The Wholesale Electricity Market
Spot prices in the wholesale electricity market increased in August. Average spot prices for the month ranged from $61.1 in the lower South Island (up from $43.5 in July), up to $89.3 in the upper North Island ($64.5 in July).
The following chart shows average weekly spot prices over the last 2 years. Recent low prices over the last few months can be seen along with a brief blip of high upper NI prices in the last month.
Electricity Demand
Demand spiked in August with a number of consecutive days early in the month setting new record highs. For the whole month demand was higher than levels seen in the last few years.
Electricity Generation Mix
Hydro generation increased during the month with increased demand and good hydro storage levels. This along with good levels of wind generation meant that thermal generation remained low even during record demand periods.
HVDC Transfer
Power transfers on the HVDC link connecting the North and South Islands are important both in showing relative hydro positions and 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.
Northward transfer stayed high throughout August to meet strong NI demand. There was minimal southward transfer all month.
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 2025, 2026, 2027, 2028 and 2029 at Otahuhu (Auckland) for the last 5 years.
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 2025, 2026, 2027, 2028 and 2029 at Otahuhu (Auckland) for the last 5 years.
Hydro Storage
SI inflows were well above average throughout August, particularly in the last few days of the month, while NI inflows were well below average all month as shown below.
High hydro generation resulted in storage decreasing through most of August, however the very high SI inflows in the last few days of the month reversed the trend. Energy storage levels decreased 260GWh through the month to end at 3,467GWh (79% full). Storage remains well above the average level seen at this time of year. The following chart shows the latest breakdown of storage across the main hydro catchments.
Security of supply risks remained low in August with storage levels well above the average levels as shown below.
Snowpack
Snowpack 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 the snowpack in the important Waitaki catchment increased during August and is close to the 75th percentile level seen in the last 30 years for this time of year.
Climate outlook overview September - November 2025 (from NIWA)
- El Niño conditions persist in the tropical Pacific atmosphere and ocean, strengthening considerably since mid-winter. Impacts on New Zealand’s weather patterns have recently started to be felt and should persist through the outlook period.
- Air flow patterns are expected to favour a prevailing westerly direction, characteristic of El Niño conditions, with a tendency towards southwesterly flows from October.
- Seasonal air temperatures for September – November 2026 are most likely to be near average for the west of the South Island. They are about equally likely to be near average or above average for the west of the North Island and the north and east of the South Island. Above average temperatures are most likely for the east and north of the North Island. Despite the lack of cold signals for the season, occasional cold outbreaks are expected to occur throughout spring.
- Rainfall totals for September – November 2026 are about equally likely to be near normal or below normal for the north and east of the South Island, and the west of the North Island. Rainfall is most likely to be below normal for the north and east of the North Island. Meanwhile, rainfall is very likely to be above normal for the west of the South Island.
- Heavy rain events associated with low pressure systems from the north are expected to be relatively less frequent during the outlook period, and potentially beyond. Instead, the highest risk of notable weather systems will originate from the Tasman Sea or Southern Ocean, with heavy rain events more likely for the south and west of the country.
- Below normal rainfall for various regions through winter has led to reduced groundwater recharge. During spring, many of these regions are likely to experience reduced rainfall, more frequent dry spells, and enhanced drying of soils and vegetation, creating challenges for water-reliant sectors.
- During September – November 2026, soil moisture levels and river flows are expected to be near normal or below normal for the east and north of both islands, the west of the North Island, and the north of the South Island. In the west of the South Island, they are expected to be near normal or above normal.
- Warmer-than-average subsurface ocean temperature anomalies have continued to strengthen and expand across the tropical Pacific, providing clear support for El Niño to intensify further and reach the very strong category early in September.
- Peak El Niño conditions are most likely to occur either in late spring or early summer, with the potential for this event to have significant impacts. It is likely to peak as one of the strongest in recent history, as anticipated over the last few months. The event is already comparable to 1997 and has shown the strongest warming trend on record.
- El Niño is expected to influence spring weather patterns, favouring periods of active westerlies, unusually windy conditions, and greater temperature variability. While these are typical spring features, they are expected to be more pronounced in 2026. The extent and persistence of these conditions will depend on nearby high pressure systems, with the greatest risk of nationwide unsettled weather currently expected during mid-to-late spring.
- Other climate drivers and intraseasonal oscillations, for example, the Indian Ocean Dipole, the Southern Annular Mode and the Madden Julian Oscillation will still contribute to New Zealand’s weather patterns, although El Niño is expected to be most dominant. In general, these other drivers are moving into phases which support El Niño-like impacts.
- Sudden Stratospheric Warmings (SSW) are historically rare in the Southern Hemisphere, but in recent years have become more common. Predictability is limited, but there is justification for enhanced monitoring until the risk reduces in October. If an SSW does occur, its impacts on New Zealand’s weather patterns can be delayed by a month or more. The SSW in 2025 occurred at intervals through September, and had impacts through December.
- Out-of-season Southwest Pacific tropical cyclones (July–October) are extremely rare. When they do occur, it is almost always under El Niño conditions. This remote risk does not currently factor into New Zealand's current Seasonal Climate Outlook, although active monitoring remains in place. The tropical cyclone season formally begins during the outlook period (1 November).
