If you’re one of our Wholesale Flicksters (formerly Freestyle!) riding the wave of the wholesale market, you’ve probably noticed a lot of king tides lately. Spot prices have been noticeably higher, and that ain’t fun when you know it’ll likely impact your power bill at the other end. So, what’s been pushing up wholesale prices and how long will it last?
La Niña and low hydro storage
If you’ve been following our earlier market updates, you’ll know that Aotearoa is currently experiencing La Niña conditions, which means less rainfall in the western areas of the South Island, and the southern catchment areas for the hydro lakes. Currently, total national hydro storage is sitting at 85% of average for this time of year (68% of full), and this is largely due to low inflows and storage levels in the South Island, which sits at 84% of average.
Like any market, prices for electricity are linked to supply and demand. When demand is high but supply is tight, prices move upwards. Because South Island lake levels are low at the moment, we know that generators are currently conserving their water, and unfortunately this means more expensive prices on the wholesale market.
Declining gas levels
We’ve also talked previously about the dropping gas output levels from Pohokura, New Zealand’s largest gas field. Gas provides security of supply here in Aotearoa when hydro levels and wind generation are low - however, the forecast for 2021 suggests that gas supply will continue to decline. According to Transpower, sustained high spot prices are an indication that gas is scarce, and we’re seeing this play out at the moment, with the current price of gas already close to what we’d normally see during winter, and future prices for the winter months already above prices seen in 2020.
The impact on spot prices
Over the last four weeks, from 19 January through to 15 February, New Zealand has seen an average spot price of 17.7 c/kWh, with some of the highest prices being seen in the South Island - historically the area of NZ that sees lower spot prices due to the usual abundance of hydro generation. In fact, higher prices in the South Island has meant that thermal generators have upped production and Transpower is now shifting energy south on the HVDC link overnight. Thanks to the above factors, as well as minimal wind generation, we’ve seen price spikes of over 40 c/kWh - ouch!
The months ahead
So, the big questions: will these prices continue, and what does it mean for our whānau on spot price plan, Wholesale (formerly Freestyle)? We hate to be the bearer of bad news, but all signs are pointing to these higher prices sticking around for some time while gas and hydro continue to rock the boat.
If you’re one of our Wholesale customers, it’s likely you’ll see higher-than-usual power bills because of this (as well as multiple high price alerts on your mobile!). We know that those high power bills can sting, so if you’re wanting a little more price security, check out our Flat and Off Peak plans, both of which give more certainty during this time of volatile pricing.
If you’re keen to continue on the wholesale ride, make sure you’re keeping an eye on your Flick app (and your alerts are turned on) so that you can shift your power usage when prices start tracking upwards, and switch things on when prices fall.
And if you’d just like to talk things through, we’re here for that, too - just drop us an email to hello@flickelectric.co.nz. We can chat through making the most of your app to help reduce your power bills, how to use our Bill Smoother feature (aka Volt) to knock the top off high bills, or our payment plan options.
Rest assured, though, that here at Flick we’re closely monitoring market conditions and prices, and we’ll update you if it looks like the factors driving high prices are changing. We got ya!