By Amanda Morrall
New Zealand power companies have been reaping the benefits of unusually low wholesale prices for electricity due to reduced demand and an abundant supply, but consumers looking for a discount are out of luck.
Despite average wholesale prices having fallen by more than quarter in the year to May, retail electricity prices have gone up more than 7% during the same period.
The Haywards average price benchmark (HAY2201), shows wholesale electricity prices were 22.6% lower in May 2011 than May 2010 with average prices per megawatt hour of NZ$36.31 this May compared to NZ$49.47 in May 2010. In May 2009, they were NZ$59.1 per megawatt hour.
The slide in wholesale prices is weather related. On one hand, heavy rain has boosted supply at New Zealand hydrostations. At the same time, unseasonably warm weather has resulted in reduced demand.
Powershop CEO Ari Sargent said demand is down 5-7% from normal usage this time of year.
Consumers hoping to catch a break shouldn't hold their breath.
Unlike mortgages where consumers have the option of a fixed or a floating rate (the latter more accurately reflecting current market conditions) electricity consumers don't have the luxury of choice.
Sargeant said it wasn't realistic to assume that electricity prices would reflect the variable rate because the business model isn't built to handle them.
"Unlike petrol, the price at the pump so to speak doesn’t change every day or every week. Typically retailers change their tariffs on an annual basis or at most a couple of times a year. Normally most retailers, ourselves included, will procure a large amount of energy either through hedging arrangements or through our own generator.''
Powershop is a wholly-owned subsidiary of the Crown-owned power company Meridian Energy.
While retail rates may seem sorely out of step with wholesale prices, Sargent said 40% of the retail price typically related to the cost of distribution and transmission.
He said power companies with a higher exposure to Christchurch were having to contend with increases in distribution costs related to damaged infrastructure and rebuilding.
Yet the 7% consumer increases shown in the chart below reflect energy prices alone, exclusive of line costs.
New Zealand's Electricity Authority said the authority did not presently monitor price differentials between retail and wholesale prices.
CEO Carl Hansen said statistics comparing the two were not a "meaningfully indicator of competition'' because of the complexity of the market.
Hansen said the Electricity Authority was in the process of establishing a market monitoring function and would be "developing a range of indices to measure the competitiveness, reliability and operational efficiency of the electricity sector. "
Hansen said the authority's mandate wouldn't be affected by the potential sell of Government-owned power companies Genesis, Meridian and Might River Power.
"The Authority’s role is to regulate key components of the sector regardless of the ownership mix of any participant,'' he said.
"Section 15 of the Electricity Industry Act 2010 requires the Authority to promote competition in the electricity industry for the long term benefit of consumers, which the Authority is pursuing through several initiatives on its work plan. As with other markets, competition for customers is the primary means of providing efficient prices to consumers.''
Free market?
Powershop has questioned that free market mantra.
Sargent said private players dealing in electricity were at the higher end of the price spectrum when it came to retail prices with Crown-owned companies in the middle of the pack.
To what extent retail prices could be impacted by the partial sell-down of these sovereign owned entities (SOEs) remains uncertain, he said.
"The unknown to me is if the Crown will retain majority ownership (which they say they will). Will they go to the same extreme as other private players or remain more moderate,'' in terms of price.
You would expect there to be more commercial pressure on them once you’ve got a proportion of the SOEs in private hands. How much that majority end will moderate that pressure is unknown until it becomes a reality.’
The weather is also a wild card. Sargent said material price jolts would more likely be effected by macro-economics not mother nature.
"Part of the problem is that most of the industry takes historical records as an indicator of the future.
"If you get one or two wet years, it won't have a huge impact on the way electricity generators view wholesales prices. Demand is a bit more fast reacting. If you see the current recession and so on continue you would expect demand forecast to remain lower. Temperature effects are less directly built into forecasts.''
Futures contracts reflect that outlook, said Sargent.
Quarterly contracts for Otahuhu (a power station on the North Island) and Benmore (South Island) show June 2012 contracts priced much higher than June 2011, reflecting current lake levels. (For details see the NZ Electricity Future Options on the Australian Stock Exchange.)
