Urgent Energy Reform Needed To Stave Off New Zealand’s De-industrialisation

Around 60 leaders from the Upper North Island energy sector gathered today to develop solutions to the sector’s deep-seated structural problems.

The event was hosted by the Auckland Business Chamber, together with policy and advocacy organisation the Northern Infrastructure Forum (NIF), and was attended by senior executives from companies involved in energy generation, transmission, retail, and investment; as well as major users, thought-leaders and officials.

The event heard from Hon Shane Jones, Associate Minister of Energy, who had a very clear message for the group: New Zealand is sliding towards de-industrialisation; energy is a big part of the problem, and more needs to be done.

Chamber CEO Simon Bridges said that sustained high energy costs are one of the biggest challenges facing the New Zealand economy.

“Unstable, unaffordable energy costs are a noose around the neck of business, and the noose is tightest here in the Upper North Island – this is where the bulk of the country’s demand is located, but we’re a long way from major sources of supply.”

Mr Bridges says the time for action is now.

“With the warmer temperatures and recent rainfall, prices have eased, but it’s only a matter of time before the next crisis hits us.”

As one panellist at the event concluded: “We’re running a strategy of hope, but hope won’t get us there.”

The event came up with a range of solutions that should form part of the reform programme, including:

* The need for a single regulator, able to look at the market as a whole and held to account for decisions
* Breaking up the pricing system to separate thermal prices from renewable prices, in order to deliver an immediate drop in wholesale prices
* A more mature market for Power Purchase Agreements (PPAs), to help make generation projects more attractive (by removing roadblocks and de-risking the financing and building of renewable electricity generation)
* Appropriate levels of compensation for major users who shed demand during periods where the system is under pressure
* Achieve a generation structure where hydro assets are used for peaking, with the base load consisting of a mix of renewables: geothermal; solar; offshore and onshore wind
* Separation of generator-retailers: structural separation would be best practice; operational separation is a simpler short-term solution and a step in the right direction
* An over-arching, future-focused energy strategy is needed; one that considers energy as a system

“The sector is fundamentally broken. We need reforms to unlock increased generation, and enable competitive, affordable prices.” Mr Bridges said.

NIF Executive Director Barney Irvine says the event was a first step towards developing solutions, and starting a grown-up conversation.

Mr Irvine said: “Today’s discussions will be used to develop an action plan. The action plan, to be formally launched in February, will serve as the basis for on-going advocacy efforts focusing on much-needed change.

“In the 90s we were leading the world in electricity market reforms; the rest of the world copied us. But since then, the world has evolved, and we’ve remained frozen in time. We’ve gone from leaders to laggards. We can – and we must – do better than that. That’s our objective.”

The Auckland Business Chamber is part of New Zealand’s largest business network organisation and part of the Chambers of Commerce network. Representing businesses of all sizes and sectors, the Chamber works to create a prosperous business environment, provide valuable networking opportunities, and influence policies that promote economic growth and success. For more information, visit www.aucklandchamber.co.nz.

The NIF is a policy and advocacy organisation formed to help raise the standard of infrastructure planning and decision-making across the Upper North Island, and maximise the contribution that infrastructure can make to productivity and liveability. Its membership consists of:

Aecom
Auckland Business Chamber
Automobile Association
Civil Contractors New Zealand
Employers and Manufacturers Association (Northern)
KiwiRail
Maven
National Road Carriers Association
Ports of Auckland Ltd
Waikato Chamber of Commerce
WSP
Vector Ltd

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