Energy Security Outlook

The Energy Security Outlook (ESO) is a monthly report that helps track how secure New Zealand’s electricity supply might be over the next two years. It uses two key tools, the Electricity Risk Curves (ERCs) and Simulated Storage Trajectories (SSTs), to show how likely it is that we’ll have enough electricity, especially during dry periods when hydro lakes are low.

For more information on how it works and why it matters, we have published an 'ESO 101' document that covers how ERCs and SSTs help forecast electricity risks, what triggers action when supply looks tight, and how extra hydro storage can be used if needed.

Energy Security Outlook 101

May 2026 Energy Security Outlook

Energy Security Outlook - May 2026.pdf (PDF 4.26 MB)

This is the first Energy Security Outlook under the recently approved Security of Supply Forecasting and Information Policy (SOSFIP).

The changes to the SOSFIP impacting the Energy Security Outlook include:
- Updating the Watch curve to ensure Watch is triggered ahead of Alert. This requires increasing the Watch curve above the Alert curve by at least 200 GWh, or by a worst-case simulated storage drop, whichever is greater.
- Increasing the Alert Contingent Storage Buffer to account for operational restrictions in the Waiau and Lake Tekapo.
- Removing restrictions on the treatment of industrial gas demand response to enable increased electricity generation.
- Updating the ERCs and SSTs to include a scenario using contracted fuel information to better support understanding of forward energy risks and mitigating actions by participants. We refer to this scenario as the “Contracted Fuel Case”. This will be in addition to the Base Case risk curves which is based on physical thermal generation capability.
All of the Electricity Risk Meter status and actions triggered will still be based on the risk curves for the Base Case.

Base Case

There have been reductions to the risk curves in May and June 2026 due to changes in modelling of industrial gas demand response under the new SOSFIP. However, overall the risk curves for 2026 and 2027 have increased due to a combination of:
- lower gas availability as a result of a small decrease in storage levels and reduced gas production forecasts. These are unrelated to the global fuel shortage issue.
- scheduled thermal outages later in 2026 and early 2027
- slightly later commissioning of new generation
- SOSFIP updates to the Watch curve and Alert curve
Since our last update the national controlled hydro storage position has increased to 109% of the historic mean at 24 May, with South Island storage at 103%.
The May-July Climate Outlook from Earth Sciences NZ (formerly NIWA) is for "normal or below" rainfall for most of the country with the exception of the western South Island. As we move into winter 2026, an ongoing focus on hydro storage management and ensuring sufficient backup thermal fuels and capacity remains necessary to mitigate the potential for very high prices. Earth Sciences NZ expects strong El Niño conditions towards the end of 2026 which could improve inflows into major SI catchments.
No Simulated Storage Trajectories (SSTs) cross any curve in 2026 but one SST cross the Watch curve in 2027. This assumes the market supplements the existing coal stockpile at its maximum import capability to maintain increased thermal generation during any extended periods of low hydro inflows.

The graphs below compare New Zealand and South Island base case controlled storage to the relevant Electricity Risk Status Curves.

Contracted Fuel Case

Most of the system's thermal generation capability is currently deliverable in 2026, reflecting a strong near-term contracted fuel position.
Due to this near-term certainty, 2026 Simulated Storage Trajectories (SSTs) cross the risk boundaries a limited number of times, with 3 Watch and 2 Alert intersections for New Zealand, and 6 Watch and 2 Alert intersections for South Island.
Under dry conditions, as thermal fuel stockpile drops, additional thermal fuel contracts in the near term (2026) can help reduce risk curves and raise the SSTs. The risk curves can reduce by up to ~209 GWh or ~36 Rankine days.
The gap between the Contracted and Base Case risk curves becomes more pronounced in 2027 (diverging by up to ~950 GWh or ~165 Rankine days) and resulting in more SSTs crossing in 2027 (11 Watch and 1 Alert intersections for New Zealand, and 5 Watch intersections for the South Island), reflecting the market's tendency to contract fuel closer to need.
By restricting available energy strictly to currently secured contracts, this case intentionally highlights the physical capacity that remains uncontracted, and the ability for additional contracting to reduce risks. This reinforces that contracted positions require continuous updating to provide ongoing security of supply cover.

The graphs below compare New Zealand and South Island Contract Fuel case controlled storage to the relevant Electricity Risk Status Curves.