We still face a serious risk that it won't rain enough in the next few months to refill the lakes and/or we won't have enough gas and coal to relieve the hydro stations and build up hydro storage. The lakes need to be close to full by mid April to ensure we have sufficient reserve energy for the winter.
If we fail to refill the lakes there is a risk of high prices, an electricity shortage and the possibility of blackouts around June. But no one can do much about it because there is no way to induce thermal generators to generate extra electricity in the meantime to fill the lakes even though it would be in the national interest to do so.
The electricity market has failed to provide incentives to persuade the generators to conserve storage and make sure that sufficient coal exists on the stockpile at Huntly. If Genesis was rewarded for acting in the national interest it would be aiming to have a stockpile of about 1 million tons by autumn to reduce the risk of massive economic damage from major power cuts in the winter.
In the short term we need to continue importing coal from Indonesia and hope the Pohokura offshore gas supply is restored quickly.
As a result of the high prices over the past month or so, electricity prices for everyone may well increase by about 2c/kWh (7.5 per cent) next year. (In the long-term, average electricity prices on a fixed price contract must always be higher than the average of spot prices because a contract is an insurance policy for which you pay a premium.)
It is worth noting that the high prices do not seem to have produced any reduction in demand even though the assumption that high prices will reduce demand is a central plank of market theory. One can only conclude that, contrary to all the assurances from the Electricity Authority, we don't have an efficient market.
Looking further ahead, the consequences of the ban on gas exploration and continuing the war on coal are likely to result in more high prices and shortages. The economic damage could be huge. Promoting expensive electric cars will make the situation even worse because all our existing generating capacity is fully committed.
The Minister of Energy, Megan Woods, should be seriously worried. However, recent answers to questions in the House indicate she doesn't understand the difference between energy (kWh) and power (kW), is unaware of the dry year risk and the need for large-scale, low-cost energy storage, does not know wind and solar power drops in the autumn and so increases the dry year risk and does not know hydrogen has to be manufactured from natural gas or electricity so it is not "renewable energy".
The minister does not have an elementary understanding of the industry she is supposed to lead.
The Minister for Climate Change, James Shaw, is between a rock and a hard place, he can be caned for going along with importing lots of coal and forgetting about CO2 emissions or he can strongly object to the shipments and risk looking seriously silly if there is a shortage. Whatever he does, he is not going to look good.
A rational government would be striving to give us an economic and reliable supply, current government policies will give us an increasingly expensive and unreliable supply.
• Bryan Leyland is an electrical engineer with 60 years experience in the power industry in New Zealand and abroad. He and his wife are majority shareholders in a small hydro scheme that he says has made windfall profits from the electricity market.
