Price discovery in a renewables-based electricity system

Consultation overview

The MDAG is a group of sector representatives who provide independent advice to the Electricity Authority (the Authority). They give advice on issues in the Authority's work programme, mostly related to:

• pricing and cost allocation
• risk and risk management, and
• operational efficiencies.

Currently, the MDAG is working to understand how price discovery would work in NZ's wholesale electricity market (including spot and hedge markets) under a 100% renewable electricity system. They have identified a number of areas where change may be needed as we transition towards a 100% renewable electricity supply. This includes:

• ensuring reliable and efficient operational coordination
• ensuring effective risk management and efficient investment
• lifting demand-side participation
• strengthening competition
• increasing market confidence.

The MDAG released a paper which presents multiple options for change in each of these areas.

Consultation on the options paper ran from 6 December 2022 to 6 March 2023.

MDAG consultation: Price discovery in a renewables-based electricity system(external link)

Our recommendations

Our submission to this consultation recommends the MDAG advises the Authority to:

• treat consumers as significant and active stakeholders in the industry
• investigate and report on whether the current wholesale market model is fit for purpose to meet consumers’ needs and deliver a fairly priced and reliable electricity supply
• consider incentives to ensure sufficient new renewable generation can enter the wholesale electricity market
• consider and promote the indicators outlined in point 3.10 in its assessments of the market
  focus on limiting charges to consumers
• ensure generator/retailer companies (‘gentailers’) do not profit from a broken system
• encourage the industry to develop mechanisms that help consumers understand and respond to price signals
• ensure that retailers provide consumers with the opportunity to respond to price signals
• require industry to consult directly with consumers, rather than using retailers or distributors as proxies
• ensure that industry recognises its role in providing consumers with reliable information, so they are well-informed about their options and the benefits and costs of these options.