NZ – Electricity generation is BROKEN? In the end consumers will simply have to pay more for everything!

Below and email was sent to Grower2Grower by an anonymous source updating the current frailty of New Zealand’s electricity generation.  The ramifications for the greenhouse industry and those growers reliant on Natural Gas is biting hard!

Week 2 August, 2024

I’m not sure if this has made your attention at the moment, but energy prices have now officially gone mad, after the most recent period of rain didn’t make much of a dent in the hydro shortage. 

Over the last week the wholesale electricity price has effectively doubled, from averaging around 37c per kWh to now being forecast to be 74 c per kWh baseload for August.  Just this morning we saw a 150c per kWh peak.  With the electricity market at these levels, a combined cycle gas turbine (like Huntly unit 5 or TCC) can pay up to $100 per GJ, while ‘peakers’ could pay up to $150 per GJ for gas for morning peaks like this morning.

While most people I speak to are not keen on pushing the gas price to these levels, recognising that this causes lasting damage to demand, I am speaking with a number of commercial and industrial companies who are re-signing term contracts of 24-36 months with a base energy price of $30-35 per GJ (++). 

Below are the recent average daily gas and electricity prices, with little prospect that there will be relief this month.   

When Europe hit these sort of energy prices in 2022 it was global news, here its … crickets.

I’m raising this now for two reasons:

• In case this has some bearing on your operating decisions in the short term
• Is there a case for a rapid investigation of CHP swaps for the boilers?

If the future electricity market will continue to be highly volatile, which seems likely given renewable penetration, then perhaps going long electricity might be a good protection against gas price volatility considering the reasonably strong correlation between gas and electricity?

Something to consider.

Opinion:

The 2018 decision to ban future Natural Gas exploration – The worst political decision made in a generation?

The debate over energy sources, including the reliance on renewables versus fossil fuels, is indeed complex and multifaceted. Many people share concerns about the reliability of renewable energy, especially in regions where weather can be unpredictable. It’s important for policymakers to consider a balanced approach that ensures energy security while also addressing environmental impacts. Engaging in discussions about energy strategies can help shape future decisions that align with both economic and environmental goals.

It may, in fact be too late to overturn the damage from that ban, however, if it is a possibility, cross-party support is crucial for creating a stable and predictable environment that businesses need to make long-term investments.  Listen to https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audio/neil-holdom-new-plymouth-mayor-urges-labour-to-support-oil-and-gas-exploration/

Other related interviews:

https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/john-harbord-major-electricity-users-group-chair-on-the-energy-crisis-highlighting-the-downsides-of-renewable-power/

For any comment e-mail stefan@grower2grower.co.nz