Key points
- Generators considering options to improve national energy security
- Huntly Power Station Rankine Units may continue operating longer-term
- Potential commercial structure includes strategic fuel reserve and firming options
Full summary
New Zealand's four largest electricity generators - Genesis Energy, Mercury, Meridian, and Contact - have entered into a non-binding heads of agreement to investigate the potential for Huntly Power Station Rankine Units to continue playing a key role in managing 'dry-year risk' and enhancing system security over a longer-term timeframe. This is in response to the market conditions experienced during winter 2024, where the market faced supply constraints due to a faster-than-expected decline in national natural gas supply, low hydro lake levels, and low wind conditions. The medium-term outlook for gas supply is also a key factor. The commercial structure being worked through may include a strategic fuel reserve to cover disruptions to other fuel supplies, as well as arrangements similar to the Huntly Firming Options Genesis brought to market last year, which could potentially be extended to cover a term of up to a decade. The new arrangements are expected to be in place by 2026, subject to any regulatory approvals.
Outlook
The generators are exploring options to extend the operation of Huntly Power Station's Rankine Units to help manage 'dry-year risk' and enhance system security as the country adds more intermittent renewable generation.