Submitted on August 24, 2021


The main index fell this month, as we expected it would.  


But there were only three contracts to include in the indexes, one each for CFD and FPVV, which is unusual, but not unprecedented. 


Just when you think things might be settling down, with the hydro lakes now looking relatively full for this time of year, it's just amazing how things can change, and how quickly. We posted an item on the outages of 9th August, suggesting that the new peak demand set that day is an indication that strong demand growth is returning after a virtual absence of 15 years.  


Less than a week later, we're in lockdown and demand has fallen off a "Covid cliff", taking prices with it, the more so in the South Is because the HVDC link is currently only able to operate at half capacity due to a failure on a transmission tower in North Canterbury.  


For the medium term outlook, the running average spot price of gas (which includes carbon) shown on the emsTradepoint web site fell from $21/GJ on 3rd August to just over $15/GJ yesterday, which is a big change in a short period. It's too early to be sure if this is a sign of pressure coming off gas supply, because it might be due to reduced demand as much as to increased supply, so we'll have to wait and see. But it could be a step in the right direction.  


The Electricity Authority recently issued a request for information from potential new market makers, who would be paid a fee for providing the service. These entities would add  to the market-making already performed by Contact, Genesis, Mercury and Meridian, and they will need to be experienced commodities traders with substantial balance sheets. The addition of commercial market-making is expected to increase liquidity in the electricity futures market and reduce bid ask spreads (the price difference between offers to sell and bids to buy). Time will tell if this development has the desired effect and whether it causes futures prices to behave. 


Download the pdf below for a more indepth review.