Market Update December 2024
The Wholesale Electricity Market
Spot prices in the wholesale electricity market for December were close to the very low levels seen in November. Average spot prices for the month ranged from $20 in the lower South Island (down from $24 in November), up to $35 in the upper North Island (unchanged from last month).
The following chart shows average weekly spot prices over the last 2 years. The extreme highs and lows over the last 6 months can be clearly seen.
Electricity Demand
Electricity demand in December started the month at a higher level than recent years then dropped off towards the end of the month as businesses shut down for the Xmas break.
Electricity Generation Mix
Through December increased geothermal and wind generation enabled hydro generation to reduce and thermal generation to back off to almost zero later in the month.
HVDC Transfer
Power transfers on the HVDC link connecting the North and South Islands are important both in showing relative hydro positions and the reliance on thermal power to meet demand. High northward flow tends to indicate a good SI hydro position, whereas the reverse indicates a heavy reliance on thermal power to make up for hydro shortages.
With high South Island hydro storage levels, December saw continued strong northward transfers and very little southward transfer.
The Electricity Futures Market
The Futures Market provides an indication of where market participants see the spot market moving in the future. They are based on actual trades between participants looking to hedge their positions (as both buyers and sellers) into the future against potential spot market volatility. They are also a useful proxy for the direction of retail contracts.
The following graph shows Futures pricing for CY 2025, 2026, 2027 and 2028 at Otahuhu (Auckland) for the last 2 years.
Note that $100/MWh equates to 10c/kWh.
Forward prices were largely flat for all years through December. CAL 2025 ended the month at $169 – up 0.5% over the month. CY 2026 price was down 1.5% at $179 while CY 2027 was flat at $174/MWh. CY 2028 finished the month down 1% at $171/MWh.
Known new generation projects are shown below (additions/removals/changes highlighted in bold).
Hydro Storage
Inflows in the South Island were again above average in December. The North Island had lower than average inflows for the month.
These continuing high inflows resulted in energy storage levels climbing at the start of December reaching a maximum level of 4,253GWh (96% full) on the 18th Dec before falling back to 4,171GWh at the end of the month. Storage remains well above the average level seen at this time of year. The following chart shows the latest breakdown of storage across the main hydro catchments.
Security of supply risks decreased further through December with storage levels increasing as shown below.
Snowpack
Snowpack is an important way that hydro energy is stored over the winter months and released as hydro inflows in the spring. The following graph shows that the snowpack in the important Waitaki catchment decreased through December (noting that the latest update is mid-month), however remains close to the mean levels seen in the last 30 years for this time of year.
Climate Outlook Overview (from the MetService)
Climate Drivers — Whilst the El Niño-Southern Oscillation (ENSO) often dominates the climate driver conversation, local drivers such as regional sea surface temperatures and the Southern Annular Mode (SAM) often take precedence at times where ENSO is not particularly strong, and this is what we have been seeing and are expected to see over coming months.
Whilst conditions in the central pacific will exceed weak La Niña thresholds in January 2025, the event is likely to be too short-lived to be declared as an official event (note that oceanic and atmospheric ENSO indices need to persist across three months to be declared). So, whilst we may start to see a more La Niña lilt to the weather maps in the first quarter of 2025 (northern lows and anomalous NE quarter air flows), you can expect to see significant spells of sub-seasonal variability driven by other local drivers like the SAM. A spell of persistent negative SAM in early December drove all our westerly weather through that period.
Of critical importance this summer are the very warm waters surrounding NZ, and in genesis regions for weather systems in the Coral and Tasman Seas. Sea surface temperatures currently sit some 1-3C warmer than normal here, and these warm waters will provide ample fuel for any developing low-pressure systems. That these waters are so much warmer than normal means any low pressures moving onto NZ are likely to have the capacity to deliver bursts of very heavy rainfall alongside unusually warm and muggy conditions.
Note that whilst we haven’t seen a Tropical Cyclone (TC) form in the SW Pacific in November or December, we must remain vigilant until the end of the TC season in April 2025. As per the NIWA/MetService TC Outlook, normal to elevated activity for New Zealand remains forecast this season.
January 2025 Outlook — December volatility could persist well into January, with a real mixed bag of weather expected to continue and no long-lived summer high-pressure cell coming into focus just yet.
Indeed, the first two weeks of January look to bring a succession of weather systems from both the Southern Ocean and Tasman Sea with SAM potentially fluctuating negative once more. So, more of the same, with a couple days of settled, warm weather interrupted by rain, wind and cooler spells in the wake of any weather fronts. Note that lows could be quite slow to clear east of the country, as we saw through late December, and this could bring some further notable falls to already wet areas in the east of both islands, whilst increased cloud cover and prolonged spells of SE winds also drive temperatures below seasonal norms during early January in these areas. Western areas of the South Island could well see dry anomalies early in the month, much like late December, with these weather systems not yielding particularly well here.
As we head through mid-January, hints that ridging could become more common-place across northern Aotearoa, holding the worst of any active weather further south and west across central and southern NZ, but widely it remains rather unsettled and showery with a wetter than normal bias across the bulk of NZ through the back half of January. If that northern ridge can push southwards with vigour, there is a chance of some more widespread settled, dry weather in this period but that remains a big if at this early stage.
