Lake levels have fallen to just 55% of average for the time of year, putting them in the bottom 5% of historic records.
As a result, the national grid operator is proposing to allow the hydro generators to access "contingency storage"— which is stored hydro that is only made available for generation at specific times to mitigate the risk of shortage — much earlier than normally allowed.
A draft decision document, released by Transpower late last week, said if lake levels were not lowered and there was little rain and snow melt for the next two months, the country would become dangerously reliant on the North Island’s thermal generation plants.
"Should a larger thermal generator fail, the impact for energy security would be severe and with the potential for widespread supply shortages."
Lakes under the microscope in the South include Tekapo, Pūkaki, Hāwea, Te Anau and Manapouri.
Transpower executive general manager operations Chantelle Bramley said it had done a lot of work in recent weeks to assess the implications of the worsening hydro situation.
"A key consideration has been the ability of hydro generators to access contingent storage without breaching resource consents."
Meridian Energy chief executive Neal Barclay said lower-than-average lake levels, combined with other factors affecting the industry — particularly low availability of gas — were contributing to higher wholesale spot prices.
He welcomed Transpower’s proposal.
"Being able to access the contingent storage in Lake Pūkaki more than doubles Meridian’s available hydro storage as of today, and that may be very valuable during the next month or so without substantial rainfall in the Waitaki catchment and assuming gas generators continue to face gas supply shortages."
Mr Barclay said the situation was "tight".
"We and other generators are doing what we can to ensure there is enough generation to meet demand and keep power going for all New Zealanders."
This included maximising plant availability, calling available hedges and demand responses agreements, and "being very careful about how we operate our hydro assets".
"We’re also taking all necessary steps in case we need to access the contingent storage in Lake Pūkaki, which is not yet a necessary step, but would more than double our available hydro storage.
"There is some work we need to do to access that contingent storage, including strengthening the dam face at Pūkaki, but planning is well under way so this work can be completed should contingent storage be required."
National Institute for Water and Atmospheric research (Niwa) climate scientist Ben Noll said it had been a "tough run this winter".
"The period from late August to the first half of September looks about the most favourable for rain I’ve seen for the season.
"There has been a very consistent signal— but this is a very critical juncture; if it doesn’t occur, then we could be in all sorts of difficulty."
Contact Energy hydro operations head Boyd Brinson said all Clutha catchment lakes, including Lake Hāwea, were about half their normal storage levels for this time of year.
It yesterday announced an agreement with Methanex to buy gas to be supplied from August through to October 2024, starting immediately.
"This is the equivalent of around 350GWh of electricity.
"By securing additional fuel supply, Contact will be able to run its Taranaki Combined Cycle gas-fired power station (TCC) through the remainder of 2024, if required by the market.
"With below average national hydro storage levels, and an ongoing decline in domestic gas production, we have taken this step to support security of electricity supply to New Zealanders."
Genesis operates the Tekapo Power Scheme, sourcing water from Lake Tekapo.
A spokeswoman said the lake was still above its minimum level and "while generation through the scheme has reduced, we continue to operate within our resource consent limits".
Transpower will announce a final decision on its proposal before the end of the month.
