Tag: market Update February 2024

Market Update February 2024

The Wholesale Electricity Market

Spot prices in the wholesale electricity market decreased in February. Average spot prices ranged from $133 in the lower South Island (down from $183 in January), up to $165 in the upper North Island (down from $204).

The following chart shows average weekly spot prices over the last 2 years. After falling at the end of January, prices rose steadily throughout February. The recent see-sawing in prices can be clearly seen to the right of the graph.

Electricity Demand

Electricity demand through February remained at the high end and above recent years as shown below.

Electricity Generation Mix

Throughout February thermal generation has picked up displacing hydro to try to conserve hydro storage.

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.

February saw northward transfer reduce and southward transfer increase to conserve SI hydro storage.

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 2024, 2025, 2026 and 2027 at Otahuhu (Auckland) for the last 2 years.

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

Forward prices were down slightly in February for most future years. CY 2025 was up slightly at $163 (+0.5%). CY 2026 price was down 3% at $147 while CY 2027 closed down slightly at $139/MWh (-0.5%).

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

Hydro Storage

Inflows were above average in the NI at the start of February before dropping away later in the month. Inflows remained below average for the SI for the whole month as shown in the following charts.

Below average February inflows resulted in energy storage levels falling. NZ storage ended the month at 3,454GWh or 78% full, down 280GWh. The following chart shows the latest breakdown of storage across the main hydro catchments.

Security of supply risks increased in February with storage levels decreasing. We are currently slightly below the level we would typically expect to see for this time of year; but remain well above the risk zones. This is shown in the following risk curves.


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 below mean levels seen in the last 30 years for this time of year.

Climate outlook overview (from the MetService)

Climate Drivers — Oceanic sea surface temperatures about the equatorial Pacific Ocean are declining, indicative of a weakening El Nino event. While this El Nino event is expected to ease and become neutral over the coming months, New Zealand should expect an enhanced westerly flow to persist through much of autumn. The Madden-Julian Oscillation (MJO) is expected to make its return to the Southwest Pacific around mid-March, bringing with it an increased potential for warmer (and wetter) subtropical systems across the North Island under an enhanced northeasterly flow. The South Island may see some of this tropical moisture as well, but these will be more of a ‘boom or bust’ scenario.

March 2024 Outlook — A dreary start to autumn as a Southern Ocean cold front sweeps up the country and brings a burst of rain and wind to much of New Zealand as the active westerly weather pattern persists. After this front, some respite is likely as high pressure settles across the country. However, with clearing skies and lighter winds comes falling temperatures, and parts of the lower South Island could see overnight lows approaching freezing by the middle of next week. This pattern shifts around the middle of the month as the MJO once again becomes active in our neck of the woods, which brings an increased potential for a subtropical low or two to approach the country. Peak risk is from mid-month into the third week of March, with the North Island most likely to see warmer temperatures, a potential rainmaker and an uptick in thunderstorm activity, though this is a ‘boom or bust’ situation. The South Island may see some northerly rain as well if a low can drive further south. However, if a subtropical low does not affect New Zealand, then much of the country can expect an overall drier-than-normal month. March ends on a transitional note, as high pressure builds back across the North Island and lower pressure returns once again further south. Although El Nino is on an easing trend, its impacts will likely be felt well into autumn.

The Wholesale Gas Market

Spot gas prices increased again in February averaging $16/GJ – up 5% in the month. Wholesale prices are now about 58% higher than they were at the same time last year.

On the supply side the gradual decline in output across most fields continued through February. Maui started the month producing just under 85TJ per day, reducing to low 80s / high 70s by the end of the month. Pohokura maintained high 70s throughout February while McKee / Mangahewa averaged mid 60TJs across the month. Kupe maintained the increased level noted last month with production averaging mid- 50s.

The following graph shows production levels from major fields over the last 4 years.

On the demand side, Methanex Motonui’s usage declined through February from around 140TJ/day to low 120s by the end of the month. Huntly power station increased, averaging 50TJ/day, while TCC started the month shut down, then started up on the 11th Feb averaging 30TJ per day for the rest of the month.

The following graph shows trends in the major gas users over the last 4 years.

Methanex reported earnings during January when it was noted that their NZ production was forecast to be lower this year, at least partly due to expected gas supply constraints.

Internationally, LNG netback prices ended the month at $12.03/GJ – down a further 14% from last month. Forecast prices for 2024 fell again to $12.77 – down another 8.5% compared to January. Forecast prices for 2025 were also down 7.5% at $13.4/GJ.

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.

LPG is an important fuel for many large energy users, particularly in areas where reticulated natural gas is not available. The contract price of LPG is typically set by international benchmarks such as the Saudi Aramco LPG – normally quoted in US$ per metric tonne.

The following graph shows the Saudi Aramco LPG pricing for the last 3 years as well as forecast pricing for the year ahead.

The other main contributing factor to LPG prices in New Zealand is the exchange rate against the USD. As shown below this has been falling over the last few years adding to domestic LPG 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 February increased, ending the month at US$132/T – a 14% lift on the January close. These prices are finally returning to levels close to what we expect to see as shown in the following graph of prices over the last 10 years.

Like gas, the price of coal can flow through and have an impact on the electricity market. 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. These increased in December 2023 to $173 and $64 respectively. Carbon prices decreased 8% in February to $67.25.

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 further in February to 56 Euro/tonne – down 11%.

About this Report

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

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

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

Further information can be found at the locations noted below.

  • Weather and Climate data – The MetService publishes a range of weather-related information which can be found here: https://www.metservice.com/


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