January 2025: Meridian’s Hydro Storage Drops to 91% of Average, Retail Sales Fall 6.7%

Hydro Storage and Inflows Under Pressure

Meridian Energy's monthly operating report for January 2025 paints a challenging picture for New Zealand's renewable energy landscape. National hydro storage levels, a critical barometer for the country's electricity supply, declined sharply from 114% to 91% of the historical average by 10 February. This drop was more pronounced in the South Island, where storage fell to 88% of average, while the North Island remained relatively robust at 117%.

Compounding concerns, January's total inflows were a mere 43% of historical averages, with the Waiau catchment, a key water source for Meridian, registering only 27% of its typical inflows. This marks the second driest January on record nationally, the fourth driest in the Waiau catchment, and the driest in the Waitaki catchment, where water storage stood at 104% of average, providing a modest buffer.

Demand and Retail Sales Trends

National electricity demand also softened, falling 5.7% compared to January 2024. This decline reflects broader economic and weather-related factors, including a cold and dry month with below-average temperatures across much of the country. Meridian's retail sales volumes mirrored this trend, dropping 6.7% year-on-year. However, the picture is nuanced: residential, large business, and corporate segments saw increases of 3.2%, 2.7%, and 4.9% respectively, while small-medium business and agricultural segments experienced declines, notably a steep 36.7% drop in agricultural sales.

Generation and Pricing Dynamics

Despite the dry conditions, Meridian's generation in January was 7.5% higher than the same month last year, driven by increased hydro and wind output. Yet, the average price received for generation plunged 43.6%, reflecting market price volatility and possibly subdued demand. Correspondingly, the average price Meridian paid to supply customers also fell by 37.3%. Year-to-date figures show a more positive trend with generation prices 11.1% higher than last year, though retail sales volumes remain 2% lower.

Electricity futures prices on the ASX surged across quarters in January, signaling market anticipation of tighter supply conditions ahead. This price movement aligns with the observed declines in hydro storage and inflows, underscoring potential volatility in New Zealand's electricity market.

Operational and Market Implications

Meridian's customer connections increased by 1% in January and 3.8% year-on-year, indicating steady growth in its retail footprint despite volume declines. The New Zealand Aluminium Smelter maintained an average load of 513MW, a significant factor in national demand dynamics.

Looking ahead, the sustained dry conditions and reduced inflows could pressure Meridian's hydro-dependent generation capacity, potentially impacting profitability and supply reliability. The company’s ability to balance generation mix, manage costs, and navigate market price fluctuations will be critical in the coming months.