Despite a plethora of weather systems rolling through, with seas surrounding the country so warm overall we would expect a warmer-than-normal month to play out for most of the country overall, despite those cooler anomalies signalled early in January in the east. Muggy, warm nights could well be quite commonplace across the month too. Rainfall patterns are likely to look near to wetter than normal quite widely, with eastern regions most likely to tap into wet anomalies in January.
The Wholesale Gas Market
Spot gas prices in December continued at the very low levels seen over the last few months. Prices for the month averaged $7.72/GJ – an 11% decrease compared to November. Average prices are now 47% lower than they were at the same time last year.
On the supply side Maui production stayed at the levels observed at the end of November – 55TJ/day. Pohokura maintained output, averaging around 30TJ/day. Kupe also held its output at around 42TJ/day until a scheduled outage from the 13th Dec on. McKee / Mangahewa decreased its production slightly averaging 61TJ/day. (Note that data was only available to the 17th Dec.) It was reported in late Dec that gas sales commenced from the Tariki well in Taranaki. It is expected to produce at least 10TJ per day and could contain 13.8PJ of gas.
The following graph shows production levels from major fields over the last 6 years.
Through much of December Methanex continued to use close to 100TJ/day. Huntly usage increased at the start of the month before falling away averaging 15TJ/day, while TCC remained idle for the month. (Note that data was only available to the 17th Dec.) There is talk that Genesis has swapped some contracted gas with Methanex, “banking” some gas for next winter.
The following graph shows trends in the major gas users over the last 6 years.
Gas storage is becoming increasingly important as falling production coincides with more variable demand, particularly from gas-fired electricity generation. The following chart shows how storage at Ahuroa has increased over the last few months. It is now at the highest level it has been at this time of year over the last few years.
Internationally, LNG netback prices ended the month at $19.79/GJ – up 11% from last month. Forecast prices for 2025 were up 5.5% at $20.42/GJ. Forward prices for 2026 were published for the first time this month – currently expected to average $17.5/GJ. (Note that netback prices are indicative of international prices – they are produced by the ACCC and quoted in Australian dollars. They are net of the estimated costs to convert from pipeline gas in Australia to LNG, hence the term “netback”)
New Zealand does not (yet) have an LNG export/import market, so our domestic prices are not directly linked to global prices. With recent gas supply issues, the Government is now talking about the possibility of facilitating the building of an LNG import facility.
LPG is an important fuel for many large energy users, particularly in areas where reticulated natural gas is not available. The contract price of LPG is typically set by international benchmarks such as the Saudi Aramco LPG – normally quoted in US$ per metric tonne.
The following graph shows the Saudi Aramco LPG pricing for the last 4 years as well as forecast pricing for the year ahead. Futures pricing increased over the last month.
The other main contributing factor to LPG prices in New Zealand is the exchange rate against the USD. The exchange rate fell through the month ending at 0.56. This would tend to push up LPG prices when quoted in NZD.
The Coal Market
The global energy crisis has been as much about coal as it has gas. The war in the Ukraine has driven energy prices, including coal, up. Prices in December fell, ending the month at US$125/T – a 9% decrease on the November close. These prices are finally returning to levels close to what we expect to see as shown in the following graph of prices over the last 10 years.
Like gas, the price of coal can flow through and have an impact on the electricity market. In October Genesis reported that it planned to import at least 270,000 tonnes of coal by March to help secure electricity supplies going into next winter. It had previously aimed to stockpile 350,000 tonnes, but now says it wants to hold about 500,000 tonnes to cover peak autumn and winter electricity demand in 2025. Genesis says that 500,000 tonnes is the equivalent of about 1,000GWh of electricity storage or 22% of maximum hydro storage in NZ.
Carbon Pricing
NZ has had an Emissions Trading Scheme (ETS) in place since 2008. It has been subsequently reviewed by several governments and is now an “uncapped” price scheme closely linked to international schemes. However, there are “upper and lower guard-rails” set up to prevent wild swings in carbon price that act as minimum and maximum prices. These increased in December 2023 to $173 and $64 respectively. Carbon prices decreased 3% in December to $62.
As the carbon price rises, the cost of coal, gas or other fossil fuels used in process heat applications will naturally also rise. Electricity prices are also affected by a rising carbon price. Electricity prices are set by the marginal producing unit – in NZ this is currently typically coal or gas or hydro generators, with the latter valuing the cost of its water against the former. An increase in carbon price can lead to an increase in electricity prices in the short to medium term (as the marginal units set the price). A carbon price of $50/t is estimated to currently add about $25/MWh (or ~2.5c/kWh) to electricity prices. In the long term the impact should reduce as money is invested in more low-cost renewables and there is less reliance on gas and coal fired generation.
EU Carbon Permits increased in December to 73 Euro/tonne – up 7%.
About this Report:
This energy market summary report provides information on wholesale price trends within the NZ Electricity Market.
Please note that all electricity prices are presented as a $ per MWh price and all carbon prices as a $ per unit price.
All spot prices are published by the Electricity Authority. Futures contract prices are sourced from ASX.
Further information can be found at the locations noted below.
- Transpower publishes a range of detailed information which can be found here: https://www.transpower.co.nz/power-system-live-data
- The Electricity Authority publishes a range of detailed information which can be found here: https://www.emi.ea.govt.nz/
- Weather and Climate data – The MetService publishes a range of weather-related information which can be found here: https://www.metservice.com/
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