Concerns about New Zealand’s energy supply security and affordability are intensifying as winter 2025 approaches, following the crisis of the previous year.
Key figures from industry, policy, and energy companies met at the New Zealand Downstream 2025 conference in Christchurch to address issues such as hydro storage shortages, gas supply constraints, and growing dependence on thermal generation.
Many remain sceptical about the sector’s preparedness for the challenges ahead, despite reassurances from leading energy companies.
A Worsening Supply Situation
Energy Minister Simon Watts did not mince words when addressing industry leaders at the conference. “Hoping for rain” is not a strategy, he warned, making it clear that government intervention may be necessary if companies fail to secure adequate energy supplies.
Watts acknowledged that a failure to ensure supply security and affordability could result in serious political and economic consequences, including potential blackouts and rising costs driving further industrial decline.
Industry experts have raised concerns that New Zealand’s energy supply outlook is even more precarious than it was last winter. John Kidd, director of consultancy Enerlytica, pointed to worsening fuel shortages.
“In terms of fuel supply, the country was in a worse position than it had been heading into last winter regarding hydro storage, gas, coal, and light winds,” he stated. He also noted that wholesale electricity prices were already exceeding $300 per megawatt-hour—an alarming signal of potential shortages.
Genesis Energy’s Response
Genesis Energy, which operates the crucial Huntly power station, has taken steps to stockpile coal in anticipation of fuel shortages. However, the process has not been without challenges.
Tracey Hickman, chief wholesale officer at Genesis, explained that securing coal supplies had been complicated by regulatory changes in Indonesia, a key export partner.
“Last year, the company and the sector were generally surprised by how fast the gas supply dwindled,” she said, adding that Genesis had to rebuild its supply chain from scratch.
Although Genesis has been working to ensure Huntly’s Rankine units are available for winter, there are lingering concerns over their readiness. Kidd questioned why the units were not already operating to conserve hydro resources.
Hickman acknowledged that maintenance and certification were still required but assured that they would be prepared in time for the colder months.
However, she also revealed that one of the Rankine units was nearing the end of its operational life, meaning continued reliance on Huntly would require significant financial and logistical support from the wider sector.
The Role of Transpower, Methanex, and Tiwai Point
Other key industry players have also taken steps to mitigate supply risks. Transpower has sought regulatory flexibility to allow hydro operators to lower lake levels when necessary, while also increasing oversight of thermal fuel availability.
Meanwhile, Methanex has indicated its willingness to supply gas again if needed, offering some relief to the market.
The Tiwai Point aluminium smelter, a major electricity consumer, has agreed to reduce demand to help balance the system.
However, the reduction will not be as significant as last year, raising questions about whether this measure will provide enough relief.
Scepticism Over the Sector’s Readiness
Kidd highlighted that while industry leaders recognise the need for new firming generation to replace ageing thermal infrastructure, there has been little movement toward concrete solutions.
“All the speakers from the main players said there was a need for the new thermal-powered firming generation to reduce the risk of relying on the Huntly station,” he noted. “However, no one indicated any plans or interest in doing this themselves.”
Genesis suffered losses last year after paying high prices for gas from Methanex, only to be caught off guard when heavy rain led to lower electricity prices.
The company is exploring gas tolling arrangements, where third parties would take on the risk of purchasing gas while Genesis would generate electricity on their behalf to avoid a repeat.
Conclusion
Uncertainty lingers over New Zealand’s energy supply as the colder months near.
While government and industry actions have been taken to mitigate risk, industry leaders and policymakers remain split on whether these measures are sufficient to prevent blackouts and avoid rising electricity costs.