Wholesale electricity prices are incredibly high – an analyst explains how the major power generation companies are handling it. Video / Alyse Wright
Electricity prices are rising and have forced one major employer in Hawke’s Bay to pause its pulp mill production.
Pan Pac, Ravensdown and Napier Port have shared the impact electricity costs are having on their operations.
Pan Pac
Pan Pac timber and pulp mill in Whirinaki, north of Napier, whichemploys more than 400 people, has paused its pulp mill production due to a spike in electricity prices.
The company confirmed it had not shed any jobs as part of its decision to pause its pulp production.
The pulp mill only became operational again in April after suffering significant damage during Cyclone Gabrielle in February 2023.
Pan Pac managing director Tony Clifford told NZME’s BusinessDesk that wholesale electricity prices reached more than $800 a megawatt-hour (MWh) this week.
“Pulp production will have to remain on hold until electricity prices come down,” he said.
“The cost of electricity now far outweighs any profit we can recoup, and it is actually cheaper for us to halt production.
“While it is not unusual for power prices to hike in winter, due to demand and lower hydro lake levels, industry has seen significant ongoing price rises every year since 2018 which has made replacing traditional electricity hedging instruments unaffordable.”
Pan Pac Forest Products' plant near Napier prior to Cyclone Gabrielle last year.
He told BusinessDesk that in the near term, two things could make its electricity bill come back down: heavy rain and a supply deal with Contact Energy coming into effect.
Pulp is a fibrous material used to make paper.
Ravensdown
Ravensdown’s fertiliser plant in Awatoto, south of Napier, is currently in a shutdown period undergoing a major upgrade.
It will roar back to life next month.
Ravensdown works manager Tony Gray said the plant had a turbine that generates electricity, which helped power the plant.
However, that turbine had been out of action since Cyclone Gabrielle.
Gray said rising electricity costs added more urgency to get it operational again by the end of this year.
“We watch the electricity pricing pretty carefully,” he said.
“Since the cyclone, we haven’t had our turbine online for a bunch of reasons, so we have been importing [electricity] which has been a significant add-on to our operational costs.”
He said the company would not shut down any operations as a result of an increased power bill, but it did switch some machines off at appropriate times to help save power.
Napier Port says it is not currently being impacted by rising power prices due to "longer-term" arrangements for electricity.
Napier Port
A Napier Port spokeswoman said the port was not currently affected by the rising prices in the wholesale market “as we have longer-term commercial arrangements”.
The port did not say when its next pricing arrangement would be. That could see its electricity price jump.
Wattie’s, based in Hastings, was also contacted for comment.
Gary Hamilton-Irvine is a Hawke’s Bay-based reporter who covers a range of news topics including business, councils, breaking news and cyclone recovery. He formerly worked at News Corp Australia.
