Tag: electricity price rise

Market Update August 2023

September 5, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased again through August. Average spot prices ranged from $131 in the lower South Island (up from $108 in July), up to $149 in the upper North Island (up from $120).

The following chart shows average weekly spot prices over the last 2 years. The gradual increase through August can be clearly seen.

Electricity Demand

Electricity demand in August was higher than it has been in recent years as shown in the graph below.

Electricity Generation Mix

Higher demand led to increased hydro generation in August while thermal generation maintained the higher output observed in July.

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.

August saw northward transfer maintained at similar levels to July with a small amount of southward transfer also occurring.

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 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years were up during August but particularly CY 2024 which finished at $168.5 (+10%). CY 2025 was at $164/MWh (+1%) while CY 2026 prices was up 3% at $165.

All the big generators presented their annual reports in August at which they discussed their plans for new generation. A number were already known about while others are yet to have firm commitments. Known new generation projects are shown below (additions / removals highlighted in bold).

Hydro Storage

Inflows were below average in the South Island through August. Transpower has not updated NI inflows since the last market report in July, however we can assume by the rate that Taupo storage has fallen that inflows are well below average for the time of year.

Energy storage levels in New Zealand’s main hydro storage lakes continued the sharp fall that we have observed since the middle of June. Storage in August has dropped quickly, ending the month at 2,468GWh or 55% full, down 727GWh. The following chart shows the latest breakdown of storage across the main hydro catchments.

Security of supply risks increased in August with storage levels falling quickly. We are now below the level we would typically expect to see for this time of year; however, we remain well above the risk zones. This is shown in the following risk curves. Note that the risk curves for next year are much higher than they are this year. There are a number of factors that would have contributed to this change, but one is likely to be the retirement of TCC gas fired generation due early next year, while another could be the unplanned outage at Huntly unit 5, with repairs not expected to be completed until May 2024. Increasing winter demand may also be contributing.

Snow Pack

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 is currently close to mean levels seen in the last 30 years for this time of year. Note this has not been updated since the middle of August.

Climate outlook overview (from the MetService)

Climate Drivers — The United States weather agency NOAA declared the start of El Niño conditions with the potential for a significant event by summer, while their Australian counterpart BoM is likely to confirm onset over the coming weeks. Despite this discrepancy, New Zealand is likely to see continuing El Niño-related impacts over the coming months, which include a more active and volatile westerly flow. This may be bolstered by a Positive Indian Ocean Dipole event, which is now looking likely to develop this spring which would enhance the westerly flow of weather across the country.

September 2023 Outlook — Spring begins with a subtropical low driving southwards across the upper North Island, with heavy easterly rain likely for those regions. Meanwhile, high pressure reigns supreme further south with below average rainfall likely over the South Island. Temperatures should trend well above average in the north, while southern regions see cold and frosty mornings followed by pleasant afternoons under largely blue skies. The second week of September sees high pressure depart eastwards, which allows a build-up of westerly fronts to sweep across the country. These features will generally be quick-moving, with most regions seeing near-average rainfall and temperatures. However, the southern part of the South Island may trend slightly drier (and warmer) as weak ridging attempts to build in-between the fronts. A weak low pressure anomaly returns across the South Island and part of the North Island during the third week of the month, indicating a slightly more active southwesterly weather pattern. An uptick in quick-moving fronts bringing bursts of heavy rain, wind and potentially late-season snow about higher-levels is possible, along with temperatures trending a bit below average with a possible cold snap. This anomaly moves offshore during the final week of the month, with New Zealand likely to see a mix of weak westerly fronts and drier weather. Cool mornings are likely to persist as the month of September comes to an end.

The Gas Market

Gas prices increased 20% in August closing at $10.6/GJ. Prices are still currently about 11% lower than they were at the same time last year.

On the supply side, Maui output was down – averaging just under 100 TJ/day (down 10%). This included a 2-day total shutdown in the middle of the month. Offsetting some of that loss, McKee / Mangahewa was up at around 77TJ/day in August (+7% from July levels).

Pohokura’s output was flat, averaging 80TJ/day while Kupe maintained its July output of around 53TJ/day.
The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage remained lower than usual with the gas swap agreement they have with Genesis (owner of Huntly) over winter reducing the amount of gas it has available to produce methanol. Consumption was steady in August averaging 94TJ/day – slightly more than half of June usage. Huntly power station gas use averaged 72TJ/day, slightly down from 76TJ/day used in July. TCC continued to be used but at slightly reduced levels through August, averaging 34.5TJ/day, down from about 40TJ/day in July.

The following graph shows trends in the major gas users over the last 3 years.

After their recent falls, global energy prices reversed the trend and increased slightly in August. They continue to be at levels above what we would have considered to be high only 2 years ago. Lack of investment in new gas supply internationally over several years had already resulted in price increases before the conflict in Europe accelerated those impacts.

Australian LNG netback prices ended the month at $13.93GJ – down 5% from last month. Forecast 2023 netback prices are $20.17 – up 4% on what the ACCC was forecasting in July. Forecast prices for 2024 are now sitting at $23.67 – up 17% compared to July.

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.

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 August drifted higher, ending the month at US$156/T – a 15% increase on the July close. These prices, though well below the highs of the last 12 months, remain above what we expect to see as shown in the following graph of prices over the last 10 years, though the gap is closing.

Like gas, the price of coal can flow through and have an impact on the electricity market. However, coal stockpiles at Huntly are at the highest they have been for many years helping to assure the market that there is plenty of fuel available in the event of dry conditions in the hydro catchments.

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. Currently these are set at $82 and $33 respectively however they are going to increase in December after the Government recently accepted the Climate Change Commission’s recommendations to tighten the auction scheme. Carbon prices continued to climb through August reaching $70.85 – up a further 24% over the month.

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 Permits decreased in August to 85 Euro/tonne – down 4%.

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/

Disclaimer

This document has been prepared for information and explanatory purposes only and is not intended to be relied upon by any person. This document does not form part of any existing or future contract or agreement between us. We make no representation, assurance, or guarantee as to the accuracy of the information provided. To the maximum extent permitted by law, none of Smart Power Ltd, its related companies, directors, employees or agents accepts any liability for any loss arising from the use of this document or its contents or otherwise arising out or, or in connection with it. You must not provide this document or any information contained in it to any third party without our prior consent.

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update July 2023

August 3, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased significantly in the last 2 months. Average spot prices for July ranged from $108 in the lower South Island (up from $54 in May), up to $120 in the upper North Island (up from $65).

The following chart shows average weekly spot prices over the last 2 years. The big price drop through May can be clearly seen, with prices recovering since then.

Electricity Demand

Electricity demand in June and July remained in line with recent years – at expected winter levels.

Electricity Generation Mix

Increasing demand in June was initially largely picked up by more hydro generation as inflows and storage remained high, however later in the month and through July hydro started to reduce, with thermal generation picking up to meet demand.

