Tēnā koutou, Flicksters! From our bubbles to yours, welcome to the first electricity market update since lockdown began.
There have been lots of changes over the past few weeks thanks to COVID-19 and NZ’s Level 4 lockdown, including decreased demand and lower spot prices on the wholesale market (good news for our Freestylin’ Flicksters out there!). So, let’s take a look at what’s been happening, what’s in the pipeline, and what impact that might have on Kiwi electricity users.
It’s been super interesting to see the change in power use for Kiwi consumers since the beginning of lockdown. Within hours of Jacinda’s announcement that Aotearoa was moving to Level 3 of our COVID-19 alert system, quickly followed by Level 4, our demand for electricity started to drop almost immediately as non-essential businesses began to shut down and we all moved to the safety of our homes.
On the first day of lockdown (Thursday 26 March) demand dropped by 12% across the whole day and 17% over the morning peak, and for the week ended 5 April, weekly demand fell 8% across the country. Check out Transpower’s graph below.
So what’s influencing the drop in demand? The biggest factors appear to be the slowing and shutting down of a number of large industrial manufacturing businesses, like pulp factories, as well as the closure of other business spaces, like clothing shops, restaurants and power companies (hi!) that would otherwise be running air conditioning and other sources of power.
At home, we’ve all contributed to a change in demand, too, by spreading our power use out during the day. The usual morning rush, where we’re all trying to get out the door for school and work (remember that?!), has slowed down, which means that so too has our early-morning demand for electricity.
Looking ahead, and compared with this time last year, it’s thought that overall demand will be around 15% lower on weekdays, and around 10% lower on weekends.
Hydro’s hanging in there
Lake levels are looking OK for this time of year, with the total available storage for New Zealand sitting above average at 97% of total full. In early March, the entire North Island was declared a drought zone, and the low rainfall has meant that Lake Taupō’s inflows and storage are feeling the pinch. This time of year would typically see North Island storage and inflows drop, but we’re currently seeing levels 30% lower than average for this time of year. Crikey!
HVDC is back
Good news, folks: the HVDC link, which transfers electricity between the North Island and South Island, is back at full capacity (12 days ahead of schedule - wowee!). This means that the more plentiful South Island generation can be sent northwards as needed to meet North Island demand.
And Pohokura’s back too!
Everyone’s doing their bit to help ease the pressure of lockdown, and that includes those working on the Pohokura pipeline, too! The pipeline’s offshore production has kicked off again as of Monday evening, a good week or so earlier than expected due to good weather and sea conditions, and work and testing being completed at record speed.
Tiwai’s cutting back
The Tiwai Point aluminium smelter, NZ’s biggest user of electricity, is closing one of its lines in order to keep staff safe during lockdown, and to contain the spread of Covid-19. The closure of Line 4 will cut the smelter’s power use by 50 MW, which means there’s more available to meet demand. As an aside, the closure of this line’s unrelated to the current strategic review that owners Rio Tinto are carrying out on the smelter’s operations.
Low spot prices
With the lockdown has come a definite shift in pricing, with almost no price separation between the North Island and South Islands (usually, North Island has noticeably higher spot prices than the South Island due to the cost of transferring power northwards).
Thanks to a combination of decreased demand, plentiful South Island hydro generation and a reduced need for more expensive thermal generation, spot prices have been looking sharp. Over the past week, from Tuesday 31 March to Monday 6 April, the average spot price for New Zealand sat at 4.1 c/kWh. Not a bad time to be a Freestyler!
That’s all for the moment Flicksters, but we’ll check in again soon with more market information as it comes to hand. Stay safe in your bubble, be kind to those around you, and we’ll see you on the other side!