Source: New Zealand Government
The Government has assured the power companies in which it is a majority shareholder that capital is available to support investment in critical electricity infrastructure.
“Reliable and affordable energy is key to New Zealand’s prosperity,” Finance Minister Nicola Willis says.
“Energy powers every part of our economy, from households to high-value industries, and will increasingly determine our ability to compete in the global economy.
“Therefore, I have written to the Crown’s Mixed Ownership Model (MOM) companies (Genesis, Mercury and Meridian) to say that the Crown is prepared to support capital funding requests for strategic and commercially rational investments that support energy security.
“This is to ensure a perceived lack of access to Crown capital does not stand in the way of New Zealand’s energy security.
“The assurance is one of several measures the Government is taking to address the gaps in New Zealand’s energy system that are keeping prices high for consumers.
“The review of New Zealand’s electricity system undertaken by Frontier Economics stated that the MOM companies, in which the Crown is a 51 per cent shareholder, have faced constraints in their ability to invest in larger generation projects, because of a perception that the Government would not provide equity injections to support those investments.
“We wish to correct that perception. The Government is committed to maintaining its legally mandated 51 per cent stake in the MOM companies, and we accept we would need to participate in any equity raise required for major new investments. We are more than willing to do this, if the proposals stack-up.”
Energy Minister Simon Watts says New Zealand is on the cusp of a renewable electricity boom.
“More new generation has been commissioned in the last 18 months than in the last 15 years because of our work to knock down regulatory barriers.
“But there is one major barrier standing in our way. We need reliable back-up options to generate electricity during our driest years, when we can’t rely on hydro lakes or wind to meet demand. Since the 1970s, natural gas has bridged this gap, but our declining gas supply is making this both more expensive and unreliable.
“The electricity market performance review conducted by Frontier Economics confirmed that the market has failed to invest in the back-up fuel and generation we need to keep the lights on and the economy running during dry years. This uncertainty is what is keeping power prices up and placing unacceptable pressure on Kiwi households, businesses and industries alike.
“When we have dry years, like what we experienced in 2024, it can take the economy up to 25 years to recover from inflated electricity prices. That’s why the Government is acting now.”
The Government’s Energy Package focuses on investing in security of supply and building better markets to improve affordability. It includes:
Security of supply
- Launching a formal procurement process for an LNG import facility.
- Incentivising industry to kick start new energy projects by exploring how whole-of-government contracts could help underwrite projects.
- Removing barriers to accelerate the delivery of renewable energy through Electrify NZ (speeding up consenting and enabling offshore renewable energy).
Building better markets
- Developing options to reduce policy risk for investors in new energy projects, such as the $200 million set aside for co-investment in gas fields through Budget 2025.
- Strengthening the Electricity Authority to make it a more powerful, decisive regulator.
- Increasing the efficiency of electricity distribution businesses (EDBs) by tasking them to collaborate, standardise processes and make smarter investment decisions.
- Establishing a stronger gas information framework to ensure timely, reliable, and transparent data is available to all market participants.
- Developing new rules, in consultation with industry, to ensure the lack of dry year back-up supply does not re-emerge.
“Today, MBIE will release a Request for Information inviting the energy sector to tell us how the Government can work in partnership with industry to kickstart new projects that will help boost New Zealand’s energy supply. Leveraging government energy demand will help unlock new investment in energy generation across a range of technologies,” Mr Watts says.
“We are also stepping in to invest in energy security through a procurement process for a liquefied natural gas (LNG) import facility. By bolstering domestic gas supplies, LNG can help manage the impacts of dry years and keep the wider energy system up and running.
“The procurement process will kick off next week, and Cabinet will consider the results of this first phase and determine next steps by the end of the year.
“There is work to do to improve the electricity market for the future. We are strengthening the Electricity Authority, so the electricity market has a powerful regulator with the right tools to deliver better outcomes for consumers. This will include giving it a sharper stick to crack down on bad behaviour and boost competition in the electricity market.
“This will be bolstered by a more sophisticated risk monitoring role for Transpower with better forecasting of security of supply risks; new rules to ensure power companies deliver the back-up supply we need; and greater efficiency across New Zealand’s electricity distribution businesses to avoid unnecessary costs being passed on to consumers in their power bills.”
“This package builds on the work already underway to boost competition in the electricity market and ensure New Zealand has abundant and affordable energy for next winter.
“The energy system plays a significant role in the economic wellbeing of Kiwi businesses, industries and households. If we can bring wholesale electricity prices down by just 2 per cent a year, New Zealand’s economy could be over $3 billion larger than it would otherwise be in 10 years’ time.
“This would allow businesses to grow, invest more, and create jobs, while helping to ease the cost-of-living pressures New Zealand households are facing.
“With our plan in place, we can make this a reality. New Zealand’s future will be powered by renewables with back-up supply when we need it most and a well-regulated electricity market that is working to deliver for Kiwis.”
