Facing power shortages, New Zealand calls for conservation

Hydroelectric dependent New Zealand faces blackouts in the next 2 months, unless residents cut back on power consumption, government officials warned.

Lake inflows this year are the lowest in 75 years, and there are no signs of a break in the weather pattern, Energy Minister Pete Hodgson said this week in Auckland. He called for 10% power savings for the next 10 weeks to avoid power interruptions.

“We do not yet have an electricity crisis, but we are looking down the barrel of one,” Hodgson said. Like Brazil and the western US, New Zealand has been gripped by a drought that has severely reduced power from hydroelectric resources.

Lakes Tekapo and Pukaki, which account for almost 55% of New Zealand’s hydro storage capacity, are just 34% and 40% full, respectively. Hodgson disputed an consultant’s analysis, which suggested the hydro lakes could be depleted to record lows and trust that spring rain and snowmelt will arrive in time to avoid blackouts.

“Energy Link also ignores the risk of further difficulties arising next year if we end this year with near-empty hydro lakes and then endure another dry period,” Hodgson said in a statement. “And its assumption of no thermal generation plant failures in coming weeks is very optimistic, given that most of that plant has been running flat out for 3 or 4 months.

“My plea to New Zealanders is not to gamble on the weather. Saving power now will save the much greater inconvenience, expense and danger of blackouts later,” he said.

As hydro generators conserve water, spot power prices have risen five-fold over retail prices. Retailers who weren’t hedged against rising prices have incurred huge losses, writedowns, and have been subjected to government review, said rating service Fitch Inc.

Noting a difference with the situation in California, Fitch said, New Zealand utilities are able to pass through increased wholesale electricity prices, after a 30-day notice, but have been reluctant to do so for fear of losing large numbers of retail customers.

If the full impact of current wholesale prices were passed on, the average New Zealand monthly household bill could rise as much as $200 (NZ), according to Fitch. The ratings agency said its main concern in the New Zealand and Australian markets is a lack of depth in associated secondary markets, which can restrict a utility’s ability to undertake significant hedging at what management considers an affordable price.

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