Winter business as usual as electricity prices jump

Winter business as usual as electricity prices jump

Takapō – Prices paid by electricity supply producers jumped 28.7 percent in the March 2021 quarter, Stats NZ says.

Electricity prices for residential customers, reported in Consumers price index: March 2021 quarter, increased 0.4 percent.

Lower lake levels in the South Island have driven up wholesale prices for electricity generation. The quarterly price change is the largest since 2018 but is nowhere near the magnitude seen in the 2008 power crisis.

That year the electric industry braced for possible winter blackouts as hydro-storage lake levels plummeted 55 percent below average, the lowest levels since the country suffered its last power crisis in 1992.

When electricity consumption increases in winter, generators have to supply more electricity to keep up with demand. Aotearoa relies on renewable generation, such as hydro and wind. And that’s usually enough to keep electricity prices fairly stable, because renewable generation has lower running costs.

There’s more than just the cost of generating electricity that goes into your power bill. Power travels from the electricity generator, through the transmission grid and into the local powerlines in the streets.

Over 50 per cent of New Zealand’s electricity is generated from large hydro-electric stations in the South Island. If there is low rainfall it means the lakes that provide the water for this generation can also be low.

Wholesale and household electricity price movements can differ due to transmission charges, industrial customers responding to peak-hour pricing, and hedging to manage price volatility.