The CFD index fell by around 20% this month, not because contract prices fell, but because nine of the 16 CFDs included in the index have terms of five years or greater. This tends to average out some of the high prices currently making up the ASX forward curve.Four CFDs have terms of 10 years. FPVV terms are also longer than the typical, but none went beyond five years.
By Lydia Maclean, April 26, 2022
By Lydia Maclean, April 12, 2022
Everyone is wondering why spot and futures prices are so high at the moment. There is more than one extraordinary factor involved here, including fall-out from the war in the Ukraine to large a degree, but today we look at one that can be easy to miss.
By Lydia Maclean, March 28, 2022
The Electricity Authority’s Market Development Group (MDAG) recently consulted on the initial phase of its investigation into price formation, with 100% renewable generation in our energy-only market. Energy Link contributed to this work and has also submitted.
By Lydia Maclean, March 22, 2022
The CFD index pushed up again this month, toward the ASX three-year average, but the FPVV index went down slightly on a greater volume (relative to CFDs). So overall, the main index rose by 1.8% to 11.3 c/kWh.
By Ruth McKinlay, March 14, 2022
We have often pointed out that ASX futures prices don’t always appear to behave rationally. In this post we look at the spread (difference) between the ASX futures prices at Benmore and Otahuhu.
By Greg Sise, March 7, 2022
As we make the transition to net-zero carbon, it’s always interesting see forecasts of emissions in the future. Every time we run our quarterly long-term forecast, the ‘Price Path’, we get updated forecasts of how emissions might change in the electricity sector.
By Ruth McKinlay, February 28, 2022
After a strong finish to 2021, the traded energy volume for index-qualifying contracts fell sharply this month, though the total number of contracts traded remained relatively high: 9 FPVV and 8 CFD.
By Ruth McKinlay, January 24, 2022
2021 finished with a flourish, with 24 contracts qualifying for inclusion in the index and a total volume of 2,471 GWh, the second highest volume since mid-2018. This may reflect pent-up demand for contracts after a long period of high prices, with buyers taking the opportunity to lock in prices while the spot market was relatively settled in the lead-up to the summer holidays.
By Greg Sise, January 18, 2022
The frequency of blog posts fell off last year after October as we found ourselves in an early Christmas rush period. We hope to be more consistent this year. First up, our submission on the Electricity Authority’s wholesale market review.
By Greg Sise, December 20, 2021
CFD index went down, FPVV index went up, so no change to the overall index this month, which stayed at 11.1 c/kWh ($111/MWh)
By Greg Sise, November 22, 2021
The main index fell by 7.6% this month, mainly the result of a fall in the FPVV sub-index. This month the data showed six new long-term contracts of ten year terms, following on from the three that appeared last month.
By Claudia McHerron, October 28, 2021
The main index rose this month as buyng pressure came back into the futures market. Three large CFDs are excluded from the indexes because they are ten years in length or more, and therefore are exempt from price disclosure under the Electricity Industry Participation Code.
By Greg Sise, October 15, 2021
We talk about the Tiwai Pt aluminium smelter almost every day at work – will it stay, or will it go? But it occurred to me today that I have absolutely no idea what Tiwai means in Te Reo Māori. I went searching, and was surprised at what I found.
By Greg Sise, October 5, 2021
A new hedge contract started trading in September 2020. It’s a cap product with strike price of $300/MWh. Over 320 of these contracts traded so far, but we still don’t know who is selling them.
By Claudia McHerron, September 28, 2021
The main index continued its fall this month, as did both the FPVV and CFD indexes. The traded volumes in the indexes were relatively low again this month, perhaps as a result of lockdowns, but this may be pure coincidence.
By Greg Sise, September 17, 2021
This week Greg Sise provides a summary of his presentation on the problem of price formation with 100% renewable electricity, which he presented at the the Electricity Authority’s Market Development Advisory Group (MDAG) recently.
By Greg Sise, September 7, 2021
Thursday of last week, 2nd September, marked the 25th anniversary of Energy Link Ltd. This post is a reflection on company and personal history, against a backdrop of an industry in transition. Over the last 25 years, it’s fair to say that some things have changed, but then some things have not.