HVDC Transfer

June saw increasing northward transfer at the start of the month, however this dropped away steeply at the end of June and into July, with a small amount of southward transfer also occurring in July. This reflects reduced SI inflows and lower storage resulting in less SI hydro generation.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years were flat during June / July. CY 2024 finished at $153 (+0.5%). CY 2025 was flat at $162/MWh (0%). CY 2026 prices were also flat at $160.

Known new generation projects are shown below (additions / removals highlighted in bold).

Hydro Storage

Inflows were high in both the North and South Islands at the start of June but fell to close to expected levels in the North Island for the rest of June and through July. The South Island followed a similar pattern but dropped to below average levels later in June and in July.

Energy storage levels in New Zealand’s main hydro storage lakes increased at the start of June, briefly going above the nominal full level across all catchments. From there storage has dropped quickly, ending July at 3,195GWh or 70% full, down 1,297GWh over the 2 months. The following chart shows the latest breakdown of storage across the main hydro catchments.

Security of supply risks increased in June / July with storage levels falling quickly but remaining above what we typically expect to see for this time of year. We remain well above the risk zones. This is shown in the following risk curves.

Snow Pack

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, with some unseasonably warm weather, the snowpack levelled off during June / early July before increasing again in the middle of July. Snowpack in the important Waitaki catchment is currently close to mean levels seen in the last 30 years for this time of year.

Climate outlook overview (from the MetService)

Climate Drivers — The United States weather agency NOAA declared the start of El Niño conditions with the potential for a significant event by summer, while their Australian counterpart BoM is likely to confirm onset over the coming months. Despite this discrepancy, New Zealand is likely to see El Niño-related impacts over the coming months, which include a more active and volatile westerly flow. This may be exacerbated by a developing Positive Indian Ocean Dipole, which also promotes a westerly flavour across the country.

August 2023 Outlook — August starts with a bang (as July did), with yet another cold southwesterly outbreak over the next couple of days. Generally stormy and wintry weather with severe westerly winds are possible for many regions of the country, and snow to low levels for the bottom of the South Island. Cold southwesterlies should slowly ease during the second half of this week as a large high pressure system builds across the country from the west. Chilly mornings are in store for many places, as this high locks in the cold through much of next week too, and settled conditions dominate for an extended period. However, just how strong this high pressure holds will determine how dry it remains around the upper North Island, as some models hint at a wetter interlude around the 10th and 11th of this month due to a north Tasman Sea low. If this low ends up closer to our shores, that could result in a nearer normal rainfall for the upper North Island. This large, slow-moving high could start to move away to the east around mid-month, opening the door to Tasman Sea and Southern Ocean weather makers again. These westerly features should favour the South Island West Coast in terms of active weather, weakening as they move northwards across New Zealand with rainfall returning to near-normal conditions for much of New Zealand for this time of the year. A few cold outbreaks remain possible during the last couple of weeks of August as well, with late season snow a distinct possibility.

The Gas Market

Gas prices decreased 6% in June and were flat through July, the 30-day rolling average price closing at $8.9/GJ. Prices are still currently about 35% lower than they were at the same time last year.

On the supply side, Maui output maintained close to 110TJ/day for most of June and July just dropping off to around 100TJ/day late in July. McKee / Mangahewa averaged around 72TJ/day in July (down 15% from May levels).

Pohokura’s output was flat, averaging 79TJ/day while Kupe bounced back from lower June levels back to around 53TJ/day for most of July.

We are now starting to see the benefits from recent and on-going drilling campaigns. Todd Energy has completed the drilling programme at Mangahewa and has now moved the drilling rig to Kapuni. OMV is also continuing its Maui drilling program, expected to continue until the end of the second quarter of 2023. Beach Energy plans further drilling at Kupe starting in the September quarter of this year.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption was steady in June averaging 174TJ/day, however a planned shutdown reduced consumption to less than 100TJ/day in July. Huntly power station gas use picked up over the 2 months from less than 40TJ/day at the start of June, up to close to 90TJ/day at the end of July. TCC was also used in anger for the first time in almost a year – averaging about 40TJ/day in July.

The following graph shows trends in the major gas users over the last 3 years.

After their recent falls, global energy prices flattened out somewhat in June and July but continue to be at levels above what we would have considered to be high only 2 years ago. Lack of investment in new gas supply internationally over several years had already resulted in price increases before the conflict in Europe accelerated those impacts.

LNG netback prices increased in July for the first time in several months. They ended the month at $14.71GJ – up 22% from last month. Forecast 2023 netback prices are $19.33 – up 3% on what the ACCC was forecasting in May. Forecast prices for 2024 are now sitting at $20.22 – up 19% compared to May.

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 June and July stayed in a narrow band of US$125/T to $140/T. They ended the month at US$135/T – a 4% increase on the May close. These prices, though well below the highs of the last 12 months, remain above what we expect to see as shown in the following graph of prices over the last 10 years, though the gap is closing.

Carbon Pricing

After earlier rejecting them, in late July the Government accepted the Climate Change Commission’s recommendations to tighten the auction scheme. They have reduced the number of units available at auction annually from 23 million this year to 12.3 million in 2028. The guardrails have also been increased from $33 to $60 for the lower level, and the upper guardrail is split into 2 tiers – the first trigger is set at $173 (up from $82) and the new tier 2 level at $216. The new prices come into effect in December this year with the triggers rising each year. Before the announcement carbon prices had dropped to $35/t, immediately after they increased to $65 before falling back to $57/t as shown below.

EU Carbon Permits increased in June to 88 Euro/tonne – up 9% and was flat in July.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update May 2023

June 2, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market again dropped significantly in May compared to April. Average spot prices for the month ranged from $54 in the lower South Island (down from $76), up to $65 in the upper North Island (down from $98).

The following chart shows average weekly spot prices over the last 2 years. The price drop through May can be clearly seen with prices dropping to less than $20 at the end of the month.

Electricity Demand

Electricity demand in May remained in line with recent post-Covid years at the start of May but then increased with some unseasonably cool weather in the middle of the month before returning to normal later in May.

Electricity Generation Mix

Increasing demand in May was largely picked up by more hydro generation as inflows and storage remained high.

HVDC Transfer

May saw high northward transfer being maintained and very little southward transfer throughout the month indicating high SI inflows and healthy storage resulting in strong SI hydro generation.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years reduced during May. CY 2024 finished at $152 (-10%). CY 2025 was also down, ending the month at $162/MWh (-6%). CY 2026 prices also dropped 6% to $160.

Known new generation projects are shown below (additions / removals highlighted in bold).

Hydro Storage

Inflows were high in both the North and South Islands through May continuing the trend of higher-than-expected inflows this year especially in the NI.

Energy storage levels in New Zealand’s main hydro storage lakes increased in May. Storage ended the month at 4,492GWh or 99.5% full, up 799GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments.

