Manapouri Power Station on the western arm of Lake Manapouri. Photo: 123rf
North Island power generators are making bigger profits thanks to full hydro lakes, and the shift to zero-carbon emissions means the extra dollars are being ploughed back into renewable energy developments.
The industry estimated it would spend about $30 billion on renewable energy generation leading up to 2050, not counting the additional costs of transmission and distribution of energy infrastructure.
Most recently, power company Mercury revised up its full-year underlying profit by $40m, benefiting from a big boost in the retail business and full hydro lakes, following a wet winter.
Meridian chief executive Neal Barclay told shareholders at last week's annual meeting the changing nature of the industry had created some pricing volatility, mostly felt by big industries and the wholesale market.
Over the longer term Barclay said the increased renewable energy would put downward pressure on prices.
"That's probably cold comfort for large industrial customers, but importantly, electricity prices for residential and small and medium sized business customers continue to trend below the rate of inflation. And in real terms, they've been declining now for more than a decade."
Forsyth Barr director and senior analyst Andrew Harvey-Green said the industry was not making excessive profits, which were offset by downturns in dry years, when electricity had be supplemented by the burning of fossil fuels.
"In terms of the profit upgrades that you've heard this time around, just in the last couple of weeks, it really is just about the fact that we've had a lot of low-cost generation and has nothing to do with hiking up prices to do that."
Criticism about profits generated by the power companies was raised at Genesis Energy's recent annual meeting, with chief executive Marc England calling out "populist media" for focusing on its bottom line profit rather than the bigger picture.
The recent profit results of four major generator-retailers - Contact, Genesis, Mercury and Meridian - indicated the annual profits exceeded $1.5b in the past year.
But Harvey-Green said the gains were weather-dependent and balanced out over time, given the mix or wet and dry years.
"Electricity companies do a little bit better when there's lots of water, but when there's not much water around, they won't do as well," Harvey-Green said.
"It's taking into account the variability that they've got to deal with so you don't want your electricity prices at home going up and down drastically every year."
In addition, he said the cost of developing generation was going up in line with increased global demand for wind and solar infrastructure, as well as the weak New Zealand dollar and rising interest rates.
"We are seeing electricity prices increase more broadly for those reasons ... as opposed to anything else."