Electricity prices, Retail
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53 Comments
The consumer is being raped by the Power companies and Government as per usual. I was forced off my farm by Transpower by the fact of giant pylons going across the farm and one being right by my house and sheds. I could write a book on the money that Transpower wasted on my farm. Repeat that a few hundred times and tens of millions of dollars would have been wasted. It is really a crime how these companies are allowed to waste taxpayer money and rip the consumer off and then pay out a big fat bonus to shiney arsed parasite CEOs for wasting money. Key and English and co have done nothing to address this waste and are no better than the no-hopers that went before them. Labour! No wonder this country is in debt up to its eyeballs.
You can imagine what the locals here think about Mighty River Power.
Could we please be a bit more thoughtful about using the term "rape" as a metaphor? If you had a choice between being raped and seeing electricity companies making more profits at some times than at other times, I doubt you'd think it a finely balanced call between equivalent options.
The point is many wholesale contracts and pricing are multi-year timeframes. When the prices were bad in the dry years, did we see that full impact? no we didnt....so if this year you expect a drop then frankly be prepared to reap the full costs in a dry year.....bet you wont want that...
regards
Have you checked out Meridian's latest campaign using the West Wind farm? What a joke. These things are the real reason power prices are going up. If it weren't for subsidies and tax breaks we wouldn't even have them. Shame we can't learn from the Danish experience, where wind energy is nearly bringing the country to its knees...
We need more power production I think our demand is growing 4% per year... so, if not wind, where from?
Wind it seem is viable, why else install them in NZ? Energy companies have not been told to by Govn? Can you show how the cost of energy increasing is directly related to chosing wind as opposed to the costs of some other generation? so what we need to see it the NET difference...
If say we are paying 10% more because we have more generation to pay for anyway....and Meridian is choosing wind over others why isnt that a sound economic/business decision?
The Danish experience, to start with they moved early on the technology and yes they are subsidized....however we are not....also their economy is not being brought to its knees but there is a penalty to GDP...however this seems to be what voters wanted and accepted.
"they paid $1.3 billion in subsidies from 2000 through 2008" so in 8 years they paid all of about $2Billion NZ.....not a huge amount....hardly bringing the country to its knees.
http://www.masterresource.org/2009/09/iers-danish-wind-study-response-t…
Also consider,
"To understand Denmark’s electricity situation, we must first understand electricity production in Norway and Sweden. When electricity from wind is produced but not consumed in Denmark, the electricity is exported to Norway and Sweden. This electricity directly replaces hydropower in Norway and Sweden, allowing Norwegian and Swedish lakes and reservoirs to retain more water than release the water to produce electricity. This is only possible because of Norway and Sweden’s vast hydropower resources. According to the International Energy Agency, in 2006, over 98 percent of electricity production in Norway was produced by hydropower[1] and 43 percent Sweden’s electricity was produced by hydropower.[2]"
So this is quite similar in NZ, having wind could be a good buffer for us in dry years...we keep the water in the dams...Im sure if you found out we were goign to have brownouts or blackouts you would be bleating very loudly... Such alterntives give us resiliancy....that is usually at the expense of efficiency / lowest cost....but it means we have survivability.
Some examples,
"In a letter to the Glenwood Springs Post Independent newspaper, Arensman points out that Glenwood Springs' municipal utility recently contracted with the Municipal Energy Agency of Nebraska (MEAN) to raise the share of the city's energy coming from wind from 12 percent to 28 percent. He writes: "Our energy consultant (JK Energy) estimates that more than doubling our wind energy purchases will cost the city about $162,000 annually. The resulting 1.5 percent rate increase will raise the average homeowner's $55 electric bill by less than $1 a month."
In addition, Arensman says, Colorado's state renewable electricity standard has not damaged its economy, but rather, led to a clean-energy jobs boom. Colorado today ranks fourth nationally in such jobs, with 1,600 companies employing 19,000 workers. Comments Arensman, "Rather than destroying the free market economy, we're making a deliberate choice to significantly reduce our carbon emissions while supporting the growth of a thriving, increasingly viable clean-energy economy."
It's worth remembering that under the Bush Administration, the U.S. Department of Energy's 20% Wind Energy by 2030 Technical Report found that obtaining that amount of electricity from wind would cost the average household about 50 cents a month. At the same time, it would:
- Support half a million jobs.
