Source: Radio New Zealand
New solar and geothermal generation means New Zealand no longer faces the same risk of running out of power in winter in so-called “dry years”, according to Contact Energy Chief Executive Mike Fuge.
Hydro-generation is the country’s largest power source but can be limited in years when rain and snow melt don’t fill up the hydro lakes – leading to something called dry year risk.
In 2024, low lake levels, along with a lack of wind and falling gas supplies, sparked a winter energy crisis that sent wholesale prices skyrocketing, with some businesses being forced to close.
Fuge told RNZ the risk of a future dry year event has “moved downwards” thanks to the use of increased solar power in summer, and extra baseload from geo-thermal plants, allowing the company to get more out of its hydro assets.
He said the Huntly coal firming option also changes the dry-year outlook.
“I think it’s different from what it was two years ago. I think the world has changed. I think with the amount of renewable investment that’s gone on, that the dry year risk has changed,” Fuge said.
He said dwindling gas supplies were a big impetus.
“I think the events of two to five years ago have woken us up to the collapse in gas supplies. And so that dry year risk has reduced because of that investment and because of that smart thinking that’s gone on with all those solutions”.
But Fuge acknowledged the risk of a dry year shortage hasn’t completely gone.
“It’s still there, it’s still a risk. It’s still something that you have to be cognizant of, but it’s much lower than perhaps it was.
And he said the outlook for this winter is very good.
” The lakes are full, AGS is full. The stockpile is at a near record level. We have plenty of gas supply. All our equipment is available. And we have another two to three terawatt hours of renewable energy online, which wasn’t there three years ago,” Fuge said.
But what about 2027 and further out?
“It’s the same, even more so by 2027, mid-27, we will have more geothermal on, both us and Mercury. We’ll have more wind on, certainly more solar. We’re about to commission Kofi Park at Christchurch Airport in 2027; there will be even more energy in the system. That doesn’t mean you ever get complacent.”
LNG and the transition away from gas
The government is currently considering whether to spend close to a $1 billion on an LNG gas import facility to offset dwindling gas supplies and provide a back stop for a dry year.
It argues it’s necessary to provide certainty to the industry.
Fuge supports the government considering the option but insists it needs to make financial sense.
“Do we need another alternative fuel supply? And what is the right size of it? That’s the question. So, we are supportive of LNG as an option. But the business case has to stack up for the nation,” he said.
Earlier this month, an OECD report on New Zealand said that a transition away from gas was critical, and that LNG should only be used as a short-term option.
Power prices and politicians
Contact Energy along with the other three partially government-owned power companies, Meridian, Mercury and Genesis, have drawn strong criticism in recent years over high-power prices for consumers and businesses.
New Zealand First MP Shane Jones has even threatened to break the companies up, so they don’t have both retail and generation arms.
Fuge rejects claims that the company has extracted high dividends and also pushed back on the OCED report which suggested New Zealand had some of the highest wholesale electricity prices in that country grouping.
He said the OECD data was not accurate, and he pointed to the wholesale spot prices this year that hit their lowest ever in January.
“I can’t speak for the lines and transmission because that’s a regulated part. But for energy prices, we’ve been very clear that energy price increases will be at or just below inflation.
And what does Fuge have to say to politicians like Jones who want to break up the energy companies or cap prices?
He stresses there is an abundance of conventional renewable energy and that represents a huge opportunity that will enable the country to thrive and boom.
“Don’t mess it up. Don’t distract. Let the investment continue to flow at pace.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
Original source: https://nz.mil-osi.com/2026/05/19/contact-energy-boss-says-risk-of-new-zealand-running-out-of-power-this-winter-eases/