Meridian Energy's hydro station at Lake Manapōuri. Photo / Supplied
Meridian Energy's hydro station at Lake Manapōuri. Photo / Supplied
Fears the country may be in for a repeat of last year’s power shortage have been allayed thanks to improved lake levels and precautions taken by power generators.
The average daily wholesale price last week hovered around the $100 per megawatt hour (MWh), having gone over $400MWh earlier in theyear.
Prices, while elevated at times, have not come close to last August’s $820MWh peak, which compared with an average winter price between 2018 and 2023 of $180/MWh.
“Things are looking a lot better now to get us through winter, definitely,“ Greg Sise, managing director at Energy Link, a consultancy, said.
Rain over much of the country, alongside extra gas procured by thermal generators Genesis Energy and Contact Energy, and an enlarged coal stockpile at Genesis’ Huntly Power Station, have added security of supply to the system.
With the pressure off, New Zealand Aluminium Smelters’ plant at Tiwai Pt in Southland plans to ramp up production after agreeing to curtail operations to save power earlier in the year.
The smelter has a demand response agreement with Meridian Energy that enables the power generator to request Tiwai, the country’s biggest power user, to cut production when the system is stretched.
“The lakes are now pretty close to average and the thermal generators, Contact and Genesis, have got some gas from Methanex going into winter, and Contact is busy storing as much gas as they can at Ahuroa [a Taranaki storage facility],” Sise said.
“There’s also plenty of coal in the stockpile and there’s more to come.”
Electricity Authority data shows the stockpile is sitting at just below 500 kilotonnes.
Intraday wholesale prices - volatile at the best of times - have sunk in recent days to close to zero due to the volume of water being dumped into the hydro lakes, Sise says.
“There’s a bit of water going through the system, and when you get the wind farms all doing their thing, prices can jump from $100MWh to basically zero or one cent.”
The difference between this year and last year - when thermal generators struck last-minute deals with methanol exporter Methanex for more gas - was the sector’s state of preparedness, Sise said.
But data out last week showed the gas supply situation remained dire.
As of January 1, 2025, natural gas reserves have reduced by 27% compared to last year, the Ministry of Business, Innovation and Employment said.
However, more renewable power generation is due to come on stream over the next two or three years as power generators continue to invest billions of dollars in wind and solar farms.
“Then it progressively becomes more and more of an issue for industrial gas consumers and Methanex as to how they deal with the gas shortage,” Sise said.
Meanwhile, the elecricity sector is grappling with the cost of building renewable generation, which has shot up over the past five years.
In 2019, projects were being built at the equivalent cost of $60 to $80MWh, compared with $110 to $120MWh today.
“Unless we can get the cost of new generation down, then the fall in electricity prices [once new projects come on stream] will not be as great as it would have been four to have years ago,” he said.
Among the big generators, Contact Energy’s hydro lake levels are sitting above average for this time of year, which the company said augurs well for the winter months.
Lake Hawea storage is sitting at about 180 gigawatt hours (GWh) of storage, compared with 150GWh this time last year.
Contact’s Tauhara geothermal project near Taupō is the sixth for the area. Photo / Supplied
Contact’s gas-powered Taranaki Combined Cycle plant - which was to have been shut down early this year - will be running through this winter on extended operating hours, with additional gas purchased to meet demand.
“This will be the first winter with our 174MW Tauhara geothermal power station operating too.”
Tauhara, near Taupo, officially opened in November last year.
The plant generates enough renewable electricity to power the equivalent of 200,000 homes.
Grid operator Transpower said early this month that national hydro storage was running at 93% of the historical mean, which meant the system could rely less on thermal backup.
“With higher hydro and wind generation last week, thermal units eased off to just 9% of the generation mix, the lowest it has been since the week ending January 19,” Transpower said.
South Island hydro storage remained steady at 91% with minimal inflows, Transpower said.
North Island storage increased from 102% to 124%, with the highest inflows into Taupo since October last year, Transpower said.
Live data on Transpower’s website showed 87% of the system was running on renewable power generation on Saturday.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
