The main index fell slightly to 14.9 c/kWh in relatively low volumes. The CFD index fell sharply again this month, to 10.1 c/kWh, but the CFD volumes were low, so the impact on the main index was also low (the indexes are all volume-weighted). 

The trend of longer terms continued, with six out of eight contracts having either four or five year terms. This trend is driven by the futures market, where prices are predicted to fall over the next four years, and signing for longer terms averages down the higher near-term prices.

Having lived with relatively high spot prices for a number of years, it is a contrast to now see these prices at relatively low levels. We had two days in the last week when spot prices were close to zero all day, across all nodes! This is unprecedented in the history of the spot market, which dates back to 1st October 1996. However, it does nicely illustrate where the market is heading, as the proportion of renewables rises toward 100%. In particular, it shows how spot price volatility will increase as renewables grow relative to fossil-fueled generation. We will see more periods where renewables can supply just about everything at very low prices, and more periods where renewables are well short of demand, and more expensive non-renewable generation is still required, creating high prices.

Will increased price volatility make it more difficult to contract for electricity as renewables rise?

That is the key question for larger electricity consumers and for hedgers, but the answer is not yet clear. A lot will depend on what develops to replace the existing fossil-fueled generation fleet, which currently provides an enormous buffer for when renewables are low. This is based on the energy storage provided by natural gas fields, the coal stockpile at Huntly, and the coal fields of Indonesia.

The government is working on energy storage options in its NZ Battery project. Commercial entities are looking at options for large-scale demand-response during periods of low renewables, and other energy storage options. Ultimately, a diversified mix of energy storage options is likely to provide the most robust solution to electricity security and price stability.