{"id":226711,"date":"2026-01-10T12:54:07","date_gmt":"2026-01-10T12:54:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/226711\/"},"modified":"2026-01-10T12:54:07","modified_gmt":"2026-01-10T12:54:07","slug":"meridian-boss-backs-more-hydro-after-2024-winter-price-shock","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/226711\/","title":{"rendered":"Meridian boss backs more hydro after 2024 winter price shock"},"content":{"rendered":"
The big power generators now acknowledge that too much faith was put in gas \u2013 with its lower carbon footprint relative to coal \u2013 as a transition fuel.<\/p>\n
\u201cThe 2024 year was a big shock for the sector when it became clear that gas was not going to be [the] transition fuel that everyone expected it to be,\u201d Roan said.<\/p>\n
\u201cIt\u2019s taken a long time to get the elements in place to recover from that.<\/p>\n
\u201cAs I look forward, I think most of the elements are now in train.<\/p>\n
\u201cBut there\u2019s still a lot of investing to do because that\u2019s the solution to all this.\u201d<\/p>\n
Consumers faced higher power bills last year because of higher distribution costs, and more increases are expected over the next few years.<\/p>\n
Meridian chief executive Mike Roan. Photo \/ Supplied<\/p>\n
Roan said the actual electricity component of power bills was likely to fall over the next few years because of a wave of new generation capacity coming on-stream.<\/p>\n
The Electricity Authority said construction of about 1400 megawatts of new generation capacity was underway, and set to come on-stream this year or next.<\/p>\n
On top of that were the investment intentions.<\/p>\n
\u201cIf we can actually land all the stuff that we think is possible, then it gives you a lot more confidence about the price trajectory, which is better than we all might have imagined at the beginning of 2025,\u201d Roan said.<\/p>\n
He viewed 2025 as a recovery year.<\/p>\n
Still, gas remains an important part of the picture, being responsible for about 8% of New Zealand\u2019s power generation.<\/p>\n
Importation of liquefied natural gas (LNG) has been put forward as a possible solution to make up for rapidly depleting gas reserves and the Government is going through a procurement process.<\/p>\n
\u201cIt\u2019s going to be hard, but we know the Government is looking at it,\u201d he said.<\/p>\n
Roan said the issue of LNG largely came down to the high fixed cost of building infrastructure.<\/p>\n
\u201cRegardless of where the Government is, from an electricity sector perspective, all of our analysis says security has been sorted out with the Huntly deal.<\/p>\n
\u201cSo, LNG, from that electricity sector perspective is more about affordability than it is about security,\u201d he said.<\/p>\n
Gas has been used extensively for \u201cpeaking\u201d power generation when demand is at its greatest or when there is an unexpected power outage somewhere in the grid.<\/p>\n
NZX-listed Channel Infrastructure is looking at the potential for some form of distillate-fuelled peaking facility at its Marsden Point site.<\/p>\n
\u201cThat might work from an economic perspective more effectively than LNG,\u201d Roan said.<\/p>\n
Key issues<\/p>\n
As NZX-listed Meridian \u2013 the country\u2019s biggest power company \u2013 and others scramble to build more generation capacity, Roan said the key issue was the speed at which projects could be consented.<\/p>\n
\u201cI\u2019ve taken a lot of heart from what has played out over 2025 to restore the balance in our sector, but we still have to find ways to invest and invest faster than we would have if gas had been around.\u201d<\/p>\n
Meridian has four developments planned for 2026.<\/p>\n
A longer-term issue is the possible expansion of Lake P\u016bkaki \u2013 already the country\u2019s biggest hydro lake.<\/p>\n
\u201cCould we lift the level of Lake P\u016bkaki and in doing so create a bigger storage vessel for the country to moderate both the impacts of dry years and bring the price of electricity down?\u201d<\/p>\n
Revamping P\u016bkaki would entail rebuilding the entire dam structure.<\/p>\n
\u201cIt\u2019s not a quick fix but if things go well, we might get into a build of that size in 10 years, but it\u2019s major hydro stuff.\u201d<\/p>\n
