Despite the recent rain, Transpower has said hydro lake levels are just 54% of average for the time of year, putting them in the bottom 5% of historical records.
It has led to the national grid operator asking for feedback on a proposal to allow the hydro generators to access "contingency storage"— stored hydro that is only made available for generation at specific times to mitigate the risk of shortage — much earlier than normally allowed.
The Major Electricity Users Group, which represents the country’s largest energy users including Fonterra, Woolworths, Oceania Gold and Rio Tinto, has said a voluntary electricity conservation campaign should be considered ahead of, or to avoid, a forced one that would affect "all consumers".
Labour energy spokeswoman Megan Woods said Transpower’s approach was inevitable.
"The crisis I think we have is that we don’t seem to have a plan to make our way through this.
"We know that dry years are going to happen more and more — what we need is a response to this."
Dr Woods noted the government scrapped the New Zealand Battery Project, which included the proposed Lake Onslow pumped hydro scheme.
"That’s entirely their prerogative, but they haven’t replaced it with anything. The problem is not going away."
University of Waikato energy expert Prof Earl Bardsley said the situation was dire.
"And now we may be going to have a situation of having to tap into desperation storage — politely referred to as ‘contingent storage’ — where the hydro lakes are drawn down well below their normal permitted minimum level.
"If all Lake Pūkaki contingent storage was used, that would result in a total lake bed exposure (below the consented maximum) of about 34sq km of dry lake bed in a ring around the lake — not a good look for our green image for tourists on the way to Aoraki/Mt Cook."
Energy Minister Simeon Brown agreed New Zealand was experiencing a fuel shortage.
"We do not have enough natural gas to meet demand. That means that our manufacturers and exporters are reducing output as they deal with high electricity prices and a shortage of natural gas."
He said the government was considering a range of options on how to address New Zealand’s energy security.
This included looking at the economic and engineering feasibility of importing liquefied natural gas (LNG).
"The previous government’s energy policies put our energy resilience at risk.
"This included the banning of offshore gas exploration, which threatened investment in additional gas production.
"They also pursued a 100% renewables target which put our energy security at immediate risk, and charged ahead with the failed Lake Onslow scheme, despite experts warning that this would have a chilling effect on investment in renewable generation."
He said the government had moved swiftly to remove the 100% renewables target, and stopped the expensive Lake Onslow scheme to give energy producers the confidence they needed to invest in more development and production.
He said Resources Minister Shane Jones was also working to reverse the previous government’s ban on oil and gas exploration.
A Transpower spokesman said it was aware of the situation.
"We expect hydro storage levels to increase in spring as rain falls, which will mitigate the situation.
"But even in a worst-case scenario of hydro inflows due to insufficient rain, we are not forecast to reach the point of launching an official conservation campaign until early January.
"If we reach that point, we will ask the general public to reduce their electricity consumption to reduce pressure on our hydro lakes. We will communicate this widely and extensively if we reach this point."
If conservation is required, retailers will compensate consumers each week by an amount determined by the Electricity Authority.
The minimum weekly amount is $12 per week.
New Zealand’s Aluminium Smelter (NZAS) at Tiwai has agreed to reduce electricity consumption by another 20 megawatts (MW) to further help New Zealand’s national grid, as the energy squeeze continues.
This is in addition to the 185MW demand reduction that the smelter recently initiated.
The agreement signed with Meridian Energy will result in 20MW of electricity becoming available to the national grid over an estimated five-week period, including ramp-down and ramp-up.
NZAS external affairs director Simon King said the agreement was separate from the demand-response agreements in place with Meridian Energy and Contact Energy and highlighted the severity of the current energy situation in New Zealand.
"Twenty megawatts is the approximate equivalent of the electricity needed to power all the homes in the city of Napier."
A Contact Energy spokesman said the electricity market had faced challenges this winter as a direct result of a shortage of gas and a dry hydrological year.
"However, these challenges have shown how resilient the energy market is.
"The real solution in the long term is building more renewable power stations and batteries, which Contact is doing. Presently, we have $1.4 billion worth of renewable energy projects under construction."
