El Niño fails to dent NZ dairy, power production

Waikato has remained green for this time of year, despite the effects of El Niño. Photo / NZME

The El Niño weather pattern has so far failed to put a dent in New Zealand dairy and electricity production.

For dairy, much of the country remains green and for power, lake levels are higher than the norm for this time of year.

Latest data from the Dairy Companies Association of NZ showed production grew by 2.55 per cent on a milk solids basis in December, and by 1.1 per cent in the season-to-date.

The calendar 2023 year was also a strong one for dairy production, and HighGround Dairy consultant Stewart Davison says January is also shaping up well.

El Niño was expected to bring a hot, dry summer.

“In terms of milk production, El Niño has not impacted things too much from a soil moisture and grass growth perspective,” he said.

“The Waikato and South Waikato is still looking quite green, considering that it’s nearly February,” he said.

However, while grass growth has been strong, high temperatures can affect production because of “cow comfortability” issues, he said.

Niwa data shows Canterbury is dry, relative to history, but Davison said dairy farms near the southern province’s foothills were in good shape, and that there were few irrigation restrictions in place.

NZ's hydro dams are fuller than normal for this time of year.

In power generation, national grid operator Transpower said further strong inflows during the week ending on January 28 led to national storage increasing to 104 per cent of the historic mean, up from 96 per cent in the previous week.

Hydro storage moved up again in both islands and now sits at 79 per cent full.

South Island storage was 99 per cent of the average for this time of year, up from 91 per cent.

North Island storage had increased from 144 per cent to 157 per cent of the historic mean.

However, Transpower said there were risks in the system.

“This is mostly associated with updated gas production forecasts that have seen a drop in estimated production resulting in less thermal generation availability across the year,” it said in a report published on its website.

The average wholesale price at Haywards, near Wellington, was $129 per megawatt-hour (MWh), a 51 per cent decrease from $262/MWh the week prior.

Transpower said the decrease was likely attributable to the strong hydro inflows, slightly reduced demand and a stronger week of wind generation.

The renewable percentage of the generation mix last week was 91 per cent up from 85 per cent the week prior.

Wind generation rose from 6 per cent to 9 per cent, while thermal was down from 13 per cent to 7 per cent.

Hydro generation’s contribution increased from 61 per cent to 63 per cent.

There was a significant increase in the “risk” curves this month — a similar level to what they were in the November update.

“The forecasted gas production has decreased on average by 8 per cent across 2024 so there is lower gas availability for electricity generation,” Transpower said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.