Wholesale Spot Prices Rise
In December, national energy prices experienced a notable increase, triggering concerns about sustained elevated costs due to a decline in hydro-lake inflows. Energy Link’s data highlighted a significant surge in wholesale spot energy prices, prompting the four major power companies to adjust pricing strategies.
Hydro Storage Decline Impacts Prices
National hydro storage levels dropped to 84 percent of historical averages, contributing to escalated thermal generation costs. South Island storage plummeted to 75 percent of average, while North Island storage increased to 132 percent of average after substantial rainfall in early January.
Retail Prices See Up to 18% Surge
Average retail prices surged by up to 18 percent in the December quarter compared to the previous year. This increase reflects the impact of varied retail pricing models among suppliers. The shift in pricing dynamics is attributed to the changing landscape of energy generation and the reliance on different sources.
Transition to Renewable Energy
Contact Energy’s CFO, Dorian Devers, emphasized the eventual decrease in prices with the increased adoption of renewable energy. However, he acknowledged that the transition would be gradual. The current rise in pricing is attributed to heightened thermal fuel costs, necessitating continued use of thermal energy to complement hydro generation during dry periods.
Devers reassured consumers on fixed-cost contracts, stating that such arrangements shield them from the volatility of spot prices. While the short-term outlook suggests sustained high prices, the long-term trajectory envisions a reduction as renewables, coupled with technologies like energy storage, gain prominence in the market.
Source：radionz.co.nz
