The Wholesale Electricity Market
Spot prices in the wholesale electricity market decreased again during January remaining at levels not normally seen. Average spot prices for the month ranged from $2 in the lower South Island (down from $5 in December), up to $4 in the upper North Island ($17 in December).
The following chart shows average weekly spot prices over the last 2 years. The extreme low prices in the last 2 months can be clearly seen.
Electricity Demand
As expected, demand picked up after the summer shut-down period. However, demand in the later part of January was below the level expected for this time of year.
Electricity Generation Mix
Reduced demand allowed hydro to reduce while maintaining the minimum level of thermal that has been seen now for several months.
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 in January remained strong, though reduced NI demand and strong alternative NI generation allowed it to sit much lower than maximum levels. Again, southward transfer was nearly non-existent.
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.
Note that $200/MWh equates to 20c/kWh.
Forward prices were down for all years through January. CAL 2026 decreased ending the month at $145/MWh – down 26%. CY 2027 price was down 6% at $172 while CY 2028 was down 5% at $167. CY2029 was down 2% at $162.
Known new generation projects are shown below (additions / removals / changes highlighted in bold).
Hydro Storage
Inflows remained above average in both islands again last month, though not to the same levels we have seen recently, as shown below.
The continued high inflows, combined with significant spill from key catchments, and maintained high hydro generation, resulted in storage falling through January. Energy storage levels decreased 203GWh through the month to end at 4,209GWh (95% full). Storage is 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 January with storage levels close to maximum 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 decreased during January but remains 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)
- Weak La Niña conditions persist in the tropical Pacific but are on a weakening trend.
- The traditional Southern Oscillation Index (SOI) was on the La Niña side of neutral in January 2026.
- The Equatorial SOI (measuring the difference in atmospheric pressure between the eastern Pacific and Indonesia between 5oN and 5oS) was in the neutral range in January 2026 and convection and trade wind anomalies continued to reflect weak La Niña conditions.
- The Relative Oceanic Niño Index (RONI) continued to weaken in January 2026.
- This weakening of La Niña conditions is expected to accelerate in the coming months, with about an 80% chance for ENSO-neutral (El Niño – Southern Oscillation) conditions to return by the end of the forecast period.
For the next three month period as a whole, the atmospheric circulation pattern over New Zealand is expected to see anomalous high pressure to the south of the country, and anomalous low pressure just to the north, leading to an easterly quarter flow anomaly overall.
- Slow-moving high pressure systems early in February should bring periods of traditional summer conditions to many parts of the country, interrupted by some shorter unsettled spells.
- From about mid-February, the risk of tropical incursions may increase again. Further settled conditions may occur in the remainder of March, but overall rainfall anomalies could be heavily skewed if a single significant event occurs. A dramatic pattern change is not anticipated in April, with rainfall events most likely to come from the north, contrasting with high pressure systems still bringing periods of settled conditions. · The Tropical Cyclone Outlook for the November 2025 – April 2026 southwest Pacific Tropical
- Cyclone (TC) season indicates a normal or elevated risk for ex-TC interaction for New Zealand. Although the season has been quiet so far, the peak risk for northern New Zealand is typically late summer and early autumn.
- Seasonal air temperatures for February – April 2026 are most likely to be above average for the north of the North Island, near average or above average for the rest of the North Island and the west of the South Island, and near average in the north and east of the South Island.
- February – April rainfall totals are most likely to be above normal for the north and east of the North Island, near normal or above normal for the west of the North Island and the east of the South Island, near normal or below normal for the west of the South Island, and near normal for the north of the South Island. As the season progresses, the risk for weather systems connected to the tropics and subtropics increases and could lead to significant rainfall events, especially for the North Island.
- During February – April 2026, soil moisture levels and river flows are forecast to be near normal or above normal for the north and east of the North Island and the east of the South Island. Near normal soil moisture levels and river flows are forecast for the west of the North Island. For the west of the South Island, river flows are about equally likely to be below normal or near normal, while near normal soil moisture levels are forecast. Near normal river flows are forecast for the north of the South Island, while near normal or above normal soil moisture levels are expected for the same region.
- Sea Surface Temperatures (SSTs) around New Zealand have cooled significantly due to the enhanced wind stress associated with the deep low pressure areas that affected the region in January, and marine heatwave conditions are no longer present in coastal waters. This recent cooling is however likely to be temporary, and the lagged effects of La Niña, which typically favour warmer-than-average ocean temperatures around New Zealand, are expected to re emerge. Forecasts from coupled ocean-atmosphere models for the next three-month period favour warmer than average ocean temperature as a whole for the season. Monitor the SST update for updates.
- Ocean waters around New Zealand warmed significantly during November 2025, particularly around the North Island. Marine heatwave (MHW) conditions - defined as sea surface temperatures (SSTs) exceeding the climatological 90th percentile for at least five consecutive days - returned across most coastal waters, as well as large offshore areas near the North Island and west of the South Island. In some locations, ‘extreme’ MHW conditions are occurring, with SSTs exceeding four times the 90th percentile threshold. Global forecast models indicate that ocean temperatures around New Zealand are likely to remain warmer than average over the summer period, which is expected to have an upward influence on seasonal air temperatures.
The Wholesale Gas Market
Spot gas prices dropped again through January (data up to 18th January). Prices for the month averaged $8.6/GJ – a 14% decrease compared to December. Average prices are similar to 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 most fields maintained or reduced output slightly through January. Turangi and Kowhai bucked the trend increasing output from about 45TJ/day up to over 50TJ/day. McKee / Mangahewa fell from about 80TJ/day in December to about 73 in January. Pohokura maintained output at 30TJ/day as did Maui at about 38TJ/day.
The following graph shows production levels from major fields over the last 7 years.
Decreased demand for thermal generation allowed Huntly to use less gas – averaging 0 at the start of the month, picking up to 14TJ/day gas usage later in January. Methanex maintained the higher usage from last month – averaging 81TJ/day through January.
The following graph shows trends in the major gas users over the last 7 years.
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 maintained the same high level seen in December. It is above the maximum levels seen at this time of year over the last few years.
Internationally, LNG netback prices ended the month at $12/GJ – down 11% from last month. Forecast prices for 2026 were $13.68/GJ and $12.3/GJ for 2027. (Note that netback prices are indicative of international prices – they are produced by the ACCC and quoted in Australian dollars. They are net of the estimated costs to convert from pipeline gas in Australia to LNG, hence the term “netback”)
New Zealand does not (yet) have an LNG export/import market, so our domestic prices are not directly linked to global prices.
LPG is an important fuel for many large energy users, particularly in areas where reticulated natural gas is not available. The contract price of LPG is typically set by international benchmarks such as the Saudi Aramco LPG – normally quoted in US$ 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 ahead. Futures pricing were up over the last month.
The other main contributing factor to LPG prices in New Zealand is the exchange rate against the USD. The exchange rate was close to 0.58 at the start of the month, climbing to 0.6 at the end. This is near the average levels seen in recent years. The increase would tend to push down LPG prices when quoted in NZD.
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 in January increased ending the month at $116/tonne – up 8%. These prices are finally returning to levels close to what we expect to see 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 to $34.
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 decreased in January to 81.5 Euro/tonne. Australian Carbon Units increased to AUD$37.6
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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