The Blog

The #CleverFlickers Market Update - 30 June 2022

Tēnā koutou Flick whānau,

It’s been a hot minute since our last market update, but now that the winter months are upon us it’s a good time to check in with where things are at on the electricity market. Let’s take a look.


The first few months of 2022 saw lots of talk of a looming dry winter, with the La Niña conditions bringing less rain to southern and western parts of Aotearoa, and a record-breaking drought in the Manapouri Manapouri/Te Anau catchment area. Planning was in place from generators for declining hydro storage over the winter months, but thankfully it’s been just the opposite with the wild weather of early June bringing a bounty of H20 to our hydro lakes. This week’s stats are in from Transpower, with national hydro storage sitting at 90% of the historical average for this time of year. In the North Island, storage is at a healthy 166% of the historical average (73% of full), while the South Island is at 83% (62% of full).

What’s in the mix?

Over the last few weeks, Aotearoa’s generation mix has seen high levels of renewable generation, supplying between 84 - 87% thanks to hydro and some days of wild wind. However, thermal (gas) generation has been needed as base-load cover and to provide supply when wind generation has dropped.


As is typical for this time of year, demand has been steadily increasing as the winter temperatures drop, and a number of cold snaps have seen Aotearoa’s demand reach the top 10 of the largest peaks on our records, with demand peaking at around 5:30 - 6:00 pm, according to Transpower’s data.

On Thursday last week, Transpower declared a grid emergency at 7:58 am, due to high demand and insufficient supply (more on this below), and on Tuesday night this week, an advice notice was issued advising that between 5:00 pm - 7:30 pm market participants would need to increase generation to ensure there was enough to meet demand.

Spot prices

Spot prices on the wholesale market have been yo-yo-ing over the last few weeks. High wind generation and low overnight demand has seen some spot price drops, as well as reduced demand over the public holidays. Countering that, we’ve also seen prices spike during peak times when there’s also been low wind generation – during last week’s grid emergency, for example, prices soared to more than 120 c/kWh in most regions, peaking at 281.3 c/kWh at 07:30am, before dropping to around 26.6 - 31.5 c/kWh after 9:00 am.

Overall, for the last four weeks spot prices have averaged 15.4 c/kWh.

Last Thursday’s grid emergency

On Thursday 23 June Transpower announced an NZ-wide grid emergency notice (known as a GEN) at 7:58 am, due to a risk that the supply of generation at that time wouldn’t meet demand. This was down to three main factors: one of Contact Energy’s peakers at Stratford which failed to start, an electrical fault on one of Genesis Energy’s units at Huntly and an unexpected drop in wind generation from 90 MW to 30 MW.

That combination meant Transpower ordered lines companies to cut supply to controllable hot water systems to ease the peak morning demand, and by 9:25 am the grid emergency was over.

But what does that mean for Aotearoa’s security of supply? Well, it looks like Transpower has learned some valuable lessons from the outages on 9 August last year – this time they communicated early, asking for reductions in controllable load and increased generation, and the situation was managed without too much impact on Kiwis. However, it’s possible it’ll happen again, and throughout winter Transpower has identified multiple days where, if the system encounters a combination of factors and demand is high, there’s a risk of blackouts.

To us, it very clearly shows the knife’s-edge balance of supply and demand of our market structure, as well as a system that rewards (and therefore incentivises) generators with skyrocketing spot prices when generation is unavailable. A well-functioning and well-structured system is not one that’s so fragile that it regularly encounters these alerts and nationwide emergencies, and passes the burden of that – in the form of blackouts and higher power prices – on to Kiwi consumers.

Weather ahead

We keep a close eye on the weather ahead as it can have a big impact on both supply and demand across Aotearoa. NIWA’s climate outlook for June through to August predicts temperatures will be warmer than average across NZ, with La Niña conditions sticking around a little longer, as well as fewer southerly winds and warmer than average sea surface temperatures. Frosts will still occur, but less often than usual. Rainfall over the coming months is looking good, with predictions of near-normal levels in the west of the South Island, and near-normal or above-normal levels across the rest of the South Island and the lower and central North Island.

Until next time, Flick whānau!