News: Blog

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.

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.

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.

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.

“Are there any risks in using CFDs to hedge wholesale electricity prices?”    

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.

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).

 This blog post follows on from Hedging Fundamentals Part 1 and answers "Why are spot prices in the NZ wholesale electricity market so volatile?"

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. 

If you have some small-scale generation, how do you sell its generation output? This post briefly describes some common scenarios.

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?

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.

Rio Tinto, the majority owner of the Tiwai Pt aluminium smelter, announced last Thursday, 9th July, that it has terminated its electricity contract with Meridian Energy and that it will close the smelter by August 2021.  The announcement is short on details, and many questions remain unanswered.

Energy Link is working as normal, from home, during the Alert Level 4 lock-down, while we all get the virus under control.  Contact us as normal, via email landline or mobile.  That’s really all you need to know, but more details are in the blog.

The gas market is opaque relative to the electricity market, but recent major gas field outages have prompted moves to improve transparency.  One of the first improvements is an initiative by the gas industry regulator, the Gas Industry Company, which

This is the third in a series of three posts on what I see as the most important issues for the electricity market for the 2020s and beyond.  The first issue was woeful lack of disclosure in the gas market, and the second issue was the ineffectiveness of the electricity hedge market.  This third and final issue is on the challenge of moving toward extremely high level

This is the second in a series of three posts on what I see as the most important issues for the electricity market for the 2020s.  The first issue was disclosure in the gas market, which has as much impact on electricity as it has on gas, and is woefully inadequate.  The second issue, and the topic of this post, is the electricity hedge market:  how it is not working for new retail

We’ve been asked many times recently why spot prices are so high, so this has prompted me to finally put fingers to keyboard for another blog.  The spot prices are a function of low hydro storage, restricted fuel supplies, and plant outages.

It’s ironic that this month’s announcement that there will be no new offshore oil and gas exploration permits issued in New Zealand was titled “Planning for the future…”. This announcement was totally out of the blue and if there is a “plan” somewhere, it appears that no one outside of government knows what it is.