Eye on electricity

Southern lakes and spot prices: declining lake levels at Te Anau and Manapōuri

  • Generation
  • Prices

How hydro storage has impacted prices in winter 2022

New Zealand experienced its wettest winter on record in 20221. This rain filled New Zealand’s hydro reservoirs, which store water for electricity generation. In late August 2022, when the lakes were collectively at their fullest, national hydro storage was at 157% of the historical average. This abundance of water caused lower electricity spot prices, as explained in our article: How hydro storage impacts spot prices, as hydroelectricity was offered into the wholesale electricity spot market at low prices.

Recent changes to Lakes Manapōuri and Te Anau

Hydro storage remains healthy across the country at 145% of the historic average2, but this average obscures storage at individual lakes. As shown in Figure 1, lakes Pūkaki, Takapō, Hawea and Taupō remain above their 90th historic percentile3, whilst Manapōuri and Te Anau have fallen below their historic means. These two lakes feed New Zealand’s largest hydro dam, the Manapōuri Power Station, which has a capacity close to 850 MW.

Nationally, inflows in September 2022 have been 112% of historic inflows, while at Manapōuri and Te Anau, inflows have been roughly half of historic inflows. These lower inflows have been compounded with Manapōuri running close to capacity for much of September, see Figure 2. The combination of lower inflows and high running has resulted in storage at lakes Manapōuri and Te Anau declining faster than the other hydro lakes.

How changes in storage affects spot prices

With storage at Manapōuri and Te Anau now below their respective historic means, the electricity offers from the Manapōuri power station have changed. When the lakes were higher, more electricity was offered in the lower priced tranches. On 31 August 2022, all Manapōuri generation was offered below $10/MWh. While on 25 September 2022, roughly 45-70% of offers were priced below $10/MWh.

This change in offers reflects the shift from managing Manapōuri’s risk of spilling and wasting water, to managing the risk of depleting the remaining storage. Higher offers results in the station generating less electricity, which saves water, but leads to higher spot prices.

With more of Manapōuri’s hydroelectricity now priced in the higher tranches, more trading periods now have spot prices around $100/MWh and there are fewer instances of very low prices. This shows how quickly the electricity market reacts to changing underlying conditions, with the drawdown of just two lakes impacting daily spot prices.

The Electricity Authority monitors trading conduct in the electricity spot market. View our market monitoring weekly reports.


1. Winter 2022 | NIWA
2. As of 29 September 2022.
3. This indicates when lake levels are extraordinarily high. Only 10% of years between 1926 and 2021 had storage levels higher in September than the 90th percentile.

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