High wholesale power prices are already limiting the deals available to households on their electricity bills, according to a price comparison website. Powerswitch has reported that several retailers, including Comtricity, Raw Energy, Octopus, Nova, Electric Kiwi, and Flick Electric, have either stopped trading or withdrawn their offers from the site.
The surge in wholesale prices has put independent retailers under immense strain in recent months. In July, Electric Kiwi announced it had to close to new customers due to the unaffordable cost of taking on additional customers. Wholesale prices, which were as low as $77.53/MWh in August 2020, have now skyrocketed to over $300.
Powerswitch Warns of Potential Retailer Closures
Powerswitch general manager Paul Fuge expressed concern that some retailers might be forced to shut down if the high wholesale Power prices persist. He warned that this would be detrimental to retail competition and could lead to further price increases for consumers.
Octopus Energy cited difficulties in accessing hedge contracts as the reason for its withdrawal from Powerswitch. The company reported that customers were facing significant price hikes, with some offers on Powerswitch being up to $900 a year more expensive than in July.
Increased Supply Needed to Lower Power Prices
The Electricity Retailers Association (ERA) acknowledged the high wholesale power prices but emphasized that most consumers are not directly exposed to spot-price fluctuations. The association attributed the price increases to fuel supply issues and a dry year.
ERA stressed the importance of investing in more supply to bring down prices. They highlighted the doubling of investment in renewable generation in the past 18 months and the additional capacity provided by deals with Methanex and the Tiwai aluminum smelter.
Despite the current challenges, Abernethy from ERA noted that electricity prices have remained relatively flat for households and businesses, considering the overall increase in costs over the past few years.
New Zealand is facing an impending electricity supply crisis.
Months of dry weather have caused low hydro storage, and declining gas reserves are being blamed for the skyrocketing wholesale electricity power Prices. The situation is already impacting businesses, leading to closures, and residential consumers may soon feel the effects as well.
RNZ provides insights into how we generate electricity, why demand is rising, how this impacts costs, and what might happen next.
Where does our power come from? In New Zealand, electricity is primarily generated through hydropower, geothermal energy, and wind power, with coal, oil, and gas combustion providing baseload or backup electricity supply.
According to data from the Ministry of Business, Innovation and Employment (MBIE), in 2023, 60 percent of New Zealand’s electricity was generated from hydropower, 18 percent from geothermal sources, 9 percent from gas, 7 percent from wind, and just over 2 percent from coal.
Hydroelectric power, which accounts for most of New Zealand’s electricity needs, is produced by using dams or structures to alter the natural flow of rivers or other bodies of water. The country has more than 100 hydroelectric generating plants, with the largest located in the South Island at Mānapouri, Benmore, and Clyde.
Geothermal power plants generate electricity using steam from reservoirs of hot water found beneath the earth’s surface. Most of New Zealand’s geothermal generation comes from Taupō, with a smaller amount from Northland.
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