Tēnā koutou Flick whānau,

The year is rapidly disappearing as we race towards summertime (yeow!), the holiday season, and the end of another tumultuous 12 months in the electricity industry. So, where are things at?

Hydro

After a dry autumn for Aotearoa’s hydro lakes, the last couple of months have seen some decent rainfall events which have topped things up nicely. Currently, national hydro storage sits as 126% of average for the time of year (82% of full). In the North Island storage is at a healthy 124% of the historical average, while South Island is at 127% of the historical average.

Gas

Gas output levels from Pohokura have been dropping throughout the year, due to the build-up of scale inside the wells which is slowing the flow of gas. An offshore rig is required to fix the problem, and it’s both costly and time-consuming to bring one to Aotearoa. All of that means that Pohokura’s problems won’t be solved any time soon, but in good news, production at other fields (like the Maui and Kupe gas fields) is increasing, with daily output from all fields at its highest since October 2020.

Demand

Typically, demand drops as we head out of the cold weather and into the warmth of late spring and summer. That’s largely due to things like the lighter evenings of daylight savings, the increase in temperatures and more time spent outdoors. So far, this year is no exception, with demand continuing to drop week by week. Transpower’s data shows that for the week ending 28 November national weekly demand was 738 GWh, a decrease of 13 GWh (2%) on the previous week.

For our pals in Tāmaki Makaurau, life has been anything but normal over the past few months. At our last update, the arrival of Delta was showing an initial impact on Aotearoa’s overall demand, but since then, with the majority of the country shifting down Alert Levels and businesses opening back up, demand levels now look to be back to normal.

Spot prices and solar

Spot prices on the wholesale market have taken a big drop over the past couple of months, largely in response to current healthy hydro storage levels and the drop in demand we’re seeing now. This comes off the back of a good 18 months of high spot prices – and record highs at that. These high spot prices have been great news for our Home Generation Flicksters who sell their excess solar power back to us at the wholesale price: from the start of February through until the end of August, spot prices averaged 24.4 c/kWh!

But the recent drop in wholesale prices has meant that buy-back rates have been lower than our solar Flicksters are used to seeing, with prices averaging 8.3 c/kWh over the last two weeks. Because of this, we’ve had a few queries from Home Generation Flicksters about the slump in buy-back rates, so it’s important to remember that Flick’s buy-back rates are linked directly to wholesale prices. And while current prices might seem low, they’re actually consistent with long-term average prices prior to the start of Aotearoa’s gas supply issues back in spring 2018.

What’s ahead though? Well, the ASX (which is a good marker of future spot prices) is forecasting spot prices between April and September 2022 to average around 16.8 c/kWh in the North Island, and around 14 c/kWh in the South Island.

The EA’s review of market competition

The Electricity Authority’s (EA) review of wholesale market competition was released in October, and found that Kiwis are subsidising Meridian’s contract with Tiwai Aluminium Smelter to the tune of around $200 per household each year. According to the EA’s review, “The smelter consumes about 13 percent of New Zealand’s electricity demand, so these contracts affect the wholesale electricity market. If the smelter had exited, that electricity would have been available to the rest of New Zealand and the increased supply would have reduced prices.”

While we wholeheartedly agree that one-off contracts like this are an issue that needs to be addressed, it’s also somewhat of a red herring, distracting from the real, underlying market problems. The EA noted that it appears that prices since 2018 can’t be explained by just market conditions alone, and there’s evidence that the market’s not truly competitive, resulting in higher power prices for Kiwi homes and businesses. We’ll be making our submission on the review and watching closely for the result in early 2022.

In line with this, our petition to the Government to improve market competition and bring power prices down has hit 11,000 signatures, and we’re gearing up to take it to Parliament. Watch this space!

Low User plans get the boot

The Government announced that they’ll be phasing out the distinction between Low User and Standard User for pricing plans, so that everyone’s in the same category. That means daily fixed charges will increase by 30 cents a year for five years (so that from 1 April 2026 the daily fixed charge will be $1.80). On 1 April 2027, the low fixed charge will be phased out completely and there won’t be a price cap on fixed charges any longer. Read our full blog on the ins and outs of it here.

Weather ahead

Grab the ice blocks and the sunscreen – summer’s here! A warm and dry few months have been forecast in NIWA’s latest climate outlook for November through to January. They’ve moved Aotearoa into “La Niña Alert”, which means temperatures right across the country are predicted to be above average, with lower than average rainfall over the main southern hydro catchments. Not a great prediction for NZ’s hydro storage, but we’ll be watching to see how it unfolds over the next few months.

That’s all for now, Flicksters!