Meridian Energy says price spikes part and parcel of wholesale market

The Mill Creek wind farm, Ohariu Valley, New Zealand
The Mill Creek wind farm, Ohariu Valley, New Zealand

The largest electricity generator in New Zealand has welcomed the Electricity Authority’s (EA) decision that there was no undesirable trading situation following a price spike in the wholesale electricity market on June 2, 2016.

Meridian’s chief executive Mark Binns said price spikes are a normal function of any working wholesale market in New Zealand and overseas.

“Spikes occur to signal scarcity to market participants in periods of high demand, such as cold winter evenings or at times when the country has low rainfall,” he said.

“The vast majority of consumers are shielded from wholesale market fluctuations by tariffs with fixed prices. Residential customers who do choose to take spot market exposure with their retailer have had the risks explained to them.

The retirement of more than 500MW of gas-powered generation in the country’s North Island throughout the last nine months could lead to more frequent periods of volatility during high demand periods or times of drought, when there is less energy available from hydro sources.