The wholesale prices for electricity remain high despite above-average water levels

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Heavy rains across the country have pushed water levels to above average levels after a dry spell, but wholesale electricity prices still remain high.

Meridian Energy’s Lake Benmore Dam.
Photo: muha / 123RF

Prices rose almost sevenfold in April, forcing the temporary closure of some large manufacturing companies that couldn’t afford to keep the lights on.

The price increases were the result of dry weather, water reservoirs that have plummeted to their lowest level since 1996, and natural gas shortages.

But data from energy consultancy EnergyLink shows that water storage has increased nationwide by a third to more than 2500 GWh in the past two months and is now 103 percent of the annual average.

Wholesale electricity prices had fallen by more than half over the same period, from around US $ 305 per megawatt hour (MWh) to 130 MWh, with prices still well above average.

“What we are seeing is a price that is more than double the historical average,” said Luke Blincoe, CEO of Electric Kiwi.

The small electricity trader has secured its electricity contracts with generators in order to provide consumers with electricity at a fixed price.

However, the futures market remained high and limited the company’s ability to buy additional contracts, which had knock-on effects.

In the retail market, there have been reports of some companies refusing to accept new customers because the price of futures contracts was so high that it didn’t make sense to either party.

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Luke Blincoe, CEO of Electric Kiwi, asked why prices were at their current levels given the recovery in water storage.
Photo: RNZ / Nikki Mandow

Electric Kiwi wasn’t quite in the same boat, but it had pulled its prices from comparison websites and cut its advertising, Blincoe said.

“The real impact on the market is that we’re not going to grow and then there is no retail price competition between retailers because wholesale is so high.

“We really need the prices to get to the early $ 100 [range],” he said.

Blincoe questioned why prices were at current levels amid the recovery of water reservoirs, suggesting that the generators were holding back water.

Generators respond

Meridian Energy said it had not withheld any electricity and all of its generation was being offered in the market.

“It is worrying that such allegations are being whirled around so frivolously and with no evidence,” a spokesman said.

“The wholesale prices remain above average due to high gas prices and gas shortages for thermal power generation.”

The spokesman said that in a healthy market, high prices incentivize the new generation, which is exactly what is currently happening across the country.

Mike Fuge, CEO of Contact Energy, said it was “nonsensical” to suggest that storage be withheld.

He repeated many of the points from Meridian, adding that the vast majority of his generation came across the Clutha River.

“This is New Zealand’s largest river system and it is a very volatile drainage basin with limited capacity to hold water,” he said.

Coal use unacceptable

Genesis Energy had imported record amounts of coal into the Huntly station this year to provide emergency power generation in the face of dry weather and gas shortages.

This led to criticism from environmentalists and politicians about the country’s dependence on fossil fuels as an energy source in dry seasons.

“Hydro is at [103] Percent of the average and we are burning fossil fuels, which is simply not acceptable when we have a massive decarbonization challenge and our power producers need to act responsibly, “Blincoe said.

Genesis didn’t want to comment on that.

However, one reason coal was still used could be that water storage on the North Island is 70 percent of its historical average, compared to 106 percent in the South Island.


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