Market Update April 2022

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased again during April in the South Island but dropped in the North Island. Average spot prices for the month ranged from $222 in the lower South Island ($209 in Mar), to $202 in the upper North Island ($213 in Mar). Graph not available from EMI this month so not updated

The following chart shows average weekly spot prices over the last 2 years. The significant increase in prices, especially in the South Island, in the last couple of months are clearly visible on the far right of the graph.

Electricity Demand

Electricity demand reduced in April – but was still in line with levels seen at the same time in the last 4 years, apart from 2020 when demand was impacted by the first Covid lockdown.

Electricity Generation Mix

Continued attempts to conserve water has accelerated the reduced hydro and increased thermal generation observed last month as shown in the following graph. 

HVDC Transfer

Power transfers on the HVDC link connecting the North and South Islands are important both in showing relative hydro positions and also the reliance on thermal power to meet demand. High northward flow tends to indicate a good SI hydro position, whereas the reverse indicates a heavy reliance on thermal power to make up for hydro shortages.

April saw northward transfer reduced further as SI hydro generators tried to conserve water and a considerable increase in southward transfer compared to March. Higher SI inflows at the end of the month reversed this trend somewhat.

The Electricity Futures Market

The Futures Market provides an indication of where market participants see the spot market moving in the future. They are based on actual trades between participants looking to hedge their positions (as both buyers and sellers) into the future against potential spot market volatility. They are also a useful proxy for the direction of retail contracts. 

The following graph shows Futures pricing for CY 2022, 2023, 2024 and 2025 at Otahuhu (Auckland) from the start of 2020 to the end of March.

Note that $100/MWh equates to 10c/kWh.

The increase in prices observed over the last few months continued through April. CY 2023 prices closed at $192 – a 8.5% increase for the month. CY 2024 also increased throughout the month finishing at $172 – a 10% increase.  CY 2025 ended the month at $147/MWh – a 7.5% increase. 

On the supply side, a number of new solar projects were announced during April which could be up and running very quickly if approved. Transpower recently revealed that there was about 2GW of mature utility-scale solar interest in the connections process, with a total of 13GW of interest expressed in solar generation projects (not all will be built). Known projects are shown below.

Hydro Storage

Inflows remained low in both islands through most of April. NI inflows were about 60% of average for April, while SI inflows were less than 50% of average for most of the month before some higher than average inflows came in at the end of the month. 

As a result of these low inflows, and even with hydro generation being substantially reduced during April, energy storage levels in New Zealand’s main hydro storage lakes dropped through April. Storage ended the month at 2,817 GWh or 62.5% full, down 195 GWh over the month.

Security of supply risks are again raising their head with sustained low inflows and the inability to arrest the rate of decline in water storage as shown in the following graph.

Snow Pack

Note this has not been updated this month as the latest data on Meridian’s website is still 26th March. 

Snow pack is an important way that hydro energy is stored over the winter months and released as hydro inflows in the spring. The following graph shows that snow pack has decreased over the last month as you would expect through summer. Storage is now below the mean level (close to the 25 percentile) we would expect for this time of year in the important Waitaki catchment (which feeds approx. 50% of the SI hydro generating capacity.)

Climate outlook overview (from the MetService 1st April 2022)

Climate Drivers —   La Nina continues to linger in the tropical Pacific, earning some commentary about a “triple dip” La Nina. A return to near-neutral El Nino-Southern Oscillation (ENSO) conditions is still expected for winter, although this is much slower than previously signalled. However, the most important climate drivers in the short term (May) will be the persistence of Highs over Aotearoa New Zealand, and the forecast for a relatively quiet Southern Ocean (think a relative lack of cold fronts across the South Island). This is especially the case through the first half of the month. Sea temperatures around the New Zealand coastline remain well above normal, with temperatures sitting at 2oC above normal for the time of year.

May 2022 Outlook — High pressure continues to dominate the weather maps through the first half of May bringing extended runs of settled weather, and plenty of sunshine, to both islands. This will be briefly punctuated by a weakening Tasman Low and attendant fronts which begin to affect South Island from late this weekend, moving onto North Island early next week. Whilst offering healthy rainfall across South Island, especially west of the Divide, expect rain from this system to become increasingly patchy further north and east.  The next strong high then quickly moves into the Tasman Sea through mid-next week with cooler south-westerly winds spreading across New Zealand and some crisp mornings developing. As we head beyond mid-month, and the end of Autumn, signs that a more unsettled spell may begin to develop with high pressure slowly eroding away to the east. Whilst there remains uncertainty as to just how quickly this will occur, we can expect to see some increased mobility returning to the weather maps with more frequent Southern Ocean fronts washing up across the country. This is much more typical of late Autumn with areas exposed to vigorous westerly flows likely to see the best of the rainfall. With this expect more temperature volatility too as short, sharp cooler snaps become more likely, especially by the end of the month.