Security of supply risks decreased in May with storage levels approaching maximum – well above what we typically expect to see for this time of year. We also remain well above the risk zones. This is shown in the following risk curves.

Snow Pack

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 there were some significant snow falls during May and that snowpack in the important Waitaki catchment is currently well above the maximum levels seen in the last 30 years for this time of year.

Climate outlook overview (from the MetService)

Climate Drivers — An El Niño signal has started to form in the tropical Pacific Ocean, but the atmosphere has yet to catch up. Almost all climate models predict a full-blown El Niño in place by the end of winter, with many models forecasting a potentially significant El Niño.

June 2023 Outlook — Meteorological winter starts on a very unsettled note, with a transition from unsettled westerlies to a deep Low over NZ and cold southeasterly rain (falling as snow at higher elevations). This Low continues to affect NZ next week before yet another Tasman Sea trough or low comes barrelling towards northern parts of the country around mid-month. These systems are expected to be large and slow-moving, impacting many regions around the country as northwesterly rain turns easterly, hence the wet outlook for the east coast. Throughout the month of June, New Zealand will continually look towards the Tasman for rainmakers, and the risk of severe weather continues. Meanwhile, the South Island should see a mixture of quiet spells and intermittent westerlies, particularly during the latter parts of the month. Large temperature swings are expected this June. A cold snap kicks in later this week, and continues through next week. Tasman Sea weather systems are then likely to inject milder air back onto the country, bringing a milder period mid-month. Overall, while June should end up on the warmer side of the ledger, frosts, snowfalls, and cold outbreaks remain part of the equation.

The Gas Market

Gas prices increased slightly in May closing at $9.3/GJ – 4% up compared to April close. Prices are currently about 62% lower than they were at the same time last year.

On the supply side, most fields had slightly declining production through May, largely due to reducing demand for power generation. Maui output declined from around 120TJ/day to 105TJ/day at the end of the month. McKee / Mangahewa averaged around 85TJ/day (down 6%).

Pohokura increased output slightly, averaging 79TJ/day while Kupe was down slightly averaging 47TJ/day in May.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption was steady in May averaging 177.5TJ/day. Huntly power station declined through the month – starting at 72TJ/day and ending the month at less than 40TJ/day.

The following graph shows trends in the major gas users over the last 3 years.

Global energy prices continued the falls we have seen in recent months but continue to be at levels well above what we would have considered to be very high only 18 months ago. Lack of investment in new gas supply internationally over several years had already resulted in price increases before the conflict in Europe accelerated those impacts.

LNG netback prices continued to decline in May, ending the month at $13.77GJ – down a further 12% from last month. Forecast 2023 netback prices are $18.77 – down 11% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $17 – down 22% compared to April.

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 May fell steeply ending the month at close to US$130/T – a greater than 30% drop. These prices, though well below the highs of the last 12 months, remain above what we expect to see as shown in the following graph of prices over the last 10 years, though the gap is closing rapidly.

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. Currently these are set at $78 and $30 respectively. Over the last few years, the Carbon Price through the ETS has climbed, though it has fallen back in recent months as shown in the following graph. In May prices increased slightly to $55/t.

EU Carbon Permits eased slightly again in May to 81 Euro/tonne – down 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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update April 2023

May 4, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market dropped significantly in April compared to March. Average spot prices for the month ranged from $76 in the lower South Island (down from $135), up to $98 in the upper North Island (down from $158).

The following chart shows average weekly spot prices over the last 2 years. The price drop through April can be clearly seen with prices dropping to near $50 before picking up again towards the end of the month.

Electricity Demand

Electricity demand in April remained in line with recent post-Covid years and increasing as the weather becomes cooler. Reduced demand over Easter was apparent at the start of the month.

Electricity Generation Mix

Higher SI inflows at the start of the month meant that hydro generation increased during April while thermal generation was able to back off over the Easter period as shown below.

HVDC Transfer

April saw increased northward transfer and very little southward transfer throughout the month indicating high SI inflows and healthy storage resulting in strong SI hydro generation.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years were flat during March. CY 2024 finished at $168 (no change). CY 2025 was also unchanged, ending the month at $172/MWh. CY 2026 prices dropped 1% to $170.

Known new generation projects are shown below (additions / removals highlighted in bold). Sky Solar went into liquidation in March putting some doubts around the planned solar farm at Ongaonga in the Hawkes Bay.

Hydro Storage

Inflows were high in the SI at the beginning of April before reverting to being below average later in the month. NI inflows were close to average or slightly above average for most of the month.

Energy storage levels in New Zealand’s main hydro storage lakes decreased in April. Storage ended the month at 3,693GWh or 83% full, down 348GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments.

Security of supply risks increased slightly in April with high hydro generation resulting in storage decreasing, however storage levels are still well above what we typically expect to see for this time of year. We also remain well above the risk zones. This is shown in the following risk curves.

Snow Pack

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 how snowpack in the important Waitaki catchment is currently close to mean levels for this time of year, meaning that there is close to the usual amount of water stored as snowpack as we would expect to see in April.

Climate outlook overview (from the MetService)

Climate Drivers — Neutral El Niño Southern Oscillation (ENSO) conditions are expected to continue for May, with most forecast models pointing to El Niño development during winter. Tasman Sea lows continue to be our primary climate driver for the first half of May, with stormy weather across the entire North Island and the north of the South Island this week and next week. The second half of May is predicted to be ‘somewhat quieter’, with some Highs in the mix – noting at this time of year, any dry spells are likely to be brief, with further rainbands in the mix. Sea temperatures around the South Island remain much warmer than usual as we enter May, with somewhat more muted (average to above average) sea temperatures around the North Island.

May 2023 Outlook — An extremely mild May is forecast across New Zealand – expect some locations to break May temperature records. Temperatures run phenomenally warm for the time of year this week, with weekly average temperatures expected to run between 3 and 6 degrees above the May norm. Next week is also forecast to run much warmer than usual, until a cold southerly outbreak kicks in mid-week. For the back half of May, South Island temperatures should remain well above average, while North Island temperatures are predicted to settle back closer to average. Overall, an extremely mild May is expected right across New Zealand. However, this does not rule out some cold events, frosts and even snowfalls. The entire North Island, as well as Westland, Buller, Nelson and Marlborough, and also Banks Peninsula and Christchurch, should expect a wet May, with normal to above normal rainfall totals. Central Otago and Southland are predicted to run a touch drier than usual, while near normal rainfall is forecast for all remaining areas.

The Gas Market

Gas prices decreased significantly throughout April closing at $8.9/GJ – 28% down compared to March close. Prices are currently about 59% lower than they were at the same time last year.

On the supply side Maui continued its strong level of production through April. Average output was 120TJ/day – up 16.5%. McKee / Mangahewa also maintained its increase in production, averaging around 90TJ/day.
Pohokura reduced output slightly, averaging 77TJ/day while Kupe was also down slightly averaging 48TJ/day in April.

