Review to probe 'complex issues' stemming from emergency hydro storage (2025)

Transpower says it is putting New Zealand's security of electricity supply first, when it comes to deciding when hydro storage held in reserve can be used.

Transpower's head of operations Chantelle Bramley said its issues paper received a wide range of feedback from stakeholders that delivering a secure supply of electricity now and into the future was the priority.

"We've listened, and it's clear from feedback that there are complex issues to be addressed in the review to ensure any permanent change doesn't inadvertently have an adverse impact on security of supply," Bramley said, adding a full review was underway with a paper to be issued before winter 2026.

"Some generators have asked for easier access to the water, and that's a legitimate question that we will consider in the review.

"In the meantime, stakeholders have confirmed that the system operator should retain discretion under the rules to trigger earlier access to additional water, known as contingent hydro storage, if it becomes necessary this winter."

At issue was New Zealand's reliance on an ageing fleet of thermal generation units to provide back-up to renewable energy resources when the wind was not blowing, the sun was not shining or there were prolonged dry spells, such as the weather conditions seen this year and last.

"There are no easy answers here," she said.

"Making it easier to use contingent hydro storage to reduce gas and coal burn may feel like a no-brainer, but it isn't. It is our fuel of last resort. If we use our contingent hydro storage early and it doesn't rain, we can run out of energy later in winter.

"Our decision puts New Zealand's security of supply first, while giving hydro generators much greater clarity about the process for accessing contingent hydro for winter 2025."

Bramley said Transpower also had to take into account future years as well as the immediate situation.

"If we use the contingent hydro stored water this year, we enter the next year relying on above average levels of rain to top up the lakes for winter," she said.

"In all of these circumstances the risk of electricity shortage is very real, and this drives the potential for very high wholesale electricity prices, like we saw last year."

Transpower data indicates New Zealand's controlled hydro catchments had the driest start to the year in 93 years of historic records.

"A system-wide response is underway, including continued focus on managing hydro storage levels and securing alternative fuel supplies such as coal, gas and diesel."

Bramley said it was important for the market to continue to co-ordinate early to increase the energy buffer heading into winter 2025.

While recent inflows had eased the decline of hydro lake storage, she said national controlled storage was sitting at just 82 percent of average for this time of year, which was at the bottom 10 percent of historic levels for this stage in April.

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