ENERGY
Hopes review will shed light on pricing Electricity users throughout New Zealand, including irrigation users have been grappling with ever rising electricity costs for the past five years, a fact confirmed by the recent Electricity Authority market monitoring review of the wholesale electricity market. WORDS BY RICHARD RENNIE.
In late October the Electricity Authority released papers outlining the main conclusions it had drawn from its review of the wholesale electricity market. The review was prompted by the surge in prices since the unplanned outage of the Pohokura gas facility three years ago. After the Pohokura gas outage prices rose and have on average been above $100MWh
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since, with the average spot price for 2019 at $127/MWh, the highest annual average since 2008 when the market was hit by severe hydro shortages over winter. In contrast the average spot price between then and Pohokura in 2018 was only $67/MWh. The Authority noted that prices over the review period have to a certain extent reflected underlying supply and demand conditions, a sign of a competitive market. The economy has been growing strongly over this time, hydro lakes have been lower than average, gas outages have occurred and all fuel costs including the carbon component have been moving upwards. Most recently, the lift in electricity prices has accompanied an ever-growing inventory of cost pressures upon producers, exacerbating the
effects of Covid’s impact on freight price rises and labour cost movement. Calculations by investment company Forsyth Barr are that the energy component for commercial contracts has surged from $82/ MWh in 2018 to $99/MWh in 2021, a rise of 6.2% a year, over double the annual inflation rate. But there is also a portion of unexplained cost rises the Authority has identified postPohokura. One example was in 2019 when low lake levels only existed for 4% of the year, yet the average yearly price remained stubbornly high above $100MWh. For anyone buying electricity in commercial quantities, including Canterbury irrigators, interest will be high in whatever recommendations come from the Authority’s review on competition and pricing.
