Retailers To Work With Electricity Authority On Wholesale Market Operations

“Retailers will work constructively with the Electricity Authority so consumers can continue to have confidence in their electricity supply”, Electricity Retailers’ Chief Executive Cameron Burrows says.

The Electricity Authority has today released a review of the wholesale electricity market from 2018 to early 2021 to investigate competition in the market, with a particular focus on the role of New Zealand’s largest industrial plant, the Tiwai Point aluminium smelter.

“New Zealand’s wholesale electricity market is a complex, interlinked system with prices responding to many factors, including demand, generation levels and transmission capacity. The Authority’s review raises questions about whether some of the settings sitting behind this system need to be adjusted to ensure the market continues to deliver for Kiwis.

“We have come out of a period of higher than usual wholesale power prices recently – particularly over the winter due to gas shortages and low lake levels – which has been challenging for some businesses exposed to wholesale energy prices. Since then, rainfall has helped significantly ease both water shortages and electricity spot prices.

“Retailers have shielded most households from recent fluctuations in spot prices. In fact, residential electricity prices are at their lowest level since 2012 according to the latest MBIE statistics.

“Those elevated wholesale prices came off a relatively low base. New Zealand industrial users pay the seventh-lowest price in the OECD for their electricity, beating Canada, the United Kingdom and Germany.”

Mr Burrows says a well performing wholesale market is crucial to stimulate additional investment in renewable electricity required as we transition to a low-carbon economy.

“The electricity sector is committed to providing secure and low-carbon energy to meet growing demand through a massive programme of investment to deliver the electricity required to convert carbon intensive activities.

“Today’s pipeline of new renewable generation projects under construction, consented or under investigation exceeds the Climate Change Commission’s forecast electricity demand growth through to 2035. We expect our actions will drive renewables from 80% of electricity produced today to around 95% within the next five years. This provides a fantastic platform for other parts of the economy to electrify and reduce their emissions.

“The questions raised through the Authority’s review are complex, in particular the operation of the Tiwai smelter near Bluff. It is worth noting the Authority conclude these are not driven by the presence of vertically integrated companies in the electricity sector.

“This review is a useful exercise. The electricity sector is performing well, but this is a good opportunity to look at what we can do to improve and continue to deliver robust, reliable, and affordable electricity for New Zealanders.”

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