Eye on electricity

Spot prices fall as hydro storage increases

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  • Transmission
  • Prices

The heavy rain that has lashed the country in recent times may have caused flooding and numerous slips in parts of the country but there has been one upside – storage in New Zealand’s hydro schemes has risen rapidly.

As of August 25, hydro storage was sitting at 77 per cent of the theoretical maximum storage – at 3400GWh up 28 per cent on the same time last year.

As the lakes levels have risen, prices on the spot market have fallen because of the abundance of available hydro generation as seen in Figure 1.

Weekly average spot price Otahuhu relative to Hydro Storage April-August 2022
Figure 1: Weekly average spot price Otahuhu relative to hydro storage, April-August 2022

The decline in spot prices relative to the abundance of hydro storage contrasts with the events of December 2019 when spot prices remained elevated despite hydro storage increasing, as seen in Figure 2.

Weekly average spot price Otahuhu relative to Hydro Storage October-December 2019.
Figure 2: Weekly average spot price Otahuhu relative to hydro storage, October-December 2019.

Following a year-long investigation after a claim made by seven claimants, the Authority decided there was an undesirable trading situation for the period between  3-27 December 2019 and reset prices for the period of the UTS to a level that was more consistent with the abundance of water available for generation.

The Authority introduced new trading conduct rules in June 2021 and is actively monitoring trading conduct behaviour.

The recent high inflows into hydro lakes as also impacted on the futures market with Forward Electricity Market prices falling for the remainder of 2022 as seen in Figure 3.

Forward Electricity Market prices 26 May-17 August 2022
Figure 3: Forward Electricity Market prices 26 May-17 August 2022
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