The Wholesale Gas Market
Spot gas prices increased through August. Prices for the month averaged $17.5/GJ – a 5% increase compared to July. Average prices are 11% below what they were at the same time last year. Note that spot gas prices include the cost of carbon (currently around $2/GJ)
On the supply side all fields largely maintained output through August. McKee / Mangahewa maintained the higher level of production seen last month, averaging just over 60TJ per day. Turangi and Kowhai maintained around 49TJ/day. Pohokura also held production levels at 21TJ/day as did Maui, averaging 34TJ/day. Kupe reduced output slightly at 31TJ/day.
The following graph shows production levels from major fields over the last 7 years.
On the demand side Huntly decreased gas usage slightly through the month averaging 18.5TJ/day. Methanex increased usage to close to 70TJ/day through August. Balance used close to 20TJ/day throughout the month.
At the start of September Methanex announced that it would be mothballing its NZ operation from the end of this year due to insufficient domestic gas supplies. It has sold its remaining contracted gas to Genesis out to 2030. While not unexpected, this is still a major blow to the local gas industry. It signals a collapse in long-term commercial confidence and a loss of structural market balance. While it temporarily frees up gas contracts for electricity generation, in the long term it is a negative because New Zealand is losing its most critical industrial gas anchor.
The closure damages the New Zealand gas industry for several key reasons:
- Loss of Long-Term Exploration Incentives - Methanex was the country's single largest gas user, accounting for a massive share of domestic demand. Stripping this demand away removes the financial guarantee upstream suppliers need to invest.
- Destruction of the Market's "Balancing Act" - Historically, Methanex acted as a vital shock absorber for New Zealand's energy grid. When hydro lake levels were low, Methanex would voluntarily scale back its methanol production trains and temporarily redirect their massive, contracted gas allocations to the electricity sector to prevent blackouts. Without them, the market loses this rapid-response flexibility.
- Clear Signal of Upstream Failure - The departure is a loud, global message that New Zealand's domestic gas fields are depleting faster than they can be replenished. This stark reality scares away international infrastructure and energy investors who see the region as unsustainable.
- Severe Co-Product and Regional Harm - The exit deeply harms the wider Taranaki regional economy, which has been built around the petrochemical sector for over 40 years.
- Increased Reliance on Costly Alternatives - Though the gas freed up from Methanex's contracts will help retail and industrial users navigate the immediate shortage through the end of the decade, it doesn't solve the core problem. The government is still pushing ahead with controversial, multi-million-dollar plans to build an LNG (Liquefied Natural Gas) import plant at Port Taranaki as an "insurance policy," indicating that domestic gas production alone is no longer considered self-sufficient.
Gas storage is becoming increasingly important as falling production coincides with more variable demand particularly from gas fired electricity generation. The following chart shows how storage at Ahuroa decreased in August but remains close to the maximum levels seen at this time of year over the last few years.
Internationally, LNG netback prices have increased on the conflict in the middle east. Prices in August increased 26% to $25.74/GJ. Forecast average prices for 2026 are currently $21.2/GJ and $20.52 for 2027. (Note that netback prices are indicative of international prices – they are produced by the ACCC and quoted in Australian dollars. They are net of the estimated costs to convert from pipeline gas in Australia to LNG, hence the term “netback”)
New Zealand does not (yet) have an LNG export/import market, so our domestic prices are not directly linked to global prices, though this may change with the Government announcing that an LNG import terminal will be built in the next few years.
LPG is an important fuel for many large energy users, particularly in areas where reticulated natural gas is not available. The contract price of LPG is typically set by international benchmarks such as the Saudi Aramco LPG – normally quoted in US$ per metric tonne.
The following graph shows the Saudi Aramco LPG pricing for the last 5 years as well as forecast pricing for the year and a half ahead. The war in the middle east caused prices to spike in Apr – Jun but they fell steeply in July before rising again in August. Futures prices increased through August.
The other main contributing factor to LPG prices in New Zealand is the exchange rate against the USD. The exchange rate was around 0.59 at the start of the month, rose to close to 0.6 in the middle of the month before falling back to end the month close to where it started at 0.59. This remains below the average levels seen in recent years. The recent increases would tend to push down LPG prices when quoted in NZD.
The Coal Market
The conflict in the middle east has resulted in coal prices increasing along with other international energy commodities. To date the impact has not been as great as that observed during the initial years of the Ukraine war. Prices in August were flat for most of the month but jumped at the end of the month, ending the month at $142/tonne – up 7% as shown in the following graph of prices over the last 10 years.
Like gas, the price of coal can flow through and have an impact on the electricity market.
Carbon Pricing
NZ has had an Emissions Trading Scheme (ETS) in place since 2008. It has been subsequently reviewed by several 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. These increased in December 2023 to $173 and $64 respectively. Carbon prices decreased in August, down 6% at $51.5.
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 $50/t is estimated to currently add about $25/MWh (or ~2.5c/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 units increased 3% in August to 83.4 Euro/tonne. Australian Carbon Units also rose, up 1% at AUD$38.75
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.
- Transpower publishes a range of detailed information, which can be found here: https://www.transpower.co.nz/power-system-live-data
- The Electricity Authority publishes a range of detailed information, which can be found here: https://www.emi.ea.govt.nz/
- Weather and Climate data – The MetService publishes a range of weather-related information, which can be found here: https://www.metservice.com/
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