Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Electricity Market Damaging Investment Reputation

The electricity market is damaging New Zealand’s reputation for future investment

The volatility of spot electricity prices over the last 72 hours requires urgent review according to Terrence Currie, Chairman of the Major Electricity Users’ Group (MEUG).

Mr Currie said pressure on the wholesale electricity market was inevitable following the failure of critical high voltage transmission power pylons feeding the Cook Strait HVDC cable on Friday because of extreme gale force winds.

Electricity spot prices jumped immediately to about 80 c/kWh (equivalent to $800/MWh) from the average for this time of year of below 5 c/kWh (equivalent to $50/MWh). There have been a number of severe price spikes since Friday and prices have varied hundreds of dollars per MWh from half hour to half hour. As at the time this media release is being released at just after 3pm today, indicative spot prices are being posted at above $1 per kWh ($1,000/MWh).

“It is completely unrealistic to expect end users’, or for that matter prospective new entrant generators and retailers, to operate in such an unstable wholesale market.

Some one needs to determine whether it is the offer behaviour of generators or inherent flaws in the market mechanisms that are causing the price instability.

“A reasonable measure of where spot prices might be expected to peak at is the 20 c/kWh (equivalent to $200/MWh) to be used for the dry-year reserve Whirinaki plant due to come on-stream mid 2004. One assumes from the latest Government Policy Statement on Electricity that electricity costing more than 20 cents a unit is “unacceptable”. Even at that price the cost of the highest cost fuels should be more than covered.

“In any other market where an extreme weather event radically affected supply and prices we would see suppliers taking a reasonable stance to protect their own interests and the interests of end users’. For example when a drought affects farmers in the east coast of the country then farmers from throughout New Zealand rally around to supply feedstock to those affected. You do not find those farmers with feedstock and transport firms taking advantage of such extreme weather events by demanding extreme prices.

In respect of the electricity sector it is either the pricing behaviour of electricity suppliers or a fundamentally flawed market that is ruining major users’ businesses, and New Zealand’s reputation for future investment.

While MEUG remains committed to improving the electricity market design including reducing the market power of the current supply oligopoly; it is difficult to retain confidence in that strategy when the market performs so poorly consequent to the failure of key transmission lines. If it is not the design of the market then the blame falls fairly and squarely back on the electricity suppliers who must accept they are risking the future of the electricity market being handed over to the central planners again.

Mr Currie concluded, “The energy intensive industries have lost confidence in the ability of the sector to provide secure supplies of electricity at competitive prices. Manufacturers have a poor choice between taking the risk of being prone to extreme spot prices even in force majeure type events or overly high hedges because of the limited competition by suppliers. Improving competition and therefore an understanding by suppliers about reasonable pricing when extreme events occur as happens in other commodity markets is urgently needed, along with a thorough review of how the wholesale electricity market performs.

© Scoop Media

Business Headlines | Sci-Tech Headlines


I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>


Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>


Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>


Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>


Half A Billion Accounts, Including Xtra: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>


Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news