a
Book Now
M
2025 Energy Crystal Ball: What’s in Store?

2025 Energy Crystal Ball: What’s in Store?

by | Jan 7, 2025 | Energy, News

If 2024 taught us anything, it’s that unpredictability is the new norm. From gas shortages and hydro lake levels nearing rock bottom to record highs and lows in pricing, the year had it all.

One thing is clear: the current market structure isn’t serving commercial and industrial customers well. Short-term issues have impacted long-term pricing, forcing customers to pay a premium for future energy, even when conditions might improve.

In a previous article, I delved deeper into how coal sets the overall price in a largely renewable energy grid. You can read more about it here.

Looking Ahead to 2025

As we step into 2025, hydro storage levels are at 85% capacity, which is 22% higher than usual for this time of year. Wholesale electricity spot pricing remains low, with thermal generation contributing only about 3-5% to the grid. Current prices are around 4-5c/kWh, a significant drop from last January’s 25c/kWh. However, with limited natural gas availability and coal firming the market, price volatility is more pronounced, especially during dry periods when wind generation drops.

Average Daily Wholesale Spot Pricing

The ASX Energy Futures Market

Forward market pricing remains stubbornly high on the ASX Energy Futures market, which sets the overall forward price for retail contracts for large commercial and industrial customers. The current quarter (Jan-Mar 2025) is priced around 12c/kWh in the North Island and 7.4c/kWh in the South Island.

The ASX Energy Futures market is dominated by the big four generators: Contact, Genesis, Mercury, and Meridian. These generators offer volume into the market for participants, which can include other generators, retailers, major energy users, or investment houses.

Long-Term Pricing Trends

Over the past year, long-term pricing on the ASX has steadily increased as natural gas supplies dwindle. The market seems to be factoring in more risk as coal becomes the dominant fuel for managing limited hydro storage.

North Island pricing for 2026, 2027, and 2028 has risen by 19%, 26%, and 11% respectively since January last year. Similarly, South Island prices have increased by 28%, 35%, and 14%. Notably, pricing for 2028 only became available on the market from October 1st last year. The forward price curve has also shifted from a staggered reducing price to an almost flat price within any given year.

North Island Pricing ASX Energy Futures

The Future of Firming Fuels

This trend suggests that coal will remain the firming fuel of choice for the foreseeable future, despite calls for liquid natural gas imports as a lower carbon emission option. The industry appears divided on future firming solutions, adding to the uncertainty.

As we navigate through 2025, staying informed and adaptable will be key to managing the ever-changing energy landscape.

Navigating the Future of Renewable Energy and Market Volatility

The announcement of new renewable generation projects is exciting, but it comes with its own set of challenges. Much of the new capacity is in solar and wind, both of which are intermittent and cannot be relied upon for firming. While battery storage is becoming more economically viable, it hasn’t reached the point where it can fully replace traditional firming methods. New hydro or geothermal developments, which could provide the necessary baseload generation to support intermittent sources, are facing lower priority due to high costs and resource consent issues.

What to Expect in the Coming Year

As we look ahead, the energy market is expected to remain volatile. Both Transpower and the Gas Industry Company have warned that natural gas production may fall below demand during the upcoming winter. This shortfall will likely keep energy prices unstable. Additionally, the commissioning of new generation projects is progressing slowly, meaning the reliance on fossil fuels for firming will continue in the short term.

Preparing for Contract Expiry in 2025

If your electricity contract is set to expire in 2025, it’s crucial to start planning early. Seeking market pricing well in advance of your contract’s expiry date allows you to set realistic budgets and mitigate the impact of short-term volatility.

Consider exploring solar options, whether on-site or off-site. Both approaches enable you to purchase solar energy as a commodity, reducing your exposure to price fluctuations in the broader energy market.

How Total Utilities Can Help

Total Utilities is here to assist you in navigating these complexities. We offer advisory services to help you evaluate your options and make informed decisions about your energy contracts and renewable energy investments. For more detailed advice, you can read our article on managing utility contract expirations here.