We are now starting to see the benefits emerging from the drilling campaigns currently underway. Todd Energy has almost completed the drilling programme at Mangahewa, and once completed they plan to move the drilling rig to Kapuni in May. OMV is also continuing its Maui drilling program, expected to continue into the second quarter of 2023. Beach Energy plans further drilling at Kupe starting in the September quarter of this year.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption was slightly up in April averaging 177.5TJ/day. Huntly power station had slightly reduced gas usage during April – averaging 62TJ/day.

The following graph shows trends in the major gas users over the last 3 years.

Global energy prices continued the falls we have seen in recent months but continue to be at levels well above what we would have considered to be very high only 18 months ago. Lack of investment in new gas supply internationally over several years had already resulted in price increases, before the conflict in Europe accelerated those impacts.

LNG netback prices continued to decline in April, ending the month at $15.65GJ – down 10.5% from last month. Forecast 2023 netback prices are $21.17 – down 7% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $21.9 – up 0.4% compared to March.

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 over the last couple of months have levelled off at around the US$190/T mark. These prices, though well below the highs of the last 12 months, remain above what we expect to see as shown in the following graph of prices over the last 10 years.

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 $78 and $30 respectively. Over the last few years, the Carbon Price through the ETS has climbed, though it has fallen back in recent months as shown in the following graph. In April prices decreased a further $6 to $53.25/t.

EU Carbon Permits eased slightly in April to 86 Euro/tonne – down 5%.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update March 2023

April 12, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market were relatively flat in March compared to February, however they returned to the more typical pattern of lower prices the further South you went. Average spot prices for the month ranged from $135 in the lower South Island to $158 in the upper North Island.

The following chart shows average weekly spot prices over the last 2 years. The recent price separation between the lower SI and the NI can be clearly seen.

Electricity Demand

Electricity demand in March remained low compared to recent years until the end of the month when demand increased markedly coinciding with some cooler weather.

Electricity Generation Mix

Low hydro inflows meant that during March thermal generation remained at the higher levels seen over the last couple of months as shown below.

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.

March saw increased northward transfer and very little southward transfer throughout the month indicating reduced NI hydro inflows and increased SI hydro generation to compensate.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years decreased slightly during March. CY 2024 finished at $168 (-3.5%). CY 2025 decreased, ending the month at $172/MWh – a 1.4% loss. CY 2026 prices also dropped 1.7% to $172.

There were a few new supply announcements this month – mainly solar. Known new generation projects are shown below (additions highlighted in bold).

Hydro Storage

Inflows were above average for the South Island during March and returned to close to average in the North Island after the very high levels we have seen in the last few months.

Energy storage levels in New Zealand’s main hydro storage lakes increased in March. Storage ended the month at 4,041GWh or 91% full, up 451GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments.

Security of supply risks reduced through March with some high inflows resulting in storage increasing to well above what we typically expect to see for this time of year. We are well above the risk zones and not far from spilling in some catchments. This is shown in the following risk curves.

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 how snow pack in the important Waitaki catchment has fallen to below the 25th percentile for this time of year, meaning that there is not the same amount of water stored as snow pack as we would normally have in March.

Climate outlook overview (from the MetService)

Climate Drivers — La Nina has officially ended. Neutral El Niño Southern Oscillation (ENSO) conditions are expected to persist through autumn, allowing our local climate drivers close to New Zealand to exert their influences through the remainder of autumn into early winter. This includes the Southern Annular Mode (SAM), a measure of Southern Ocean storminess, which point towards continued westerlies for the South Island but interspersed with periods of settled conditions under slow-moving high pressure. Climate prediction models are increasingly pointing towards El Nino developing towards the latter half of winter and into spring, which would signal a colder and more unsettled spring as frequent southwesterlies spread across the country.

April 2023 Outlook — April temperatures are expected to yo-yo, likely ending up on the warmer side of the ledger, overall, for the South Island and lower half of the North Island, but near average for Taupo northwards. A front crossed over the country during the weekend of 1,2 April, bringing brief rainfall to western regions and a risk of thunderstorms in the north. Generally settled weather follows as high pressure takes hold over the country, with warm afternoons but cooler mornings, and the possibility for frosts before sunrise. A more potent low with accompanying northerly fronts moves slowly onto the country from the south Tasman Sea during week two, and could bring notable rainfall accumulations to the West Coast of the South Island with diminishing amounts elsewhere. Variability increases from mid-month onwards, as westerly systems become more commonplace again, interspersed with narrow ridges of high pressure. Temperature flips will become more likely as warm northerlies change cooler southwesterlies. The final week of April shows hints of a more southwesterly flavour to the weather maps, which could bring about an increased risk of wintry cold snaps and snow events. Overall, near normal April rainfall totals are forecast for many regions, with the exception of the northeast of both Islands (with normal to above normal totals forecast).

The Gas Market

Gas prices increased throughout March closing at $12.3/GJ – 19% up on February close. Prices are currently about 32% lower than they were at the same time last year.

On the supply side Maui continued its strong level of production through March. Average output was 103TJ/day – down 6%, however the last week of the month it averaged 124TJ/day. McKee / Mangahewa also had a step increase in production, increasing from around 70TJ/day at the start of the month, to well above 90TJ/day in the middle of March.

Pohokura reduced output slightly, averaging 86TJ/day while Kupe maintained the higher levels seen towards the end of January – averaging 54TJ/day in March.

Hopefully we are now starting to see some of the benefits emerging from the drilling campaigns currently underway. Todd Energy has almost completed the drilling programme at Mangahewa, and once completed they plan to move the drilling rig to Kapuni in May. OMV is also continuing its Maui drilling program, expected to continue into the second quarter of 2023. Beach Energy plans further drilling at Kupe starting in the September quarter of this year.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption was slightly down in March averaging just under 170TJ/day. Huntly power station maintained the increased gas usage seen in February, averaging 66TJ/day through March.

The following graph shows trends in the major gas users over the last 3 years.

Global energy prices continued the falls we have seen in recent months, but continue to be at levels well above what we would have considered to be very high only 18 months ago. Lack of investment in new gas supply internationally over a number of years had already resulted in price increases, before the conflict in Europe accelerated those impacts.

LNG netback prices continued to decline in March, ending the month at $17.5GJ – down 20% from last month. Forecast 2023 netback prices are $22.83 – up 3% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $21.82 – up 11% compared to February.

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.

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 flattened out during March ending the month at $US194/T, up 4%.

These prices remain well above 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. However, coal stock piles at Huntly are at the highest they have been for many years helping to assure the market that there is plenty of fuel available in the event of dry conditions in the hydro catchments.