- Provide $1.5 billion annually in property tax revenues by 2030.
- Provide payments of more than $600 million a year to farmers and ranchers by 2030.
- Save a cumulative total of 4 trillion gallons of water, or 80 percent of the amount in Utah's Great Salt Lake (5 trillion)."
So lets think on this.....50cents more a month, what is the expected price rises of coal and oil in the next few years? 50cents as insurance against fossil fuel rises....
regards
Steve,
Just remember to be critical when you read these reports - reality is often different (start here: http://www.windaction.org/ ). There is a fellow in NZ somewhere called Brian Leyland - try and look him up. I think he is a goon of the coal companies but he articulates very well why our future is not with wind power. We still have hydro options in NZ, once the red tape can be cut.
The nub of the Danish problem is that, unlike hydro, wind turbines can't act as batteries, that is, when the power is made the power must be used. The second problem is their inefficiencies, on average they are producing electricity 20% of the time. Of that, much is at night when demand is low. Per kilowatt hour we may as well start paying our unemployed youth to generate electricity on exercycles!
And as for Meridian, it is not a sound economic/business decision, rather a political decision. And good to hear that wind energy has saved Colorado's free market.
Wonder where that $600 million to pay farmers and ranchers came from...?
I attended a couple of lectures a while back, one by Greg Sise, a fellow who had dealt on behalf of big corporates, to secure lower (bulk - ha) rates for them. At the expense of all the individual folk.
Then the more enlightening one, from David Caygill, where he pointed out that each new generation source, is the cheapest next option. By default, that means every new generator will be more expensive than the last. As will it's produced power. None will ever be cheaperthan the present.
Combine that with the increasing cost/contention of fossil energy, and the inevitable displacement (electric cars and the like) impact.
Then add what I hammer on about here - that the ability to pay is itself underwritten by a peaking energy supply, and you get to where energy relative to incomes has to become more expensive.
The answers are few - but efficiencies are one of them.
http://www.physics.otago.ac.nz/nx/eman/eman-410-seminar-series-downloads.html
not sure if wind farms are the next cheapest option.
I Agree we should value our finite resources.
Instead of exporting coal (53%of coal mined ) we should build more coal fired power stations near the demand(Auckland) and cease the "Green Extavagence" of wind farms which visually pollute the rest of NZ
LOL.....so lets not have some visual pollution, lets have real sulphur, carbon monoxide, ash, etc etc pollution....and then there is the obvious health damage....
"In addition, the National Academy of Sciences found in a 2009 report that fossil fuels annually cost Americans $120 billion in health damages alone. But, even that number may be too low--a recent study from the Center for Health and the Global Environment at Harvard University puts coal's hidden costs at $300 billion to $500 billion a year.
...that makes no sense...
regards
That's an interesting piece of something, DonM.
Not sure if I go with it, though. Seems to me that building more infrastructure to gobble up finite resources more hurriedly, isn'e exactly 'valuing our finite resources'.
And - if you don't like the visual pollution, there's another way - efficiencies.
I run a house on about 5amps/12 volts, so about 0.06kw/hr. If every house did so, we could run electric cars as well as our houses (existing stock) on our existing hydro.
Is there 'money in it'? Yes, for the consumer........
the govt is acting quite cynically. they have forced up the price of power with two things in mind, firstly to recognise a reasonanble return on assets, and secondly with the intention of eventual sale. ROE is affected by asset valuations. All i can say is the SOE power assets must be enormously overvalued to warrant the price of power in this country, or the bloated pay packets of those working in these organisations are way out of step. generating power when you have an abundance of water (as NZ does) is not rocket science. they only make such hugh profits due to the fact that the barriers of entry are enormous, and that the taxpayer has over the years (through taxes) paid for the infrastructure many times over. The price of electricity is a massive driver of inflation here and is seriously undermining our competitive advantage. why on earth someone (some company) hasn't set up a business to mass produce and install solar panels I'll never know. I would be happy to fund...
KANE02 - mini/micro hydro is the first one to consider. There's a lot of potential, it doesn't need dams, and it doesn't care about cloudy days, night-times, nor gales. It just ticks over 24/7.
