, Colombia and several North American and Northern European jurisdictions. Ó 2014 Elsevier Ltd. All rights reserved. 1. Introduction The reliability and cost-effectiveness of an electricity system with increased wind power depends critically on the correlation of the wind resource with other renewable energy resources or other wind energy sites [1] and electricity demand [2]. This paper presents a novel approach to analysing these correlation relation- ships, as we separate the seasonal trend from daily deviations from that trend, and analyse the correlation between these anomalies. Studying the correlation between anomalies helps us understand the relation between ‘‘extreme’’ events, for example the potential impact of wind power on volatility of electricity prices in dry years. This new approach in analysing renewable energy resource availability in electricity systems helps bridge the research gap between conventional correlation analysis in this field and wind power feasibility studies. New Zealand’s energy system is largely based on hydro power, but with growing demand, new capacity will likely be met by either wind, geothermal energy or natural gas. With the country’s vast renewable energy resources [3,4], New Zealand has potential to become totally dependent on renewable energy sources in the long term [5] and reduce its carbon emissions to 1990 levels [6,7]. Due to its topography and location, New Zealand is particularly well endowed with wind energy resources [8]. Mason et al. [9] http://dx.doi.org/10.1016/j.apenergy.2014.10.015 0306-2619/Ó 2014 Elsevier Ltd. All rights reserved. ⇑ Corresponding author. Tel.: +64 9 923 1708; fax: +64 9 373 7427. E-mail address: k.suomalainen@auckland.ac.nz (K. Suomalainen). Applied Energy 137 (2015) 445–462 Contents lists available at ScienceDirect Applied Energy journal homepage: www.elsevier.com/locate/apenergy