The industry has long grappled with energy intermittency because of its heavy reliance on renewable energy sources.<\/p>\n
Roan saw increased hydro storage as one way of overcoming intermittency.<\/p>\n
\u201cThe one thing New Zealand has that is going to be really valuable for us, whether it\u2019s electricity or not, in the future is that we have a lot of water.<\/p>\n
\u201cAnd a lot of that water flows all the way to the ocean, so it isn\u2019t captured or used for anything.<\/p>\n
\u201cThat means that we are really, really lucky as a country, but the way to deal with intermittency is you need more storage, and the cheapest cost of storage is hydro.\u201d<\/p>\n
As Roan saw it, gas acted as an underground energy reservoir.<\/p>\n
He noted the enlarged Huntly coal stockpile would come at a cost in terms of carbon emissions, producing a more expensive form of electricity.<\/p>\n
\u201cSo we\u2019re looking at how we can create storage that is cheap, flexible and doesn\u2019t have emissions, so [the] only thing you can really do is extend your hydro assets.<\/p>\n
\u201cThe generations to come would be beneficiaries of that effort, just like we\u2019ve benefited from the hydro backbone that was built 60 years ago.<\/p>\n
\u201cIt\u2019s not an immediate fix. We\u2019ve just started looking at it because we didn\u2019t expect that gas storage would disappear on us.\u201d<\/p>\n
Roan said it would take the best part of a year to work out whether the P\u016bkaki option would be feasible.<\/p>\n
\u201cIt\u2019s kind of come from the loss of gas \u2013 it\u2019s not something we would have thought of or even contemplated if we hadn\u2019t have lost another fuel source.\u201d<\/p>\n
Roan said the company was looking at how it could help customers through four years as distribution and transmission prices increase.<\/p>\n
\u201cWe\u2019re looking at products that help people, if the price goes up, but you can shift your electricity to different times a day.\u201d<\/p>\n
Election year<\/p>\n
The rising price of power looks set to become an election issue this year.<\/p>\n
Roan said the findings of Government reviews showed the sector was in decent shape.<\/p>\n
\u201cThere are healthy levels of competition and you know, the business model that we have that was part of the conversation last year actually supports consumers in the long run,\u201d he said.<\/p>\n
\u201cSo even though there\u2019s an election in front of us, election won\u2019t change or impact the solution.\u201d<\/p>\n
Roan felt more now confident that there was a big coal stockpile sitting at Huntly.<\/p>\n
Likewise, he had faith in Meridian\u2019s demand-response deal with the country\u2019s biggest power user, New Zealand Aluminium Smelters, which can dial back usage at its Tiwai Point aluminium smelter when the system is stretched.<\/p>\n
\u201cAnd of course, you know, right now, the hydro storage facilities around the country are full.\u201d<\/p>\n
Frontier Economics released its report last year and there have been a handful of others following on from the 2024 winter price spike.<\/p>\n
Roan said it was understandable the electricity sector came under the microscope from time to time.<\/p>\n
\u201cThere have been 11 reviews of the electricity market since it\u2019s been … around for 29 years.<\/p>\n
\u201cEvery time electricity prices lift or there\u2019s an underlying challenge, there\u2019s a review and you learn a bit of stuff.<\/p>\n
\u201cBut the nice thing, and the reason that we\u2019ve had such a stable environment to go on about investing in our business and our competitors, is the reviews will come back and say the same stuff, which is you\u2019ve actually got a good market.<\/p>\n
\u201cI feel like we\u2019re responding okay, but there\u2019s more to do.\u201d<\/p>\n
Roan said the events of 2024 prompted a raft of improvements.<\/p>\n
\u201cWe haven\u2019t actually seen all the benefits yet, but I feel like there\u2019s been such a concerted collective and individual effort to overcome that challenge.<\/p>\n
\u201cIt\u2019s wasn\u2019t all there as we ended \u201925, but it\u2019s coming.\u201d<\/p>\n
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.<\/p>\n