In the news this week
A few items in the news this week that caught my eye. There's some good news in here this time too.
Hydro lake levels recovering.
There has been some rain in the South Island hydro lake catchments, Te Anau and Manapouri in particular. The national storage levels are still below the mean but improving.
Quick take - This is really good news given the tight gas situation. However, caution is recommended as we don’t actually have huge amounts of storage. The lakes fill and drain relatively quickly. We still need regular rain to keep the lakes full. Continue to watch this space.
Manapouri Transformer issues.
While we are on the topic of hydro lake levels it is worth noting that the Manapouri scheme is struggling with transformer issues. Meridian is planning to replace five of the seven transformers.
This comes on the back of two transformers already having been replaced due to “gassing”, which means that gas is being generated in the oil. This is likely due to overheating which could be a manufacturing issue. I say this because the transformers were installed between 2015 - 2018, so they are not particularly old by transformer standards.
Quick take - As far as I can tell this currently drops Manapouri’s maximum output by 128MW as they don’t want to run the transformers too hard. At the moment this appears to be manageable. However, transformers have a long lead time due to the amount of electrical infrastructure being built around the world. Average lead times are currently over a year. Here’s hoping that the five units to be replaced hold in there long enough for replacements to arrive and be installed.

50MW of geothermal coming online:
Eastland Generation is planning to commission the 50MW TOPP2 geothermal plant at the end of this year. They are currently looking for offtake agreements to sell the power, which should have plenty of players lining up.
Quick take - This is good news too. It’s great to see more geothermal generation coming online. This is reliable baseload generation not dependent on the sun shining or the wind blowing. Let’s hope it’s not all taken up by a data center offshoring all the profits like the recent TeHuka 3 development.
I understand there’s around another 100MW of geothermal coming online sometime next year too. Good stuff!
$200 Million Govt. support for gas drilling.
As part of the budget this week associate energy minister Shane Jones announced a $200 Million budget for the government to take a 10-15% stake in gas exploration drilling.
Quick take - This is good news in a baby steps kind of way. In drilling terms this is a tiny amount of money, and I don’t expect it to result in much. It is spread over four years so it’s really only $50 Million each year. Also, a 10-15% joint venture stake doesn’t really de-risk anything much, the waiting on weather allowance for offshore drilling is more than that alone in percentage terms.
However, what is does do is signal political intent. What would be really significant and much more helpful would be the other side of the house supporting it. We are only about 16 months away from an election and the gas industry really needs bipartisan support to undo the sovereign risk created by the Arden government in 2018.

Budget 2025 - Treasury Predictions
Treasury is now predicting a -0.8% GDP figure for the year ending 30 June.
It had previously been predicting this year's growth to be 0.5% at the half-year update in December, and as much as 1.7% this time last year.
In response to trade war concerns, Treasury initially lowered its global growth assumption for the June 2026 year to 2% from 2.5%.
Treasury is now forecasting GDP growth of 2.9% in the year to 30 June 2026, down from the 3.3% it forecast in December and the 3.2% expected a year ago.
Growth is then expected to lift to 3% in the June 2027 year.
Quick take - I’d love it if I had any faith in the treasury’s growth projections of 2.9% in 2026, alas I don’t.
Treasury use a dynamic stochastic general equilibrium (DSGE) model. Energy is not an input to this model. Instead, it looks at the following inputs, none of which produce anything without energy, which readers of this Substack know, is the master resource.
Labour force growth.
Capital stock.
Interest rates and exchange rates.
Terms of trade
Govt. fiscal settings
Demographic trends
Productivity (total factor productivity - TFP)
The TFP is what economists call the residual. They represent it as productivity. The reality however is that it is actually the energy available for the economy to convert into production.
The generation being added in the news points above is great, but it is not enough to offset the gas decline. As such the energy available to the economy is reducing and GDP will do the same.
This is why we keep hearing about our low productivity. Our low productivity is not because you all need to work harder. It’s because we don’t have enough machines and even if we did, we wouldn’t currently have the energy we need to power them.
Have a great weekend and as always thanks for liking and sharing. I’ve having great discussions with energy curious people wherever I go lately, I hope you are too.
Thanks
Larry
Thanks for the update Larry.
Were the transformers built in China? If so you may need to look for the kill switch as well