Carbon Pricing

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 eased slightly in March to 90.5 Euro/tonne – down 1%.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update February 2023

March 8, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased markedly again in February. Average spot prices for the month ranged from $142.5 in the central North Island to $153 in the upper South Island. High upper North Island rainfall and very low South Island rainfall broke the typical pattern of lower prices in the lower SI and higher in the Upper NI.

The following chart shows average weekly spot prices over the last 2 years. The rapid increase in prices over the last 2 months can be clearly seen.

Electricity Demand

Electricity demand in February rose early on before falling away towards the end of the month. As noted for the last few months, demand levels have reduced to close to the lowest levels seen in the last few years.

Electricity Generation Mix

Low SI hydro inflows meant that during February thermal generation remained at the higher levels seen towards the end of January as shown below.

HVDC Transfer

Power transfers on the HVDC link connecting the North and South Islands are important in showing relative hydro positions and 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.

February saw substantially reduced northward transfer and increased southward transfer throughout the month.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years decreased slightly during February. CY 2024 finished at $174 (-5%). CY 2025 decreased, ending the month at $174.5/MWh – a 4% loss. CY 2026 prices also dropped 3% to $175.

There were a few new supply announcements this month – mainly solar. Known new-generation projects are shown below (additions highlighted in bold).

Hydro Storage

Inflows remained well above average in the North Island during February particularly in the middle of the month when Cyclone Gabrielle rolled through. The South Island picked up a week of higher inflows before returning to the very low levels seen in recent months

Energy storage levels in New Zealand’s main hydro storage lakes increased in February. Storage ended the month at 3,590GWh or 81% full, up 194GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments.

Security of supply risks has reduced slightly through February with some mixed inflows resulting in storage staying close to what we typically expect to see for this time of year. We are still well above the risk zones, however, if storage returns to dropping at rates seen recently it will not take long to eliminate this buffer. This is shown in the following risk curves.

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 how snow pack in the important Waitaki catchment has fallen to below the 25^th percentile for this time of year, meaning that there is not the same amount of water stored as snow pack as we would normally have in February.

Climate outlook overview (from the MetService)

Climate Drivers — La Niña is almost out the door, with climate models predicting neutral El Niño Southern Oscillation (ENSO) conditions through autumn. This means that local climate drivers close to New Zealand will be in charge of our weather maps in the coming months. The tropics remain active this week, with Tropical Cyclone Judy tracking southeast out of the tropics but staying well clear, to the northeast of New Zealand. Another tropical low also has a high chance of developing into a tropical cyclone from Friday 3 March. This system is expected to then follow a similar path to TC Judy. At the time of writing, neither system is expected to have significant impacts on New Zealand (but keep up to date at www.metservice.com/warnings/tropical-cyclone-activity). Instead, the major player for New Zealand for March will be the Southern Annular Mode (SAM), a measure of Southern Ocean storminess. The SAM is forecast to change to a negative phase for most of March, meaning a major regime shift to unsettled westerlies over the country. Sea surface temperatures remain well above average around the South Island but have yo-yoed in the vicinity of the North Island recently (from above average to below average and back again).

March 2023 Outlook — Southerlies prevail this week, with an unsettled westerly regime predicted for the 2nd and 3rd week of March. By the end of the month, we may see a High across New Zealand (lower confidence). The westerlies result in increased March rainfall across the west and south of the South Island (normal or above normal totals), with near-normal monthly totals predicted for western parts of the North Island. In contrast, below-normal March rainfall totals are forecast for northern and eastern areas of the North Island – welcome news for these saturated regions for the ongoing cleanup. Near normal monthly tallies are forecast for eastern Otago and Canterbury. Above-average March temperatures, overall, are forecast for all South Island regions – noting that this is the time of year when fogs and frosts make themselves felt. In contrast, North Island temperatures are forecast to end up slightly cooler than average (near average to below average).

The Gas Market

Gas prices increased at the start of February, peaking at around $12.8/GJ before falling later in the month, closing at $10.1/GJ – 5% down on January close. Prices are currently about 19% lower than they were at the same time last year.

On the supply side Maui continued its strong level of production through February. Average output was 110TJ/day – up 10%, while it peaked at 130TJ on the 22^nd. Pohokura had a period of reduced production at the start of the month before returning to around 95TJ/day – down 5% from average January levels.

McKee / Mangahewa output increased to around 73TJ/day (up 11 from last month). Kupe maintained the higher levels seen towards the end of January – averaging 53TJ/day in February.

Hopefully, we are now starting to see some of the benefits emerging from the drilling campaigns currently underway. Todd Energy is more than halfway through a drilling programme at Mangahewa, and once completed they plan to move the drilling rig to Kapuni in early 2023. OMV is also continuing its Maui drilling program, expected to continue into the second quarter of 2023.

A big announcement at the end of February was that OMV is looking to divest its NZ assets. OMV currently owns 100% of Maui and 74% of Pohokura – the 2 biggest producing fields making up more than 50% of NZ’s current production. This raises concerns about who will buy them and what level of investment will be put into maintaining output into the future? If a buyer cannot be found how motivated will OMV be to maintain current investment levels?

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption maintained the high levels seen since towards the end of November last year, averaging just under 180TJ/day. Huntly power station maintained the increased gas usage seen at the end of January, averaging 63TJ/day through February.

The following graph shows trends in the major gas users over the last 3 years.

LNG netback prices continued to decline sharply in February, ending the month at $21.75/GJ – down 35% from last month. Forecast 2023 netback prices are $22.18 – down a further 14% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $19.71 – down 13% compared to January.

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. Prices continued recent falls during February ending the month at $US187/T, down over 20% and down more than 50% from what it was at the start of the year.

These prices still remain well above what we expect to see as shown in the following graph of prices over the last 10 years.

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 $30 respectively. Over the last few years, the Carbon Price through the ETS has climbed, though it has fallen back in recent months as shown in the following graph. In February prices decreased $6.75 to $65.75/t – slightly below 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 again in February to 91 Euro/tonne – up 4%.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update January 2023

February 8, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased markedly in January. Average spot prices for the month ranged from $109 in the central North Island to $122 in the upper South Island. High upper North Island rainfall and very low South Island rainfall broke the typical pattern of lower prices in the lower SI and higher in the Upper NI.

The following chart shows average weekly spot prices over the last 2 years. The rapid increase in prices over the last month can be clearly seen.

Electricity Demand

As people returned from summer holidays, electricity demand in January started to increase. As noted last couple of months, demand levels have reduced to close to the lowest levels seen in the last few years.

Electricity Generation Mix

The increase in demand, low SI hydro inflows and poor wind all contributed to increased levels of thermal generation being needed through January as shown below.

HVDC Transfer

January saw substantially reduced northward transfers and even some southward transfers at the end of the month.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years decreased slightly during January. CY 2024 finished at $183 (-5%). CY 2025 decreased, ending the month at $182/MWh – a 2.5% loss. CY 2026 prices also dropped 1.3% to $180.6.

