Flick Electric CompanyThe Blog

The #CleverFlicker's Monthly Market Update - 23 July 2020

Kia ora, folks!

We’re back with another market update for our crew of #CleverFlickers, and those of you with a keen eye might have noticed we’re a little behind schedule with our update this time round. It’s been a busy few weeks, with lots going on in the industry and on the wholesale market - so grab a cuppa and a chocolate biccy, and let’s check it out!

Demand

As the frosty mornings and snow-capped peaks suggest, winter is well and truly here, and bringing with it a jump in our power usage. During June and July demand for power has been high, and we’ve seen a number of peak demand year-to-date highs, including three large peaks on evenings that coincided with cold snaps. Thanks to these chilly winter blasts, our peak demand hit a new high at 6661 MW on 8 July - brrrr! Over the last week, though, we’ve seen demand drop slightly, following warmer temperatures in Auckland and the upper North Island.

Hydro

Low hydro storage levels have been a lingering problem since the dry summer and autumn, especially in the North Island, and at a national level hydro storage currently sits below the tenth percentile for this time of year. But with the help of some decent rainfall in the Taupō catchment area, North Island hydro storage is on the rise, sitting at 78% of average. Whoop!

Gas

Our low hydro storage has meant we’ve needed to rely upon higher levels of thermal generation over the past few weeks, and a third thermal generation Rankine unit at Huntly has been made available, if required, to help cover any shortfall.

Spot prices

Spot prices across the country have averaged $155/MWh since the beginning of June through to 22 July - a good deal higher compared with the spot prices for the same period in 2019, which averaged $104/MWh. Why the increase? It was most likely influenced by below average hydro storage and the need to use more costly thermal generation, combined with the jump in winter demand. Over the last week, average prices fell 12% on the previous week to $120 /MWh, thanks to lowered demand and lifting North Island hydro storage levels. Yippee!

If you’re on Freestyle and feeling the higher spot prices, remember that we also offer a fixed-generation price plan, too (whoop!) - you can check FIXIE out here.

Meridian’s spilling

At the end of last year we were one of a number of independents who supported a claim against Meridian and Contact, where it appeared they were allegedly spilling excess water from their hydro stations at Manapouri (Meridian), Roxburgh and Clyde (Contact), despite the stations running at less than maximum capacity. A few weeks ago, the EA released its preliminary findings in which it says there was significant unnecessary spilling by Meridian, resulting in costs to electricity purchasers that were around $80m higher than they should’ve been.

Winston Peters, the Minister for State-Owned Enterprises, has voiced his thoughts on the topic, too, saying “It is a damning preliminary finding by the Electricity Authority and there is something very wrong with the regulation of the energy market when it takes a complaint for market manipulations to be investigated and acted upon.”

We agree! Submissions for the findings are due in August, and we expect a response in September at the earliest, so watch this space.

Tiwai Point Closure:

Two weeks ago came the announcement by Rio Tinto that they would be closing the Tiwai Point Aluminium Smelter by August 2021. If the closure goes ahead, we know the subsequent loss of nearly 2,500 jobs will be a heavy blow to Southland.

From an energy perspective, the closure is likely to be a bit of a mixed bag. For now, it’s a guessing game, but we reckon we might see lower spot prices, particularly in the South Island, where that surplus electricity will be able to be used (good news if you’re a Freestylin’ Flickster!).

Because we’ll be less reliant upon back-up generation such as thermal and coal, it’s possible we’ll see new projects shelved or plants closed, which might put the pressure on our security of supply when hydro storage or wind generation is low, and mean spot prices are more volatile, too.

Transporting that surplus electricity from the bottom of the South Island to the rest of NZ will also mean that infrastructure upgrades are necessary, too. Some projects that’ll be assessed to help with this include upgrading the HVDC connection so more power can be brought north, or building reserve capacity in the North Island, like a battery (sidenote: we reckon that’s a great idea!).

Check out this blog by EnergyLink for some good industry insights into what might happen if the closure goes ahead.

Forecast

What’s ahead, weather-wise? According to NIWA’s outlook for July, August and September, rainfall is likely to be near normal or below normal in the west of the South Island, near normal or above normal in the east of the North Island, and near normal in all other regions.


That’s all for now, Flicksters - but, as always, if you have any questions, make sure you drop us a line at hello@flickelectric.co.nz!