The Electricity Authority released an issues paper for consultation, as part of their work to understand how to promote competition in the electricity market in the 100% renewable electricity transition. The paper proposed that:
- more and faster investment in generation and a focus on monitoring and enforcement is currently the best strategy to promote competition in the wholesale electricity market
- the transition to 100% renewable electricity generation may increase the market power of some generators during extended periods of cold weather with little wind and sun
- the new trading conduct rule and more monitoring is making a difference
- there is now substantial intended investment in new renewable generation, which will help to promote competition
- uncertainty around the 100% renewable electricity aspiration, the Gas Transition Plan, the NZ Battery project, and Energy Strategy causes delays in investment, and
- fundamental structural change is not currently justified by the available evidence and may risk unintended consequences.
This consultation ran from 12 October to 14 December 2022.
Electricity Authority consultation: Promoting competition in the wholesale electricity market in the 100% renewable energy transiton(external link)
We made a number of recommendations in our submission on this consultation, including that the Authority:
- specifically ensures equity and fairness for small consumers be applied to its interpretation of its expanded objective, alongside the existing 'limbs' of competition, reliable supply and efficient operation
- ensures that residential and small business electricity bills have the best information available to incentivise and enable demand responses
- recognises the limited ability of residential and small business consumers to respond to price and places them at the centre of its decisions about price, reliability, sustainability, and the structure of the electricity market
- provides leadership in connecting management of electricity supply to other government policy objectives (and responsible agencies) where there are intended and unintended impacts on health, poverty alleviation and climate change
- uses additional metrics other than economic in assessing appropriate regulatory settings.
in relation to the transition to renewable energy
- investigates and reports on whether the current wholesale market model is fit for purpose to meet consumers' needs and delivers a fairly priced and reliable electricity supply, and considers incentives to ensure sufficient new renewable generation can enter the wholesale electricity market
- investigates and reports on alternative models, including as a starting point:
- treating renewables and non-renewables separately in the wholesale market
- developing a flexible and equal access market as suggested by the Innovation and Participation Advisory Group in its advice to the Authority dated July 2021.
- investigates and reports back on possible options to improve current settings that could be included in New Zealand's energy strategy.
We also provided a report from the NZIER in support of these recommendations.