There were no new supply announcements this month, but there were stories of problems with getting new projects up and running, with either budget blow-outs or delays, or both. Known new-generation projects are shown below.

Hydro Storage

Inflows remained well above average in the North Island during January, however South Island inflows plummeted to very low levels – less than 50% of average for this time of the year at the end of the month.

Energy storage levels in New Zealand’s main hydro storage lakes decreased again in January. Storage ended the month at 3,559GWh or 81% full, down 439GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments.

Security of supply risks has increased through January with very low SI inflows resulting in storage falling to close to what we typically expect to see for this time of year. We are still well above the risk zones, however if storage continues to drop at current rates it will not take long to eliminate this buffer. This is shown in the following risk curves.

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 how snow pack in the important Waitaki catchment has fallen to below the 25^th percentile for this time of year, meaning that there is not the same amount of water stored as snow pack as we would normally have in January.

Climate outlook overview (from the MetService)

Climate Drivers — Sea surface temperatures in the central Pacific Ocean continue to gradually warm, and expectations are that the El Niño Southern Oscillation (ENSO) will finally move into neutral territory during February with the current La Niña event drawing to a close. However, the atmosphere typically has a lagged response to the oceans, so we will still see the fingerprints of La Niña on our weather maps into Autumn, with more north-easterly winds than normal the most obvious signature of this. The Southern Annular Mode (SAM) remained strongly positive last month, but signs that we may be headed towards some more variability through February with negative phases signalled. This gives us a good chance of seeing an uptick in rainfall across South Island, much of which has been running dry for several months under persistent belts of high pressure.

February 2023 Outlook — Tropical moisture streams across the country from the north for the start of February, with the South Island getting involved in the heavy rainfall action for the first time in some while. Indeed, the West Coast may well see impacts from heavy and thundery rain through the end of this week, whilst useful rainfall will spread across and east of The Divide at times too for the thirsty soils here. The final front in this barrage crosses North Island on Monday, flushing away the tropical moisture to the east and heralding a much cooler, less humid and drier week for both islands next week. However, this more settled spell won’t last for long, and the back half of February looks rather volatile with systems approaching the country from both the sub-tropics and the Southern Ocean. Expect both islands to pick up rainfall with prolonged settled spells at a premium. The upper and central North Island remain most at risk of seeing further bursts of very heavy rainfall too, recalling we are still well within the tropical cyclone season.

The Gas Market

Gas prices decreased through much of January before rebounding at the end of the month, closing at $10.7/GJ – 1% up on December close. Prices are currently about 7% lower than they were at the same time last year.

On the supply side Pohokura continued at the increased production levels seen over the last few months – consistently producing just under 100TJ per day. Maui production increased significantly – averaging just under $100TJ/day – up from 68TJ/day last month, and peaking at 115TJ/day at the end of the month.

McKee / Mangahewa output reduced to around 62TJ/day (down 8 from last month). Kupe decreased production for the first half of the month to 40- 50TJ per day before increasing to about 56TJ/day at the end of January.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage once again dominated all other gas users. Consumption maintained the high levels seen towards the end of November, averaging 180TJ/day. Huntly power station increased gas usage through the month rising to over 70TJ/day towards the end of the month. Stratford Peaker also started up in the middle of the month, at times using more than 30TJ/day.

The following graph shows trends in the major gas users over the last 3 years.

Global energy prices continued the falls we have seen in recent months, but continue to be at levels well above what we would have considered to be very high only 12 months ago. Lack of investment in new gas supply internationally over a number of years had already resulted in price increases, before the conflict in Europe accelerated those impacts.

LNG netback prices reversed the price increases of last month, decreasing in January, ending the month at $33.42/GJ – down 19% from last. Forecast 2023 netback prices are $25.76 – down 25% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $22.61 – down 27% compared to December.

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. Prices dropped considerably during January ending the month at $US236/T, down over 40%.

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

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 $30 respectively. Over the last few years the Carbon Price through the ETS has climbed as shown in the following graph. In January prices decreased $2.25 to $72.5/t – still 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 again in January to 87.76 Euro/tonne – up 5%.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update December 2022

January 9, 2023 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market decreased again in December. Average spot prices for the month ranged from $12.5 in the lower South Island ($29.5 in November), to $19 in the upper North Island ($47 in November).

The following chart shows average weekly spot prices over the last 2 years. Prices are currently as low as they have been over the last 2 years – particularly in the South Island.

Electricity Demand

As the weather warmed up and businesses closed up for the festive season, electricity demand in December continued to drop. As noted last month demand levels have reduced to close to the lowest levels seen in the last few years.

Electricity Generation Mix

The fall in demand as we headed into December meant there was a reduced requirement for generation overall. Hydro generation remained high and with improved wind there was less requirement for thermal generation.

HVDC Transfer

December saw high northward transfer with no requirement for any southward transfer during the month.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years increased significantly during December. CY 2023 prices closed at $200 – a 20% decrease for the month. CY 2024 finished up at $193 (+9%). CY 2025 increased ending the month at $186.5/MWh – a 6.5% gain. CY 2026 prices also rose 6.5% to $183.

There were some announcements for new solar farms planned to be on-line by 2024. Known new generation projects are shown below – with additions highlighted in bold.

Hydro Storage

Inflows remained above average in the North Island during December. In the South Island inflows were slightly below average for the month

Energy storage levels in New Zealand’s main hydro storage lakes decreased through December. Storage ended the month at 3,998GWh or 91% full, down 274GWh over the month. The following chart shows the breakdown of storage across the main hydro catchments (from when it was last reported in mid-Dec).

Security of supply risks are minimal at the moment with high levels of water storage, reduced demand, and as we move through the period where hydro inflows are typically higher. This is shown in the following risk curves.

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, published by Meridian, has not been updated since what we presented it last month.

Climate outlook overview (from the MetService)

Climate Drivers — La Niña conditions continue in the tropical Pacific and are expected to persist in January with the weather maps true toLa Niña conditions continue in the tropical Pacific and are expected to persist in January with the weather maps true to form; think higher than normal pressure across South Island and more frequent humid, north-easterly winds nationwide. A gradual warming of sea surface temperatures in the central Pacific has occurred over recent weeks though and neutral conditions are forecast by the end of Summer, waving goodbye to La Niña slightly earlier than normal. La Niña normally peaks in late Summer. The Southern Annular Mode (SAM) continues to be overwhelmingly and strongly positive this month, re-enforcing the La Niña signal for higher than normal pressures across southern NZ.

January 2023 Outlook — The tropics have fired up for the start of January and a couple of notable weather systems from the north mean the fine summer weather of late December has abandoned us…for now. Humid northeast winds have brought showers and rain across the country over recent days, with spots in the Coromandel seeing over 200mm of rain in the last couple days and parts of the Peninsula cut off due to road closures. Northland, and parts of northern Tasman have also recorded notable totals. This system clears away on Sunday, but the reprieve will be brief for North Island. Another significant sub-tropical low is likely to cause more disruption across northern and central New Zealand next week with gales and heavy rain threatening similar areas on Tuesday and Wednesday. The wet theme continues for North Island next week then, whilst the lower South Island sees the best chance of more settled and drier weather with a ridge developing tomorrow and clinging on here.

