Market Update June 2022

The Wholesale Electricity Market

Spot prices in the wholesale electricity market dropped considerably in June. Average spot prices for the month ranged from $153 in the lower South Island ($207 in May), to $177 in the upper North Island ($225 in May).

The following chart shows average weekly spot prices over the last 2 years. The significant increase in prices in the last six months are clearly visible on the far right of the graph, with the dip in prices in the middle of June contributing to the lower average prices this month.

Electricity Demand

Electricity demand increased in June as expected as we head through the winter period. It is in line with levels seen at the same time in the last three years.

Electricity Generation Mix

Some improved inflows meant that hydro generation increased in the last month, however the increase in demand meant that thermal generation also increased 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.

June saw continued stronger northward transfer as SI inflows remained closer to average and higher demand required greater levels of north transfer. Southward transfer continued to occur throughout the month but to a lesser extent than a couple of months ago. 

The Electricity Futures Market

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 increased significantly over the last month. Storage is now well above the mean level we would expect for this time of year in the important Waitaki catchment (feeds approx. 50% of the SI hydro generating capacity.)

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

The increase in prices observed over the last few months reversed slightly through June. CY 2023 prices closed at $194 – a 4% decrease for the month. CY 2024 also decreased throughout the month finishing at $176 – a 3% decrease.  CY 2025 ended the month flat at $155/MWh. Prices for all years have increased by almost 50% since the start of the 2022!

With new generation there were a few announcements during the month with some delays in expected completion dates and some minor changes in capacity at Mainpower’s Mt Cass project. Known projects are shown below.

It was also announced by Contact Energy that its Te Rapa gas cogeneration plant (44MW) decommissioning is being brought forward from 2024 to winter 2023, however, more than offsetting that, Contact is delaying its decommissioning of TCC (377MW) from 2023 until late 2024.

Hydro Storage

Inflows recovered through June with slightly above average inflows in the SI and almost 200% of average inflows in the NI.

As a result of these higher-than-average inflows, energy storage levels in New Zealand’s main hydro storage lakes increased through the month. Storage ended the month at 2,818 GWh or 62% full, up 320 GWh over the month. 

Security of supply risks eased during June with the higher inflows and increased storage as shown in the following graph.  

Snow Pack

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 increased significantly over the last month. Storage is now well above the mean level we would expect for this time of year in the important Waitaki catchment (feeds approx. 50% of the SI hydro generating capacity).

Climate outlook overview (from the MetService)

Climate Drivers — The 2021-2022 La Nina has ended, with most indicators showing the tropical Pacific Ocean is now at neutral levels. However, many climate models forecast a return to La Nina conditions in spring; a so-called “triple dip” event. A more important factor for New Zealand through late winter and spring is the likely formation of a negative Indian Ocean Dipole event, which favours a more ‘active’ north Tasman Sea, and in turn more frequent northerly rain events over New Zealand. Sea temperatures around the New Zealand coastline have moderated recently, during the windy and unsettled June. Sea temperatures around our coastline are now sitting at about 1C above normal.

July 2022 Outlook — The first few days of July offer a ‘relatively quiet’ pause in our weather. An active Tasman Sea low then approaches the country from about the 5th, and although there is large uncertainty about timing and details, it is likely to bring a wet and windy regime to most places. There is also a decent potential for further South Island snowfall – keeping ski fields smiling. This recipe of ‘stormy’ Tasman lows and Southern Ocean fronts continues through until about mid-month, keeping rainfall and snowfall totals ticking along for most regions. Once we hit mid-month, expect a major pattern change to colder weather (southerlies and high pressure). The back half of July is predicted to be slightly colder than average, and precipitation should favour eastern areas of both Islands (including risk of further decent snowfalls in the South Island).

The Gas Market

Gas prices continued to climb at the start of June with the monthly average price peaking at close to $25/GJ before dropping, ending the month at $18.5/GJ – 24% down on May. Prices are now 4% lower than they were at the same time last year.

On the supply side, the following graph shows a significant drop again in June. Maui’s planned shutdown ended up being extended twice, not coming back online until the 20th June and then at reduced output of around 60TJ/day – down from over 100TJ/day in March.

Pohokura output continued its very gradual decline evident over the last couple of years finishing the month averaging around 81TJ per day – a further 1% drop. McKee / Mangahewa increased output – averaging around 70TJ – a 9% increase from May. Kupe’s output was steady at around 66TJ/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 further during June. Their usage averaged 55TJ/day, down 7% on May. TCC increased usage to 22.5TJ/day –up 50% on May consumption. Methanex Motonui was most impacted by the Maui shutdown reducing to 60TJ/day while the full shutdown occurred and only increasing to around 90TJ/day when Maui came back.  Methanex Waitara operated at around 6TJ/day at the start of the month but shutdown from the 9th June. The following graph shows trends in the major gas users over the last 3 years. 

Global energy prices remained high during June as on-going 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 the Ukraine and the potential for sanctions on critical gas supplies from Russia has added to the uncertainty and therefore further added to energy prices. 

LNG netback prices were mainly flat in June ending the month at $27.91/GJ. However expected prices for the rest of 2022 and 2023 have increased sharply. 2022 netback prices are now expected to average $40.90/GJ (a 17% increase on last month) while 2023 netback prices also increased 26% to $36.80/GJ – 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 the Ukraine has driven energy prices, including coal, up. Prices hovered around the $US400/T all of the month closing at $US385/T – down 4%.

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 guard-rails” set up to prevent wild swings in carbon price 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 June prices dropped slightly to $75/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 increased slightly to 85 Euro/tonne in June – up 1%. 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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