Drought threat creates demand for alternative energy sources

15 January 2015


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Geothermal generation supplied nearly 20% of New Zealand’s total electricity last week – a substantial rise from the average 7% contribution from this energy source. The spike in demand was due to lower than average output from thermal and hydro generation, caused by power station outages in December and low inflow levels in the country’s hydro lakes.

Thermal-based generation outages kept pricing elevated throughout December and Contact’s Otahuhu B plant in Auckland remains out due to on-going maintenance. National water storage in hydro lakes has continued to fall around 7% below average for this time of year. Latest NIWA forecasts predict less than a 50% chance of rainfall hitting normal levels in the South Island between January and March. This could be compounded by above-normal temperatures in the west of the South Island over the same period with a 35-40% chance of average temperatures in all other Southern regions.
The country’s biggest hydro generator, Meridian, is reported as being “comfortable with the current situation.” Meridian’s operating report for December shows its inflows last month were 81 per cent of average.

Spot Prices 2014
Wholesale electricity prices remained elevated over the Christmas period with pricing increasing in the last week as the prospect of drought in parts of the South Island heightened concerns about the adequacy of national storage heading into autumn.

Pricing since the beginning of October has been well above the previous two years and this set to continue through January 2015.
The past 18-months have seen spot market pricing converging with Fixed Price Variable Volume (FPVV) pricing. As a result Total Utilities has recommended larger customers avoid the higher risk spot market product and accept more secure FPVV rates, without paying the normal cost premium for the added security. Total Utilities is reiterating this advice.