As we head towards mid-month there is promise of more typical settled summer weather. High pressure looks likely to become well established right across the country and the tropics quietens down. Much like late 2022, widespread sunshine and plenty of dry weather is on the cards but beware of afternoon showers popping up on the hills and ranges. High pressure could well hold into the final week of the month, but the expectation is that it will gradually slide to the south-east, so we may open the door to a weather system from the Tasman Sea.

Temperatures continue to run warmer than average overall, with western and inland areas most likely to see bigger departures from normal. Onshore eastern areas, often more exposed to winds, rain and cloud may be cooler at times, especially by day over the first half of the month.

The Gas Market

Gas prices decreased through December ending the month at $10.5/GJ – 17% down on November. Prices are currently about 9% higher than they were at the same time last year.

Note in the following supply and demand information, data was only available until the 20^th December.

On the supply side Pohokura continued at the increased production levels seen over the last few months – consistently producing just under 100TJ per day. Maui production reduced, averaging 68TJ/day, down from 80.

McKee / Mangahewa maintained output, up to close to 70TJ per day for most of the month. Kupe increased production to about 56.5TJ/day up from 40-50TJ/day at the end of November.

Hopefully we are now starting to see some of the benefits emerging from the drilling campaigns currently underway. Todd Energy is more than halfway through a drilling programme at Mangahewa, and once completed they plan to move the drilling rig to Kapuni in early 2023. OMV is also continuing its Maui drilling program, expected to continue into the second quarter of 2023.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage dominated all other gas users. Consumption maintained the high levels seen towards the end of November, averaging 180TJ/day. Huntly power station was the next biggest user averaging only 18.5TJ/day. TCC has not used any gas since the middle of August.

The following graph shows trends in the major gas users over the last 3 years.

LNG netback prices increased in December ending the month at $41.11/GJ – up 22% from last month but not as high as some were expecting as we move through the northern hemisphere winter. Forecast 2023 netback prices are $34.37 – down 20% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $31.09 – down 6% compared to November.

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.

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 were flat during December ending the month unchanged at close to $US400/T.

These prices remain 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.

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 $30 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 December prices decreased $6.25 to $74.75/t – still 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 in December to 83.75 Euro/tonne – up 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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update November 2022

December 5, 2022 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market decreased in November. Average spot prices for the month ranged from $29.5 in the lower South Island ($68 in October), to $47 in the upper North Island ($76 in October).

The following chart shows average weekly spot prices over the last 2 years. Prices are currently as low as they have been over the last 2 years – particularly in the South Island.

Electricity Demand

Electricity demand in November continued to drop but was close to what we would normally expect to see for this time of year. At the end of the month demand dropped to below levels seen over the last few years. We expect demand to continue to decline as we head towards the Xmas break.

Electricity Generation Mix

The fall in demand as we headed into summer meant there was a reduced requirement for generation overall. Hydro generation was lower to start the month resulting in an increase in thermal generation, but higher inflows in the middle of the month meant that thermals could back off as shown in the following graph. Wind generation was low in the middle of November also impacting thermal generation.

HVDC Transfer

November saw increased SI inflows and storage, resulting in increased northward transfer and very little southward transfer during the month.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years continued the decline that began in the middle of October. CY 2023 prices closed at $166 – a 22% decrease for the month. CY 2024 finished down at $177 (-11%). CY 2025 decreased ending the month at $175/MWh – a 4% drop. CY 2026 prices also dropped through the month, closing down 8.5% at $172.

There were some announcements of new or changed supply during the month – including NZ Windfarms looking to repower its Te Rere Hau windfarm increasing capacity from 46MW to 126MW, and Eastland Energy announcing a pipeline of solar and geothermal projects adding around 200MW. However, these projects are not confirmed as yet. Known new-generation projects are shown below.

Hydro Storage

Inflows remained above average in both Islands during November with some very high inflows occurring in the South Island in particular at the start of the month.

These high inflows meant that energy storage levels in New Zealand’s main hydro storage lakes increased through November. Storage ended the month at 3,661GWh or 96% full, up 141GWh over the month.

Security of supply risks are minimal at the moment with high levels of water storage, reduced demand, and as we enter the period where hydro inflows are typically higher. This is shown in the following risk curves.

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 the snow pack reduced sharply during the month. Storage is now below the mean level seen in the last 30 years 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 — La Nina conditions in the tropical Pacific persist and will continue to influence our weather maps, with a tendency for higher than normal pressure across South Island, and warm, humid northeasterlies nationwide. The Southern Annular Mode (SAM) is set to be mainly positive through much of December encouraging higher-than-normal pressure across the South Island. Sea surface temperatures around our coasts have dipped out of marine heatwave conditions but remain well above average and are likely to climb again where high pressure persists.

December 2022 Outlook — High pressure in the Tasman Sea holds a southwest regime across the country in the first week of December. Whilst this is fairly typical for the time of year, the orientation of the high and the prevailing winds make for a cool start to the summer months. Rainfall will be limited to passing showers until around the 8th when low pressure from the Tasman Sea is expected to bring a bout of wind and rain across the country. This system should also introduce a little warmer air too.

High pressure is then set to edge across of the country, promoting settled conditions. As this high edges east, and increasingly northeasterly wind bias is likely to develop with warmer weather and showers moving into eastern regions, especially in the north, and afternoon showers are likely to develop across inland North Island. We may see a brief unsettled interlude at this point before the next high moves in from the west with the same pattern, cool southwesterlies giving way to increasingly warm northwesterlies, mainly settled with a few showers.

As we look towards the new year, high pressure looks likely to remain in place across South Island, with warm, dry, settled conditions prevailing. Further north this is likely to be the case much of the time as well, although showers may punctuate an otherwise settled start to summer.

The Gas Market

Gas prices increased through November ending the month at $12.6/GJ – 10% up on October. Prices are currently about 14% higher than they were at the same time last year.

On the supply side, Pohokura continued at the increased production levels seen over the last few months – consistently producing around 100TJ per day. Maui production was also consistently close to 80TJ/day throughout the month.

McKee / Mangahewa improved output, up to close to 70TJ per day for most of the month – up 10%. Kupe was shut down for most of November, and when it returned late in the month it only produced 40-50TJ/day.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui’s usage dominated all other gas users. Consumption averaged 150TJ/day, however towards the end of the month it was consistently using 185TJ/day. Huntly power station was the next biggest user averaging only 14TJ/day and dropping to even lower levels at the end of November. TCC has not used any gas since the middle of August.

