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.
Manapouri Low Output
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.
100% Renewables Submission
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.
Electricity Contract Indexes March 2022, Issue 156
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.
Nodal Spreads in ASX Futures Prices
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.
Price Path Emissions
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.
Electricity Contract Indexes February 2022, Issue 155
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.
Electricity Contract Indexes January 2022, Issue 154
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.
Wholesale Market Review
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.
Electricity Contract Indexes December 2021, Issue 153
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)
Electricity Contract Indexes November 2021, Issue 152
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.
Electricity Contract Indexes October, Issue 151
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.
Of twists and turns and the meaning of Tiwai
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.
New Option Contract: Cap 300
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.
Electricity Contract Indexes September, Issue 150
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.
Price Formation with 100% Renewable Electricity
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.
Energy Link’s 25th Anniversary
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.
Hedging Fundamentals Part 5 - The role of forecasting in hedging
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.
Electricity Contract Indexes August, Issue 149
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.
Perspectives on the 9th August Outages
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.
Electricity Contract Indexes July, Issue 148
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.
Is the Gas Market Working for Consumers?
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.
Electricity Contract Indexes June 2021, Issue 147
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.
Electricity Contract Indexes May 2021, Issue 146
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.
Our LCOE Calculator Works Out the Cost of New Generation
By Greg Sise, June 14, 2021
Our prototype LCOE calculator is now live!
Hedging Fundamentals Part 4
By Paul Chapman, May 28, 2021
“Are there any risks in using CFDs to hedge wholesale electricity prices?”
Electricity Contract Price Increases?
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.
Hedging Fundamentals Part 3
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.
Who's setting the Gas Price?
By Greg Sise, May 7, 2021
"Electricity prices are high at present. Gas prices are also high. Who’s setting these prices?”
Energy Link Electricity Contract Indexes April 2021, Issue 145
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).
Levelised Cost of Energy - What is it?
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?"
Hedging Fundamentals Part 2
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?"
What's behind the high spot prices?
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.
Energy Link Contract Indexes March 2021, Issue 144
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.
Hedging Fundamentals Part 1
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?".
Selling generation into the market
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.
Energy Link Contract Indexes February 2021, Issue 143
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.
What probability did futures traders give to Tiwai staying?
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?
Tiwai Remains Another ‘X’ Years
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.
Energy Link Contract Indexes January 2021, Issue 142
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.