By Greg Sise, December 2025

Energy Trendz Perspective - Issue 7

2026 Predictions...

Our Executive Chairman, Greg Sise, takes a light-hearted look at 2025, and makes some frankly dodgy predictions for 2026.

What a year it’s been!

It was reaffirmed that our electricity system is totally at the whim of the weather, as we watched the hydro lake levels go from being pretty healthy in January to decidedly low by April, but with a solid move sideways through to early August, followed by a rapid slide close to the ‘panic zone’, before rising to record highs just a couple of weeks ago.

There’s one thing you can’t say about our electricity system, that it’s boring.  I’m sure the public enjoys the ins and outs of the ‘electricity plot’ as much as they do something like the Brokenwood Mysteries, The Gulf or Celebrity Treasure Island.

And once again, I went to being in demand at social gatherings as people wanted to know if the system really is f!@#ed?  The electricity plot gets people talking and raises awareness, which even if they don’t watch much TV, I imagine people really appreciate a distraction from the drudgery of daily life.  As my Nana used to say, “it’s shocking!”

Our electricity system is really just a series of very large swimming pools that are filled by rain coming across the Southern Alps, so that swimming pools, spas and bathtubs can be kept warm in Auckland.  It’s ironic that cold water is used to create hot water, using the energy imparted to water by gravity in the process.  During periods of low rainfall, the conversation in Auckland often short-circuits to the level of lake so-and-so (I say, writing this in Dunedin). 

That’s not to say that Aucklanders have short fuses, as they are generally grateful that we South Islanders consented a long time ago to export our clean hydro power to the North Is.  Although not all southerners are happy with the Cook Strait cables and their existence has really generated some heat over the years as the debate over whether to cut them or not has resurfaced.

One thing I heard a few times during the year was that “hoping it’s going to rain is not a strategy.”  Duhhhh!  That’s what a hydro system is – it’s a bet that it will rain in the catchment consistently enough to keep the lights on.  We don’t have to hope it will rain, because we know with 100%, absolute certainty that it will rain.  Sooner or later.  Inflows into our hydro lakes (the big kahuna swimming pools) are actually pretty consistent, but there are periods of up to several consecutive months when inflows can be lower than average, leading to lower lakes.

Low lake levels invariably lead to calls to bring the electricity market under government control.  Well, here’s some news for the doomsayers before you blow another fuse, the last time NZ was really in danger of having empty lakes was in 1992, four years before the current market was in place, and when all the lakes were controlled by one large SOE.  The chart shows the storage levels during the 1992 crisis, with NZ storage falling below 600 GWh in July 1992.  Since the market started in 1996, NZ storage has only fallen below 1,000 GWh in one year, as the hydro storage is managed more conservatively than it was pre-market.

All four auctions of carbon units held this year failed to attract bids, which should be celebrated (a) because it is a 100% hit rate and (b) because it must mean demand for carbon units has fallen because our emissions are down.  Right?  Well, they did drop 4% in 2023 in net terms, relative to 2022, and they seem to be trending down again this year.

It is fascinating observing the current coalition government, as they are the masters of spin.  One minute they say they are committed to climate change targets and that the Emissions Trading Scheme is the key mechanism for achieving the required emission reductions.  The next minute they remove the requirement for the ETS volumes and price controls to be in accord with NZ’s nationally determined contributions under the Paris agreement.  Smart move.  So smart, in fact, that within a few days the carbon price fell almost 20% as carbon traders realised that the ETS turned into a very large white mammal with a trunk.

But if carbon prices are low and falling, they might not be very good at signalling the need to reduce emissions at a higher rate, so that we do our bit to limit climate change.  But don’t worry, because gas is the new carbon.  A combination of government policies and bad luck has brought us to a very dark place in respect of gas, which still provides a lot of support to the electricity system when the lake levels are low and during periods of high demand. 

Just when we thought the gas situation couldn’t get any worse, the annual gas reserves figures that appeared in inboxes on 5th June showing a fall of another 28% on 2024, officially confirming the gas market is actually f!@#ed! 

On a positive note for emissions, the silver lining in this cloud, gas prices continued to rise in 2025, filling the void left by falling carbon prices, so emissions from gas consumption have nowhere to go but down if the current decline in gas production continues unabated.

But every cloud can also bring rain, hail and snow, or maybe a tornado, and now just about every commercial and industrial gas user in the country is panicking over what to do next:  switch to electricity?  Burn coal?  Shut the doors and go home?  It can’t get much worse, can it?  Can it?

As I write this on 17th December, the nation awaits the government’s decision on LNG import, which could see liquified natural gas tankers docking at New Plymouth within two years. 

It’s a tough one.  Do we spend a few hundred million dollars to have the option to keep the gas flowing and to keep businesses and jobs?  Help keep the hydro lakes from emptying during dry periods?  Or, do we hope for a miracle to restore domestic gas supplies?  If I had to bet, I wouldn’t risk more than a few thousand dollars to bet the answer will be LNG.

What do consumers make of all this?

It might keep me talking at social gatherings, but for most Kiwis the experience of opening the power bill that arrives weekly or monthly is the new self-flagellation.  Why use a short whip or stick for penance for our sins? We only have to open the bill to feel the pain.  Take several deep breaths with your eyes closed, open them, double-click, and revel in the bad news. 

But a friend of mine actually got a nice surprise the other day – his power bill had only gone up 10%!

Seriously though, sales of woolly sox have gone through the roof in the last two years, despite the warming climate, and my favourite AI says “knitting is definitely enjoying a renaissance in New Zealand” which is very positive for the wool industry.  That’s the silver lining of the electricity price cloud.

Energy Link is in the forecasting business, so I am not afraid to make some predictions for the coming year, to finish this look at 2025.

First up – hydro storage.  One thing we can be certain about is that it will keep raining.  But with periods when it doesn’t rain so much.  The weather is getting more volatile, so my predictions are:

1.         the lakes go from their current highs to record lows by the end of March, prompting nationwide calls for voluntary electricity demand reductions;

2.         then it will rain more or less constantly through to the end of the ski season (I am a keen skier, by way of disclosure), ending with full lakes and spill early October, and the water stored in the snow pack at a record high;

3.         then it will dry up with La Nina weather dominating, and by this time next year the lakes will only be 50% full.

 Everyone is forecasting demand growth will take off immediately as the nation electrifies, as we all buy battery-powered EVs, and as net migration gets more and more positive.  Yet, mysteriously, demand has not grown at the rates predicted. 

After many hundreds of hours of exhaustive research, I have discovered that the annual demand figures published by MBIE are very likely very wrong.  This egregious error will be discovered soon, and the data will be republished showing demand has grown by 20% in the last two years.  I believe the new data will appear early in April 2026.

Finally, I can’t close without a prediction for the gas market, which has suffered so much in the last few years.  It think that old gas fields could have a final ‘gasp’ of production which could last for several years before production collapses to zero.  This could very well happen when everyone believes the gas market is on its knees.  I remain forever the contrarian.

It’s been another very busy year for Energy Link team, and we’re all about to head away for a nice long break, to recharge the batteries, get rid of the negative energy and restore our positive energy levels.  Our goal is to return work feeling fully charged, radiating positive energy, ready to send a high-voltage current of energy through our little part of the industry.

Watch out for us.

I hope you also get a chance to recharge your battery over the holiday season.

Merry Christmas and Happy New Year.