Wholesale electricity prices have dropped to their lowest winter level in more than a decade, and the industry says it is a signal for businesses that have been waiting to move off coal, gas and diesel.
July wholesale prices have been averaging about $75 a megawatt hour, which the Electricity Retailers and Generators Association says is the lowest average July price in more than ten years. Winter is usually when prices climb, because demand for heating peaks while hydro lakes and wind can run short, so a cheap July is unusual and worth paying attention to.
Electricity Retailers and Generators Association chief executive Bridget Abernethy told RNZ the fall was partly down to strong hydro storage this year, but that something larger was going on underneath the weather. “We’ve seen a lot of renewable generation come online recently, so there’s been a big upswing in renewable generation build, including batteries,” she said.
That mix matters. Hydro storage can swing from one season to the next depending on rain and snowmelt, which is why New Zealand has had expensive, nervous winters in recent years when the lakes ran low and gas was tight. New solar, wind and grid scale batteries are less about luck and more about capacity that stays in the system year after year. When there is more of it, the market has more ways to cover a cold, still evening without leaning on scarce and costly fuel.
The forward market is telling a similar story. Abernethy pointed to futures prices at Ōtāhuhu, a key pricing point in Auckland, for 2027, 2028 and 2029, which she said had fallen by about 30 percent over the past year. Forward prices are what buyers agree to pay for power delivered in future years, so a sustained drop there suggests traders expect the cheaper conditions to hold rather than bounce straight back.
For households the immediate effect is muted, because retail power bills are shaped by network charges, levies and hedging contracts as much as by the raw wholesale price, and those move slowly. The clearer signal is for business, and in particular for companies weighing up whether to swap fossil fuelled boilers, kilns and truck fleets for electric equipment.
Abernethy said the recent numbers were the kind of thing that gets those decisions over the line. “Businesses are not looking for short-term fluctuations, they’re looking for those long, sustained, lower prices,” she said. A single cheap month does not justify spending millions on new plant, but a run of low prices and softer forward curves changes the maths on a project that has to pay back over ten or twenty years.
The two areas she singled out were process heat and transport. Process heat covers the steam and hot water that factories use to make everything from milk powder to timber, and it is one of the biggest sources of industrial emissions in the country because so much of it still comes from coal and gas. Electrifying it, through heat pumps or electrode boilers, only stacks up if power is reliably affordable. Transport is the other big prize, with heavy vehicle fleets among the harder things to shift off diesel.
Abernethy said well known names were already making the move, pointing to Whittaker’s and Speight’s as examples of businesses transitioning away from fossil fuels. The largest single example is New Zealand Steel at Glenbrook, south of Auckland, where an electric arc furnace is being built to replace part of the old coal fed process. Once running, the furnace is expected to account for roughly half of the country’s domestic steel production and to cut the plant’s emissions by more than 45 percent, making it one of the biggest industrial decarbonisation projects the country has attempted.
None of that happens on cheap power alone. Abernethy was blunt that price is only half the picture, and that companies need to trust the rules will not change under them before they commit. “What matters more than anything is stable policy settings that give investors the confidence,” she said. Electrification projects are long, expensive and hard to reverse, and a business that spends heavily on electric plant wants to know the cost and rules of connecting to the grid will not lurch around in a few years.
There are reasons to stay cautious. This winter’s low prices lean partly on healthy hydro lakes, and a dry year could push wholesale costs back up quickly, as recent winters have shown. Batteries and new renewables help smooth that out, but they do not remove the weather from the equation entirely. The industry’s case is that the trend is heading the right way, and that the forward market backs it, even if any single winter can still surprise.
For now the headline is straightforward. Power on the wholesale market is cheaper this July than it has been in a decade of Julys, and the people who sell it are betting that is enough to nudge more of New Zealand’s factories and truck fleets off fossil fuel and onto the grid.
What do you make of the shift off coal and gas, and would cheaper power change how your business or household uses energy? Share your thoughts in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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