The following graph shows trends in the major gas users over the last 3 years.

LNG netback prices dropped again in November ending the month at $33.74/GJ – down 24% from last month. Forecast 2023 netback prices are $42.97 – down nearly 30% on what the ACCC was forecasting 2 months ago. Prices for 2024 are also now being published, sitting at $31.09 at the moment.

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. Prices increased during November ending the month back up close to $US400/T – up 14%.

These prices remain 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.

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 prices that act as the 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 November prices decreased $4 to $81/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 also reduced in November to 81 Euro/tonne – down 3% as demand for permits fell.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.

Market Update October 2022

November 8, 2022 by magnum

The Wholesale Electricity Market

Spot prices in the wholesale electricity market increased in October. Average spot prices for the month ranged from $68 in the lower South Island ($49 in September), to $76 in the upper North Island ($59 in September).

The following chart shows average weekly spot prices over the last 2 years. The significant drop in prices in the last few months is clearly visible on the far right of the graph, with an increase in the last few weeks also apparent.

Electricity Demand

Electricity demand in October remained close to the top end of what we have seen in recent years. We expect demand to continue to decline as we head towards summer.

Electricity Generation Mix

The fall in demand as we head into summer meant there was a reduced requirement for generation. This coincided with reduced inflows compared to recent months allowing hydro to reduce through the month as shown in the following graph. Thermal generation remained at the low levels seen in recent months.

HVDC Transfer

October saw reduced SI inflows and storage, resulting in reduced northward transfer and a small amount of southward transfer during the month.

The Electricity Futures Market

The following graph shows Futures pricing for CY 2023, 2024, 2025 and 2026 at Otahuhu (Auckland) for the last 2 years.

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

Future prices for all years increased at the start of October and then fell back later in the month. CY 2023 prices closed at $214 – a 1% decrease for the month. CY 2024 finished higher at $199 (+1.5%). CY 2025 also increased ending the month at $182/MWh – an 8% increase. CY 2026 prices were produced for the first time in October. After starting at $154 they increased during the month to close at $188 – a 22% increase.

Known new-generation projects are shown below.

Hydro Storage

Inflows remained above average in the North Island during October, but below average in the South Island.

Despite reasonable inflows, energy storage levels in New Zealand’s main hydro storage lakes decreased through October. Storage ended the month at 3,520 GWh or 80% full, down 273 GWh over the month.

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 stayed largely flat during the month. Storage remains close to the 75^th percentile level seen in the last 30 years 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 — La Nina conditions in the tropical Pacific continue to influence our weather maps, with reduced incidence of usual spring westerlies, and a tendency for higher than normal pressure across South Island. In the short term, the Southern Annular Mode (SAM) has swung strongly negative of late, providing strong westerlies across the country as is classic for the time of year. Indian Ocean Dipole influence is expected to wane over the coming weeks with the more temporally variable Madden Julian Oscillation (MJO), a pulse of enhanced shower activity which migrates around the globe every 60 days or so, coming to the fore. Sea surface temperatures remain well above average around New Zealand and look likely to increase further under high pressure.

November 2022 Outlook — SAM – the Southern Annular Mode has swung strongly negative with a bang, bringing classically spring-like strong westerlies across Aotearoa. As these pile in with torrential rain for the West Coast, eastern regions will also see some spillover rain. The rain comes with humid air and elevated temperatures by both day and night. SAM swings back strongly positive late in the week, with high pressure returning to South Island bringing settled weather and lower temperatures.

Next week an area of low pressure from the northern Tasman Sea looks likely to bring a spell of wet and windy weather to North Island, whilst South Island hangs on to the high pressure which became so familiar in October. Once again the weather maps look heavily La Nina influenced.

The second half of the month likely sees a balancing act play out between the high pressure and settled weather in the south, and the more unsettled, showery conditions further north. Expect warmer-than-average conditions thanks to an increase in northeasterly winds. Those areas exposed to the north will likely pick up sporadic showers, or possibly bouts of rain tied to Tasman lows as the skirt the northern flank of the high. Just how far rain spreads across the country will come down to the relative strength of the highs as lows attempt to move in, and any boost that the MJO deigns to give lows forming to our northwest.

The Gas Market

Gas prices remained flat through October ending the month at $11.5/GJ – 2% down on September. Prices are currently about 4% higher than they were at the same time last year.

On the supply side, Pohokura continued at the increased production levels seen over the last few months but with more consistent daily output. Output averaged 104TJ – a 1% decrease on last month. Maui production, which had been constrained due to an extended outage, increased at the back end of October from around 60TJ/day up to closer to 80TJ/day at the end of the month. This is still well below the 100plus TJ/day achieved earlier this year.

McKee / Mangahewa output experienced some issues during the month with production down to close to 30TJ on some days. Overall it averaged around 63TJ/day – down 10%. Kupe maintained output at around 60TJ/day.

Hopefully, we are now starting to see some of the benefits emerging from the drilling campaigns currently underway. Apart from Pohokura, drilling programs are also currently ongoing at Maui and Mangahewa which will hopefully increase supply further in the coming months.

The following graph shows production levels from major fields over the last 3 years.

On the demand side, Methanex Motonui gradually increased consumption during October from around 155TJ/day at the start, up to 175TJ/day at the end of the month. Huntly’s gas usage decreased further during October. Its usage averaged 40TJ/day, down 26% on September. TCC did not generate at all for the second month in a row. Methanex Waitara was consuming around 6TJ per day at the start of the month but was shut down from the 12^th of October on. The following graph shows trends in the major gas users over the last 3 years.

Global energy prices remained high during September as the ongoing lack of supply in Europe, brought on by the strong post-COVID lockdowns economic recovery, followed by the war in Ukraine, has continued to result in elevated wholesale prices for gas and electricity.

LNG netback prices dropped considerably in October ending the month at $44.32/GJ – down 34% from last month. Expected prices for the rest of 2022 have fallen slightly, the average for the year down now to 41.92/GJ (a 4% decrease on last month). Forecast 2023 netback prices dropped 23% to $46.95/GJ as fears of shortages during this European winter subsided – however, these prices are still well above historical levels as shown below.

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. Prices eased during October falling to close to $US350/T – down 13%. This is the lowest it has been in the past 6 months.

These prices remain 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.

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 the 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 October prices increased $2.5 to $85/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 rising carbon prices. 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 prices 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 in October to 81 Euro/tonne – up 22% as demand for permits increased.

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/

Disclaimer

About Smart Power

Smart Power is a full-service Energy Management consultancy. Apart from Energy Procurement, Smart Power can also provide:

Technical Advice on how to reduce your energy use/emissions
Sustainability Reporting
Invoice Management services.

We also offer boutique energy and water billing service for landlords/property developers.

Contact us at https://smartpower1.wpenginepowered.com/contact/ or ring one of our offices to talk to one of our experienced staff about how we can assist you with achieving your energy goals.