By Paul Chapman, August 31, 2021
Forecasts of spot prices are an important tool in the hedging toolkit, and this post provides an overview of the role of forecasts in hedging.
By Claudia McHerron, 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.
By Greg Sise, August 17, 2021
The blackout event of Monday 9th August caused a huge amount of negative publicity for the electricity market, but let’s take a closer look at some interesting aspects of this event.
By Claudia McHerron, July 23, 2021
The main index rose this month, but it does look like the market is at a peak, and the CFD index actually dropped like a stone this month, though this was on only one CFD contract that could be included in the indexes.
By Greg Sise, July 16, 2021
The Gas Industry Company (GIC) recently released a consultation paper on gas market settings and whether these are fit for the purpose of helping New Zealand through the transition to low-carbon energy. Somewhat belatedly, here are my thoughts.
By Claudia McHerron, June 23, 2021
There were 7 contracts traded that were eligible to include in the index calculations this month, which was a step up from last month which had only 3 contracts.
By Claudia McHerron, June 15, 2021
There were only 3 contracts traded that were eligible to include in the index calculations this month, following the trend in April of low volumes of trading.
By Greg Sise, June 14, 2021
Our prototype LCOE calculator is now live!
By Paul Chapman, May 28, 2021
“Are there any risks in using CFDs to hedge wholesale electricity prices?”
By Greg Sise, May 21, 2021
Electricity contract prices have risen, and could rise further. Every month we publish the electricity contract index, but I thought it's instructive to delve deeper into the underlying contract data.
By Greg Sise, May 16, 2021
In New Zealand the contract-for-differences (aka CFD) is the most common off-exchange method for hedging the price of electricity traded on the wholesale market for a specified quantity and time period. In other words, the CFD is a fundamental tool in the hedging toolbox.
By Greg Sise, May 7, 2021
"Electricity prices are high at present. Gas prices are also high. Who’s setting these prices?”
By Claudia McHerron, April 30, 2021
There were 8 contracts traded that were eligible to include in the index calculations this month, but the last of these was on the 6th April, and since then nothing has traded in the OTC market (or at least not that meets the index criteria for size and duration).
By Greg Sise, April 23, 2021
“We’re about to launch a new, free tool on our web site. It calculates the LCOE of your generation project. But what the f*&% is it?"
By Paul Chapman, April 18, 2021
This blog post follows on from Hedging Fundamentals Part 1 and answers "Why are spot prices in the NZ wholesale electricity market so volatile?"
By Greg Sise, March 28, 2021
What’s behind the high spot prices? We take a more detailed look at who is setting prices, when and why.
By Claudia McHerron, March 19, 2021
There were no FPVV contracts traded over the last month, so the FPVV index goes sideways this month, i.e. it defaults to last month's value of 10.2 c/kWh. Strong CFD growth has brought the main index up to 12 c/kWh.
By Paul Chapman, March 19, 2021
This blog post breakdown the fundamentals of hedging and provides an answer to the question "What is a hedge?".
By Greg Sise, March 12, 2021
If you have some small-scale generation, how do you sell its generation output? This post briefly describes some common scenarios.
By Michael Cawte, February 24, 2021
Both the FPVV and CFD sub-indexes rose sharply this month, and the main index jumped almost 16% as a result. Hardly surprising, given the seemingly inexorable upward movements in spot and futures prices.
By Greg Sise, February 1, 2021
We now know that the Tiwai smelter is likely to be around for another four years to December 2024; but prior to 14th January we didn’t know this. What do futures prices tell us about futures traders’ views of the probability of Tiwai staying longer than August 2021?
By Greg Sise, January 21, 2021
The Tiwai Pt aluminium smelter has received a stay of execution, with the news last week that Meridian Energy and the smelter’s majority owner, Rio Tinto, reached agreement on 13th January to amend their existing agreement so that its termination date is now 31st December 2024, and not August 2021.
By Greg Sise, January 21, 2021
The FPVV sub-index went up this month, but the CFD sub-index went down. The net result was the main index more-or-less went sideways, increasing by just over 1% to 8.9 c/kWh.