Flick Electric CompanyThe Blog

The #CleverFlickers Market Update - 18 September 2020

Kia ora, Flicksters!

Hard to believe but here we are, heading into the tail end of what has been a very turbulent year. Spring’s upon us, and with it comes the usual spring winds (go wind turbines, go!), some snow, and hopefully some rain for those areas of Aotearoa that need it.

So, what’s been happening in the electricity market? Let’s take a look.

Hydro

2020’s warm and dry winter (the warmest on record according to NIWA) has had a flow-on effect on our national hydro storage, which has steadily dropped over the past few months from 3000 GWh in May, to less than 1500 GWh at the start of September. A relatively big drop, considering we’d usually be sitting at around 2200 GWh at this time of year.

While storage continues to sit low at 70% of the historical average for this time of year, in good news it has increased over the past few days thanks to lots of rain in the South Island earlier this week. Whoop! That means that South Island hydro currently sits at 74% of average, while North Island storage has dropped to 39% of average.

Gas

Even though lake levels are low, our security of supply is still looking good thanks to Aotearoa’s thermal generation, which can be used to cover the shortfalls. Phew! (Although less great for carbon emissions!)

HVDC

With South Island lake levels sitting low for this time of year, there’s been a noticeable decrease in southern hydro generation, particularly at the Waitaki station. That’s meant we’ve seen an increase in the transfer of electricity from the North Island to the South, a sign that water conservation is underway.

Spot Prices

From 20 August 2020 through to 16 September 2020 spot prices have averaged $133/MWh (or 13.3 c/kWh), pushed up by the factors we’ve talked about above - low hydro lake levels and the use of more expensive thermal generation.

Quarterly drop in demand, drop in generation

Some interesting info from MBIE’s quarterly report shows that electricity generation dropped 5.4% in the June quarter, while demand dropped 5.1%. That was largely due to good ol’ COVID-19 and the closure of non-essential businesses.

Our renewable generation declined, too, no thanks to a lack of rain in the right places (the hills around our hydro stations!) along with plant maintenance, while our gas generation shot up 16% to help cover the shortfall.

Weather

Nope, you weren’t imagining it - it’s been a warm winter! NIWA’s climate data shows temperatures were 1.14°C than usual for this time of year, with 17 places around the country encountering their warmest mean winter temperatures on record - yikes! Timaru secured itself the top spot with the highest winter temperature of 25.1°C on August 30 (the highest temperature recorded there during winter since records began in 1885).

According to NIWA forecaster Ben Noll, the warmer winter was down to a combination of more subtropical winds bringing warm air from the north, warmer sea surface temperatures, higher air pressure and - yep - climate change.

August brought a particularly dry end for parts of the South Island, especially Canterbury and North Otago where less than 20% of normal August rainfall was recorded. Throughout the country, rainfall was below normal in parts of almost every region, except Northland and Auckland where it was above normal.

What’s ahead? NIWA’s seasonal climate outlook is forecasting above normal temperatures across the country, and normal or less than normal rainfall for the South Island and bottom of the North Island. The warmer spring weather is good news for our usage as it usually means both our individual and collective demand for power drops, and along with that, your power bill, too!

Tiwai Aluminium Smelter

Exactly what will happen with the aluminium smelter is anyone’s guess at the moment, although the talk in the industry suggests there’s a 2-in-3 chance it’ll stay in operation for a couple more years. It’s currently a big pre-election talking point, with both Labour and National having said they’ll aim to negotiate with Rio Tinto to keep the smelter open for another 5 years, and Winston gunning for the longer-term, at 20 years.