Electricity wholesale price

IBISWorld forecasts the wholesale price of electricity to drop by 31.8% in 2025-26, to $151.4 per megawatt hour. This decline comes after sharp increases in 2024-25, driven by an exceptionally dry-year that constrained supply, with hydro generation falling to the lowest level since 2013. The projected fall in price during 2025-26 is likely to be driven by increasing electricity supply, fuelled by rising annual rainfall boosting hydropower reserves over the year. The share of electricity generated by renewables (wind, hydro and solar) has climbed during 2025-26, contributing to dips in price. October 2025 recorded the highest renewable share and the lowest October prices in a decade. Inflows into the major hydro lakes climbed during late-winter and spring 2025, lifting storage and pushing down prices. Given that over 80% of New Zealand's electricity generation is derived from renewable sources, the level of storage in New Zealand's hydro lakes is highly influential in shaping electricity prices.

Over the past decade, the wholesale price of electricity has been extremely volatile, driven primarily by demand and supply shifts. Fluctuations in hydro-power reserves, due to their large proportion of power generation, have also affected prices over the period. When stored water within hydro lakes decreases, prices increase as the main input becomes scarcer and more valuable. Since 2017-18, volatility has intensified, as supply was uncertain and demand has bounced around. In 2017-18 and 2018-19, low rainfall and dry conditions reduced hydro lake storage, ultimately curtailing the generation capacity of hydro firms. In 2018-19, maintenance on the Pohokura gas field reduced the supply of natural gas. This increased the cost of gas-fired electricity generation, further exacerbating price tension. The completion of this maintenance, along with increases in hydro-power production, improved power supply and decreased prices over much of 2019-20.

There were multiple reviews by the Electricity Authority into New Zealand's wholesale electricity market since 2019, which surrounded an effort to investigate whether the electricity market is working in the interest of consumers. In 2023, the Electricity Authority released a Decision Paper outlining the regulator's conclusions after multiple reviews, setting out a series of proposals aimed at increasing competition in the wholesale market in the transition to 100% renewable electricity. The paper argued that New Zealand's electricity market, while far from perfect, was working broadly in the interest of consumers. Therefore, it only suggested moderate changes to the operation of the market, including more transparent pricing mechanisms and clearer disclosure requirements.

Prices have remained volatile over the past five years. Prices are sensitive to rainfall levels, meaning years with higher rainfall and hydro output decrease prices, while drier years, such as 2024-25, lead to greater reliance on gas and coal, increasing prices. In 2020-21, prices soared as pandemic-related lockdowns caused volatile fluctuations in demand, while unexpected supply shortages occurred at the Pohokura wells during June and July of 2020, reducing the availability of gas for energy generation. Annual rainfall also declined sharply in 2020-21, which eroded hydropower reserves and accelerated price rises on the wholesale market in 2021-22. As global prices stabilised and heavy rainfall filled the hydropower reserves, wholesale prices collapsed in 2022-23. Electricity wholesale prices spiked in 2023-24 and 2024-25 because of tight suppl, after El Nino weather events led to low hydrolake levels, significantly reducing the hydroelectric supply and increasing electricity wholesale prices. Overall, IBISWorld forecasts the wholesale price of electricity to climb at a compound annual rate of 0.6% over the five years through 2025-26.