How Meridian Energy's Hydro Storage Surge Could Reshape New Zealand's Power Market

Hydro Storage Recovery

Meridian Energy's latest monthly operating report for April 2025 highlights a significant rebound in New Zealand's hydro storage levels. By 12 May, national hydro storage climbed from 77% to 88% of the historical average, with the North Island notably surpassing average levels at 105%, while the South Island reached 86%. This recovery follows a warm April with variable rainfall patterns, including above-average precipitation in northern regions and drier conditions in the lower South Island.

Electricity Demand and Retail Sales

Despite improved water storage, national electricity demand in April was 3.0% lower than the same month last year, continuing a trend of subdued consumption over the past year. Meridian's retail sales volumes edged up slightly by 0.4%, driven by increases in residential, small-medium business, large business, and corporate segments, although agricultural sales declined sharply by 26.2%. Customer connections grew by 0.7% during April, reflecting modest expansion in Meridian's retail footprint.

Generation and Pricing Dynamics

Generation volumes tell a nuanced story: Meridian's total generation in April was down 16.8% year-on-year, primarily due to reduced hydro output amid lower inflows, particularly in the Waiau catchment which recorded only 80% of its historical average inflows. However, wind generation increased, partially offsetting the hydro shortfall. Notably, the average price Meridian received for its generation surged by 56.1% compared to April 2024, reflecting higher market electricity prices. Correspondingly, the average price paid to supply customers also rose by over 50%, indicating broader market price inflation.

Operational Costs and Capital Expenditure

Meridian disclosed employee and operating costs of NZ$26 million for April, slightly higher than the previous year, alongside capital expenditures totaling NZ$33 million, split between stay-in-business and investment capital. These figures suggest ongoing investment in infrastructure and operational resilience despite the challenging hydrological conditions.

Market and Environmental Context

The report underscores the impact of weather variability on hydro-dependent generation, with April 2025 being notably warm and featuring uneven rainfall distribution. The lower inflows in key catchments like Waiau and Waitaki, where storage levels remain below average, could pose challenges if dry conditions persist. Meanwhile, the New Zealand Aluminium Smelter maintained an average load of 522MW, a significant factor in national electricity demand.

Meridian continues to provide weekly lake storage updates, reflecting transparency and the importance of water resource monitoring in managing New Zealand's renewable energy supply.