I've retired our solar, and long-ago jettisoned wind (I'm sure I could have phrased that better!), mini-hydro is seriously better.
And no, I'm not a tout, don't make money from the game.......
I like mini/micro hydro, however there is an assumption that in dry weather there will be a stream...(near me).....I suppose the answer to resiliance is have wind as well....I agree on Solar, for me it just doesnt make long term sense....
Ive been looking at some micro turbines from the US....I should look at is harder....cant be that hard to make my own....if you can power the lathe/miller of course...
Im glad I/we have you as the bug in the test tube.....no sense in making the same mistakes twice....
regards
Find yourself an old washing machine Steven, the motor is the most expensive bit.
F&Psmart drives are apparently very good.
Also PDK's has mentioned the good idea of wind to pump water up to a dam/reservoir is the go for the battery:)
Of course the one place tha solar really makes sense is to power the fridge/freezer. Combined with thermal as the battery to store the cold.
No need to reinvent the (pelton) wheel, folks.
Rainbow whatever-they-are in Nimbin NSW, sell rotors. $160, last time I looked. Others (Ecoinnivation for one) sell the spoons, and you could use anything at all for the centre part.
You can use the Smart Drive, but you have to cut the washng drum off the boss, then turn the boss up, and use it as the carrier.
The better is the Gentle Annie - maybe not so efficient (splitting straws), and maybe limited in total output, but it is a metal-frame motor, easily re-wired to delta (3 pairs of the coloured wires, they're all the same colour-code) and it can carry the rotor on it's own shaft - no alignment problems.
I have about 50, if anyone wants one. You need to find one with grunty magnets - when you spin them you can feel the 'cogging', the harder the better.
With a 12 volt system, they're only going to be doing about 150 revs (no spin!) and they'll never die.
On the cheap, I'd make spoons out of warehouse teaspoons, bash a ridge along the middle, twist the handle at right-angles, and bolt them to an old 1/2 inch shaft pulley.....
no wind farms near you eh Steven?
Never mind the extra roading, lines ,pylons ,feeder stations criss crossing their way up the island...that makes no sense.
also large transmission losses to get there make to process less efficient.
Went to an"open day' a while back(no expense spared there).The is a massive wind farm (280 turbines 150m high)going in.The total extra output from these will at best be absorbed by about 4-5 years growth in electricty demand...that makes no sense as in 4 years time we have to do it all over again...
I have a mate who has an awsome site for private generation(hydro to supply power to himself and 3 neighbours in a remote valley)Genesis said ok and you can supply to the national grid but we will pay you only 4c/kwh.He still will go ahead with the project but wont be supplying them.(He will probably leave all the lights on at night and give them the finger)
modern coal power gaeneration is much less polluting than in the past.any way Auckland has nothing out east and a prevailing westerly wind?
Yes I can see wind farms...but yes I have to climb a hill to do so and look over the ridge....they dont bother me in the slightest considering the benefits....get used to the fact that if you want power and a workable economy wind will be there....providing it.
The transmission lines across the country make perfect efficiency sense, the losses are a tiny %...there are no "large" losses, we get hydro for free bar the payback on the capital to build the dam and a small amount of maintenace....no coal to dig out and maybe cost lives...or get scarce.
I dont know were you get "modern coal power is much less polluting" from....lets see some URLs. A lot depends on the quality of the coal, NZ's cheaper stuff (all the North Island coal?) has a high-ish sulphur content from what I recall.
4c/kwh is probably the fair wholesale rate, there is no sense in them buying it at much else and not having it reliable either he is after all a single plant Sure leave the lights on, he pays for the light bulbs sems dumb.....personally I'd take the 4cents its in effect free $, after all he's paid for the plant already.
regards
transmission losses typically around 7% but has been up to 14%
I wouldnt call that "tiny"http://www.tradingeconomics.com/new-zealand/electric-power-transmission-and-distribution-losses-percent-of-output-wb-data.html
Don m - you'll be a climate-change denier, then?
Your mate should contact SEANZ.
I understand they have a feed-in agreement which is one-for-one, in and out.
Sure your 'm' isn't an 'E' ?
