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Meridian buys power from rival Genesis amid strong demand, declining storage

Thursday 14th February 2019

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Meridian Energy, the country’s biggest hydro generator, has bought electricity from rival power company, gas/coal generator Genesis Energy over the past two months. This is a sign it is trying to manage its hydro risk coming into winter.

The hot, dry weather has seen more use of air conditioning and irrigation systems, increasing electricity demand. But at the same time it has caused lake storage levels to fall.

Meridian has a "swaption" contract with Genesis which it uses to cover its production when its lakes are low or there are other shortages in the market. It can draw up to 100 MW at any time, and up to 150 MW during the winter months.

Meridian also bought power from Genesis in October and November when lake levels were falling, gas supplies were tight, and Genesis and Contact Energy had plants shut for maintenance.

Genesis said national demand in January was almost 2 percent higher than a year earlier. Its retail volumes were 10 percent higher than January last year, with all segments – including irrigation – showing increases.

Corporate sales volumes were almost 19 percent higher, while volumes drawn by the Tiwai Point aluminium smelter, which late last year restarted its fourth potline after a six-year break, were close to the new contract level of 622 MW.

Wholesale electricity prices remain high as maintenance at the Pohokura gas field limits supplies and unusually hot weather pushed demand to new summer records. North Island storage is also declining amid the sustained dry weather and snowpack at Meridian’s Waitaki catchment is already gone – about three weeks earlier than usual.

Power cost an average $190.83 megawatt-hour on Feb. 12 - 80 percent higher than a year earlier, according to Electricity Authority data.

Sustained high electricity prices have boosted the share prices of all the major generators. Meridian shares last traded at $3.785, almost 36 percent higher than a year ago. They reached a record $3.79 yesterday.

Meridian noted that January temperatures had been the third-highest on record. Last week, national grid operator Transpower said increased air conditioning and irrigation load pushed peak and total demand for the three days starting Jan. 29 to their highest summer levels since the market began in 1996.

Electricity futures prices rose last month after OMV confirmed maintenance work at Pohokura, the country’s biggest gas field, would reduce supplies for about 30 days during February, March and April. That work started this week.

Meridian said good hydro and wind production saw it generate 1,138 GWh of electricity in January, up from 1,055 GWh in December and 968 GWh in January 2018.

It received an average $125.30/MWh for that output, up from $98.80 in December, but down marginally from $127.30 last year.

Meridian says storage in both its Waitaki and Waiau catchments were slightly below average at the end of January.

EnergyLink data shows that Lake Pukaki, operated by Meridian and the country’s biggest hydro reservoir, was at a seven-month high last week and slightly above average February levels during the past five years.


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