The Gas Market

Gas prices continued to climb in April. Average prices were $21.5/GJ – 19% up on March. Prices are now 40% higher than they were at the same time last year.

On the supply side, the following graph shows a significant drop in April. Maui production dropped 10% having averaged 100TJ per day in March reducing to 90TJ in April. 

Pohokura output continued its very gradual decline evident over the last couple of years finishing the month averaging around 83TJ per day – a further 2% drop. McKee / Mangahewa decreased output as well – averaging around 68TJ – a 9% decrease from March. Kupe maintained output averaging around 70TJ/day.

Long term the situation at Pohokura will not improve significantly until the operators complete drilling to improve output, currently due to occur late 2022. Drilling programs are also currently on-going at Maui and Kapuni, however we do not expect the supply/demand balance to improve significantly until late 2022 or early 2023.

Huntly’s gas usage reduced during April presumably due to tight gas supplies pushing them to run more on coal. Gas usage averaged 64TJ/day, down 7% on March. TCC operated for most of the month – using up to 50TJ/day at times during April. No gas was used at TCC from the 23rd for the rest of the month. Methanex Motonui backed off gas usage by 7% to around 153TJ/day on average – while Methanex Waitara operated at around 6TJ/day until the 23rd when it stopped. The following graph shows trends in the major gas users over the last 3 years. 

Global energy prices remained high during April as the ongoing lack of gas storage/supply in Europe has continued to result in elevated wholesale prices for gas and electricity. On top of that the war in Ukraine and the potential for sanctions on critical gas supplies from Russia have added to the uncertainty and therefore further added to energy prices. 

LNG netback prices fell in April to $38.09/GJ – a 15% decrease last month. Prices for the remainder of 2022 are expected to average $33.59/GJ (a 12% decrease on last month) while 2023 netback prices increased 12% to $28.11/GJ – still well above historical levels.

New Zealand does not have an LNG export market so our domestic prices are not directly linked to global prices. However, some of our large gas users deal in international markets which are impacted by global gas prices and they may try to produce more in NZ (increase demand) to take advantage of lower gas prices. For example Methanex announced that they expected to produce 10% more methanol in 2022 in NZ than they did last year driven in part by “robust methanol prices.”

The Coal Market

The global energy crisis has been as much about coal as it has gas. The war in Ukraine has driven energy prices, including coal, up. After starting the month at around $US280/T, prices increased through April to close at $US326/T – up 16%.

These prices are still well above anything seen in the last 10 years as shown in the following graph.

Like gas, the price of coal can flow through and have an impact on the electricity market.  Genesis has been importing significant amounts of coal over the last 2 years for electricity generation at Huntly, though Genesis has pointed out that most of this has been purchased at contract prices significantly below international spot prices. When running, these units often set the marginal price. Even when Huntly is not setting the market price, hydro generators factor in increasing fuel costs in determining the prices they will offer into the market, again flowing through to higher electricity prices.

Carbon Pricing

NZ has had an Emissions Trading Scheme (ETS) in place since 2008. It has been subsequently reviewed by a number of governments and is now an “uncapped” price scheme closely linked to international schemes. However, there are “upper and lower guardrails” set up to prevent wild swings in carbon prices that act as minimum and maximum prices. Currently, these are set at $70 and $20 respectively. Over the last few years, the Carbon Price through the ETS has climbed as shown in the following graph. Prices are now over twice what they were just over a year ago. In April prices eased slightly to just below $76/t – still well above the $70 upper guard rail requiring the Government to release additional units in an attempt to dampen prices.

As the carbon price rises, the cost of coal, gas or other fossil fuels used in process heat applications will naturally also rise. Electricity prices are also affected by a rising carbon price. Electricity prices are set by the marginal producing unit – in NZ this is currently typically coal or gas or hydro generators, with the latter valuing the cost of its water against the former. An increase in carbon price can lead to an increase in electricity prices in the short- to medium-term (as the marginal units set the price). A carbon price of $75/t is estimated to currently add about $37.5/MWh (or ~3.75c/kWh) to electricity prices. In the long term, the impact should reduce as money is invested in more low-cost renewables and there is less reliance on gas and coal-fired generation.

EU Carbon Permits rebounded to 85 Euro/tonne in April – up 8%. They are still almost twice the price they were a year ago, as concerns are raised about the amount of coal that may be burnt in Europe if Russian gas is sanctioned or reduced in any other way.

About this Report

This energy market summary report provides information on wholesale price trends within the NZ Electricity Market.

Please note that all electricity prices are presented as a $ per MWh price and all carbon prices as a $ per unit price.

All spot prices are published by the Electricity Authority. Futures contract prices are sourced from ASX.

Further information can be found at the locations noted below.

  • Weather and Climate data – The MetService publishes a range of weather related information which can be found here:


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