"Genesis said ok and you can supply to the national grid but we will pay you only 4c/kwh." What a bunch of thieves! In France, in order to entice people to install solar panels people have been able to take up 25 years contract with EDF (state-owned French electricity company) and they get paid 6 times the rate they pay to buy when they sell it to the grid! Not quite the same deal (like many people my parents are on it and make a nice income from it too).
In other words, other electricity consumers in France - those who are not wealthy or fortunate enough to own a property which is suitable for installing solar panels - are having to pay a higher price for their electricity in order to provide your parents with a nice income.
What public good exactly does this help, that could not be achieved in other cheaper ways?
The electricity prices haven't increased because of that as far as I know (although I'm sure EDF profits have plummeted but it's a state-owned company so...). The cost/kWh is less than it is here.
Btw, the installation cost of solar panels are heavily subsidised (way more than the 1K offered here) to make them as affordable as possible. That's how keen they are for people to go for clean, renewable energy.
If EdF are paying far more for electricity from this source than they could pay by obtaining electricity elsewhere, then that is imposing an additional cost on somebody, be it the taxpayer or other electricity consumers.
If the object of the exercise is to deliver more energy from clean, renewable sources then there are other, cheaper ways of doing that. Small-scale solar electricity generation is, by some considerable margin, the least cost-efficient of all the ways that are available to reduce carbon emissions. The same amount of money could buy more clean, renewable energy, or alternatively the same amount of clean, renewable energy could be bought for less money, through other technologies.
"Small-scale solar electricity generation is, by some considerable margin, the least cost-efficient of all the ways that are available to reduce carbon emissions" Really? I didn't know that. We are planning to install solar panels soon at our place and I'm looking forward to paying Meridian less. If there are other better ways to do that, I'm keen to be enlightened.
As for the French scheme, I'm sure it's not perfect and from what you say possibly not the best option but my parents didn't come up with it. Since it was implemented, it'd have been stupid of them not to take up the offer (for the record, they didn't take it up for the extra income, that was a bonus. They actually like the idea of self-sufficiency and pretty much produce/catch all their food and my dad recently dug a well for water, in addition to producing their own electricity).
What a stupid and unhelpful comment. And to think I was actually expecting some useful advice...
The amount used is irrelevant. The question is, for the same amount consumed, why should I pay the amount charged by electricity companies if the option to pay less is there? It's like not shopping around and accepting the first quote you're given.
I'm not among the people who happily accept the price gouging by NZ electricity companies (like 7% increases every few months at some point) and since there are ways to buy less from them by producing part what I consume myself through solar panels, I'd have to be plain dumb no to do that. What I was interested in knowing is the other better options you hinted at. None by the sounds of it.
MdM - easy. The public good is that the inertial smack of an exponentially-growing collection of activity (much of it increasingly specialised, much of it reliant on just-in-time transport logisitcs) into the inevitable peaking of energy to run it all, is lessened.
It softens the real landing, for real people. Not sure that artificial proxies for energy (dollar notes) matter very much, in comparison.
If at all.
Then there's the wee problem that the others are not paying their way - Yucca Mountain didn't work, and there's no other way figured out yet - so presumably some future generation is going to be expected to pick up the tab.
I think its the same in the UK, but that makes no sense....all its really doing is robbing Peter to pay Paul..
Its an enticcement, but who pays and is it economical to do so? When in effect the retailer is forced to pay retail prices there is no margin for them and building hundres of small plants could well cost more than 1 large plant, be less efficient and emit more CO2....
NB Its not theiving its probably a fair-ish market price....
regards
I don't know if it makes "no sense". The idea was to encourage people to take more responsibility for what they consume and become more self-sufficient (unfortunately, without the "bribe" I'm guessing that not that many people would have bothered).
It's not economical long-term that's for sure. The cost of the French scheme was covered by the govt but it's been so successful that they have had to make changes because it's costing them too much (eg the contract can't be for 25 years anymore). Still, as a result millions of households in France have installed solar panels and I think that's a pretty good thing (not that I'm an expert on energy).
