Flick blog

What's Up With The Market? 3 July 2018

Hey Flicksters!

Spot prices haven’t been playing ball over the past week, and a number of our Freestyle #CleverFlickers are thirsty for knowledge. Yass!

The energy market is dynamic and complex so we’ve boiled down for you readers some of the things that have impacted on spot prices in recent days…

A big increase in demand in Auckland

Thanks to some super chilly weather across most of the country this week and last (from hail in Auckland to snow flurries down in Christchurch and Dunedin), the demand for power has really kicked up a notch - especially in Auckland. This has meant a bit of real-time effort to bring enough generation on board.

Fact: Demand has been at a higher level than this time last year, and we also hit a new peak demand level for the past 12 months in June!

Higher spot and reserve prices

The increase in demand, of course, pushes up the price of power (as with any market that relies on supply and demand). But spot prices are influenced by the reserves market, too. So, what is the reserves market, and what impact is it having? Reserves are just what they sound like - reserve energy. Reserves need to be purchased to ensure that there’s generation available to be used if there’s a sudden and unforeseen event which causes a major disruption - like the disconnection of a large generator from the grid.

In a situation where there’s a shortage of reserves in the market (like in times of higher demand), the dispatch model potentially reduces some of a generator’s output so it can instead provide reserves. When this happens, more expensive generation has to be dispatched to replace the output reduction at the generator that has been turned down to instead provide reserves.

Fact: We’ve seen exactly this situation over a number of the recent peaks where diesel and coal generating units have been brought on board to supplement the cheaper energy.

Less wind generation

Unfortunately, though temperatures have been icy around the country, they haven’t come with a whole heap of wind. So the drop in wind generation has left a sizeable shortfall in cheap renewable energy, too.

Fact: When we take all of New Zealand’s 18 wind farms into account, there’s a combined capacity of 690 megawatts in wind energy that can be created. On Thursday, June 28 there was no wind generation whatsoever. Yikes!

Plant maintenance

There have also been two peaker plants that have been turned off for maintenance work. They have a combined electricity output of 200 MWh, so that’s a good amount of power that has been missing from the National Grid, even before the cold snap hit.

Fact: Peaker plants are generation plants that can quickly be switched on and off to meet surges in demand. Taranaki’s Stratford Peakers take just 10 minutes to start up. And in good news - one of these very units came back on deck on 30 June, so we should see generation ramping up as a result. That means more supply to help bring down costs of demand!

These factors have combined to create something of a perfect storm (pardon the pun), and a pricey few weeks on the wholesale market.

What does this mean for Winter Savings Guarantee?

Nothing! While no-one likes to see those higher spot prices come through, prices have been looking good overall and we’re 100% committed to our Winter Savings Guarantee.

Storage in the hydro-lakes is sitting at 107% of average for this time of year - so they’re still in good nick!

Want more info?

If you’re interested, follow Transpower’s live data which shows you what forms of generation are being used in relation to their capacity at any given time. It’s interesting stuff!

Also, check out Transpower’s market update for the week ending 24 June.

Our phone lines are always open too! You’re always welcome to give us a call on 0800 4 FLICK, or send us a line at hello@flickelectric.co.nz.

We’ll also do our best to keep you informed as often as possible - so keep your eyes peeled for updates to the blog, and on social media.