Flick Electric CompanyThe Blog

What's Up With The Market? 5 June 2019

Tēnā koutou, Flicksters, and welcome to winter!

NZ has well and truly felt the change of seasons over the last week (right on cue, Mother Nature!), and, as is normal for this time of year, that’ll likely equate to an increase in demand while we all stockpile the vege soup, turn the lights on at 4 PM, and hunker down by the heat pump.

So how’s the market looking, what’s going on with gas and hydro, and what can we expect electricity prices to do? Let’s have a squizz.

Gas is back

Good news on the gas front - Kupe and the offshore Pohokura field are both back in service, and their production levels are back to normal. This should help minimise those much-discussed gas constraints that we’ve seen for North Island gas generators since September 2018. Whoop whoop!

How’s ya hydro?

Thanks to Mother Nature and her southerly gale, hydro catchments across the country received a good dose of rain over the long weekend. But when it comes to North Island vs South Island, it’s a real game of two halves: South Island inflows were higher than the historical average last week, and storage sits well above average. While Lake Taupō inflows were above average last week, too (increasing by about 8%), storage remains low for this time of year at 53% of average.

Overall, our national storage increased by around 400 GWh over the last week and is now sitting at 129% of average for the time of year. These current levels indicate that the risk of hydro shortage this winter is low - we like the sound of that!

The ol’ HVDC cable

For Freestylers using their Flick app to keep an eye on spot prices, you might have noticed some price separation between the North and South Islands earlier this morning.

Why? Well, due to salt build-ups caused by the recent southerlies, HVDC Poles 2 and 3 (part of the cable that transfers power from Benmore to the Haywards power station in the Hutt Valley) were operating at reduced capacity at times while they were being cleaned. That means they were carrying less electricity to the North Island, and other, more expensive forms of power were being used to fill the gap for a short period. Interesting stuff!

And those spot prices?

Over the last two weeks, spot prices have averaged $83 per MWh - or 8.3 cents per KWh - which is higher than prices this time last year, but much better than where we’ve seen them sitting over the past months.

So, what’s ahead?

There’s more rain in the forecast for this week which could have a nice flow-on effect for our hydro lakes and (fingers crossed) maintain some pressure on spot prices.

It’s also the first time since September 2018 that both our hydro and gas have been in healthy supply at the same time. If we’re lucky, this combination - plus a bit more rain in the South Island lakes - might encourage some downward movement of spot prices. Stay tuned!