So we have installed lots of solar panels on roofs the end result of which is probably less efficient overall than other solutions. The ppl how have installed probably can afford it, but the ppl who cant like OAPs are subsidising them with dearer electricity or higher taxes.....so it makes some ppl more self-sufficient, maybe, but in effect it makes others less....they are robbed of money that could be giving them choices. It makes the ppl who can afford it feel good, probably squashing those nasty moral issues like pillaging the planet and robbing their kids futures...
So you think its a really good thing but you dont know if its actually any good.....how can you know its any good without some evidence it is? it just feels right?
More than anything I suspect its a sop to make it look like the Govn is trying to do something about AGW....when in effect they are not....
Real sustainable options is the likes of hydro, wind in fairly big plant. Probably insulation and other energy efficiency techniques. these however dont address the energy squeeze coming, in transport energy....solar isnt portable....the thing to save on is petrol and deisel.
regards
LOL. I know it's a good thing for me to pay a lower electricity bill!
I'm not feeling too sorry for people who can't afford it despite the fact more than half the cost is paid for them and that the rest is recouped very quickly under that scheme. It only costs a few Ks to install solar panels even without any subsidy so if someone can't afford that I have to wonder how they could afford to buy a house in the first place.
That's where the 'head' systems (peltons and to a certain extent turgos) wil out.
We just bypass, and it's just a percentage of the flow, goes back in after the drop. It's also an artificial ditch, but the Koura don't know that.
No omelette was made without cracking eggs, but mini hydro is one of the better.
The Enron example here in California comes to mind. Who's seen "The smartest guys in the room"?
Watch it, and then maybe look at NZ power supply increases from the likes of Contact for example. You will note similar excuses being used to jack up the price, only............they don't cut your power off on purpose and then claim "demand overloads" are the problem. No.. in NZ apparently it's a "supply problem" EVEN when the southern lakes are full to the brim and the wholesale price is way low. Go figure
1. Geothermal (7c/kWh) and wind (9c/kWh) are the two cheapest sources of new electricity in New Zealand. They are unsubsidized. However, note that the present wholesale electricity price is 3.6c/kWh so almost all of the retail price (I pay 26c) is not the actual cost to the power company of buying the electricity. Actually, I am not quite sure what the 26c goes towards.
2. The average load factor of wind turbines in New Zealand is 40%, not 20% as stated, which is higher than in other countries and also higher than the load factor for coal.
3. Bryan Leyland is a prominent climate change skeptic/denier and one of the most active members of the NZ Climate Science Coalition.
4. Domestic solar currently costs about 35c/kWh so it's not strictly economic yet in the narrow sense, unless you are off-grid or want to reduce your carbon emissions.
5. Paying students to generate electricity on exercise bikes - at 100W sustained power generation, $13/hour, this would cost $130/kWh or 1400 times the cost of wind power.
6. There were a lot of comments about the benefits of saving power - unfortunately the truth is that we have a very bad track record at this. The easiest savings come from solar hot water, a guaranteed 13% tax-free return on your investment, but less than 4% of NZ houses have it. Mitre 10 is full of 2400W electric heaters selling at about $60 that would cost $2300 a year to run if left on 10 hours a day. There are also still hundreds of thousands of houses with no insulation at all.
One needs to factor in the inconvenient fact that other. constantly spinning power sources are needed to plug the 60% gap (your figgers) when the birdkillers aren't.
Oh, and my Powershop average for the last year is a whisker under 20c. so there's (counts madly on fingers and toes) 23% savings on your quoted 26c, right there. Who says conservation is hard?
We would need about ten times as many windmills as at present before we would need to worry about wind variability. As someone else pointed out, when the wind is blowing water can be saved in the hydro lakes. Wind, hydro and geothermal (with the prospect of some tidal power) would give NZ a very reliable and renewable electricity system (although it's not certain yet how long the geothermal will last).
Interesting about powershop, I had a look and in my area they charge 25c a unit, although there is no daily fixed charge (I pay 30c a day for that).
I'm not saying conservation is hard for any particular person or household (our household has cut its usage by 75% recently), I'm saying it appears to be hard for the country as a whole.
Probably the birdkiller line was just a wind-up, but please post a link if you have one. All the studies I have seen say that wind turbines are responsible for a tiny fraction (0.1%) of human-caused bird deaths. Power lines are far more dangerous for starters.
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