By staying proactive and informed, you can better manage the uncertainties of the energy market and make strategic decisions for your business’s future.

The Benefits of Solar PPAs – Why You Need One

The Benefits of Solar PPAs – Why You Need One

by | Oct 1, 2024 | Energy, News, solar power, Sustainable Business

Imagine powering your organisation with clean, renewable energy while keeping costs under control. Well, a Solar Power Purchase Agreement (PPA) could help you achieve that.

A Solar PPA is a long-term contract allowing your business to procure electricity directly from a renewable power generator. This can consist of solar energy generated from on-site panels or offsite grid connected solar farms.  This allows solar to be purchased as a commodity at a relatively low generation cost compared to forward energy market prices.

There are many different types of Solar PPAs–which I’ll discuss a little later in this article–so you can choose which type works best for your organisation.

Types of Solar PPAs

There are many different types of Solar PPAs, so you can choose which type works best for your organisation.

On-site PPAs

Commercial Solar PPA: This contract typically lasts 15 to 20 years and requires no upfront investment from you. The solar company takes care of everything—from designing and financing to building, operating, and maintaining the solar system at your site. You simply pay a fixed rate per kWh for the electricity generated, which is usually lower than the rates from the grid. This arrangement helps you reduce your reliance on carbon-intensive energy sources, maximise energy savings, and gain better control over your costs.

Private Wire PPA: Similar to the Commercial Solar PPA, this type utilises ground-mounted solar panels installed on nearby land. Electricity is transmitted directly to your site through a “private wire.” Like the Commercial PPA, it typically lasts 15 to 20 years and allows you to decrease your reliance on grid power while cutting costs and carbon emissions.

Off-site PPAs

Offsite PPAs are sourced from grid-scale generation assets, commonly categorised as “sleeved” or “virtual” PPAs. They offer several advantages over onsite PPAs:

  • The solar system can be built in optimal locations, ensuring higher efficiency.
  • Energy purchase amounts aren’t limited by your site’s capacity.
  • Contracts can be flexible, adapting to multiple sites or relocating if necessary.

Sleeved PPAs: Also known as corporate PPAs, these agreements involve you, an energy retailer, and an offsite renewable generation source. Typically, they are take-or-pay contracts, where you commit to purchasing a fixed volume of energy at a predetermined price. The retailer takes delivery of the renewable energy and incorporates it into your supply contract, often allowing up to 70% of your demand to be met by renewable sources. These contracts can range from 10 to 20 years, with shorter terms usually carrying a premium.

Virtual PPAs: Virtual PPAs, or synthetic PPAs, are structured as contracts-for-difference. They include a strike price for the generated electricity; if market prices fall below this price, you pay the generator the difference, and vice versa. This structure offers flexibility in the amount and location of energy supplied and can support multi-site models.

The New Zealand Energy Market

In New Zealand, the energy market is largely shaped by a handful of key players, with Contact, Genesis, Mercury, and Meridian accounting for around 90% of the electricity supply. This has historically limited options for large businesses seeking to secure energy directly from generators, as most businesses are seen as too small for generators to take notice. As a result, they have to deal with retailers where the cost of generation is defined by the market.

However, a wave of independent renewable energy companies is shaking things up. Collaborations like the recent partnerships between Ryman Healthcare, Mercury, and Solar Bay, or The Warehouse Group and Lodestone Energy, or Inghams and Lodestone Energy, are paving the way for organisations like yours to lock in long-term contracts at competitive rates.

How Total Utilities Can Help

Total Utilities offers PPA consultation services as part of our broader energy procurement solutions. As an independent advisor, we assess a wide range of options without bias, ensuring that we recommend the most suitable PPA strategy for your organisation.

To learn more about investing in an onsite or offsite Solar PPA, speak to our experts today.