New Zealand’s Electricity Generators Eyeing Market Solutions to Boost National Energy Security

WELLINGTON: New Zealand’s four largest electricity generators, Genesis Energy, Mercury, Meridian, and Contact, are considering market options to bolster the nation’s energy security, in response to the challenging market conditions experienced during winter 2024.

The country faced a critical shortage of energy supply due to a rapid decline in natural gas reserves, low hydro lake levels, and minimal wind generation. The medium-term outlook for gas supply remains a significant concern.

To address this, the four companies have entered into a non-binding heads of agreement to explore the continued operation of the Huntly Power Station Rankine Units. Originally, one unit was slated for retirement in 2026, with the other two to follow in the early 2030s. However, these units may play a crucial role in managing ‘dry-year risk’ and enhancing system security as New Zealand increases its reliance on intermittent wind and solar energy.

The commercial structure for this initiative is still under development, with key terms such as pricing and costs being negotiated. Potential components of the structure include a strategic fuel reserve to mitigate disruptions to other fuel supplies and arrangements akin to the Huntly Firming Options introduced last year, which could be extended for up to a decade.

The new arrangements are expected to be implemented by 2026, pending regulatory approval.