Source: Energy Resources Aotearoa
Energy Resources Aotearoa acknowledges the Government’s response to the electricity market review conducted by Frontier Economics, calling it a measured and pragmatic package that strikes the right balance between stability and action.
Chief Executive John Carnegie says the decision not to embark on wholesale reform will provide the sector with the predictability it requires to invest with confidence.
“The Government has rightly avoided plunging the sector into uncertainty by focusing on surgical, targeted changes. You don’t rebuild investor confidence by smashing market settings and starting again. For a sector building billions in new generation, stability matters.”
Carnegie says the real test of the package will be whether it delivers the firming capacity needed to keep the lights on.
“Frontier’s report made it clear: the market by itself won’t deliver the dry-year backup New Zealand needs. Households and businesses already know this after two shaky winters and a run of industrial closures.
Making firming the cornerstone of the response is the right call. New Zealand can double renewable generation by 2050, but without ensuring secure firming, we risk blackouts and higher costs.”
Carnegie cautiously supports the decision to run a competitive procurement process for a liquefied natural gas import facility.
“LNG is the oxygen mask for our energy system-life support that gives us breathing room while domestic gas supply recovers and new generation is built.
It may well be a vital insurance policy that could keep the wider energy system up and running in dry years, but LNG will come with risks that require careful management.
That’s why it’s essential we also create the right regulatory and cost conditions to ensure economic production of domestic natural gas for as long as possible. This will deliver security at a lower cost to consumers and smooth the transition as New Zealand moves towards a lower-carbon future.”
Carnegie also welcomed moves to reduce policy risk for investors and lift capital constraints on the Mixed Ownership Model companies.
“With sovereign risk reduced and the generator retailers now freer to raise and deploy capital, Ministers have made it clear they expect these companies to seek out and bring forward commercially sound opportunities for new generation and, critically, new firming capacity.
With that expectation backed by the prospect of Crown support for credible projects, mixed-ownership companies are now in a stronger position to move forward more quickly.”
Carnegie says the Government was wise to reject some of the more disruptive recommendations from Frontier, including creating a centralised ‘Thermalco’, removing electricity from the Emissions Trading Scheme, or forcing amalgamations of electricity distribution businesses.
“Maintaining the market architecture while sharpening incentives strikes the right balance. The sector is now on notice to deliver the affordable and reliable energy New Zealanders need.”
