Analysis by University of Auckland Associate Professor, Energy Economics, Stephen Poletti, Victoria University Energy Policy Centre Professor Bruce Mountain and Victoria University of Wellington visiting scholar Geoff Bertram.
Wholesale prices in the New Zealand electricity market have soared over recent weeks, climbing as high as NZ$1,000 per megawatt hour. North Island pulp and paper plants have temporarily closed down because of the spike in costs.
Associate Energy Minister Shane Jones has accused the big energy generators of profiteering, and said the government was investigating ways to force them to cut prices.
On top of that, Energy Minister Simeon Brown has announced plans to investigate the feasibility of importing liquid natural gas (LNG) to help increase gas-generated electricity supply and lower prices in the process.
This would entail buying or renting a floating LNG terminal and building out complementary infrastructure such as pipelines. That would take a minimum of a year (more likely two or three years) and would be expensive, with imported gas prices considerably higher.
A much better option, we suggest, would be to prioritise the expansion of rooftop solar throughout New Zealand. This could not only add significantly to the overall electricity supply, but also help bring down prices.
The immediate cause of the crisis is low hydro-lake levels, combined with a long-term reduction in the supply of natural gas. Exacerbating this is the market power wielded by the big electricity generator-retailer companies ("gentailers"), which are set up to profit during times of scarcity.
Electricity supplied by gas-fired generation has steadily declined. Since 2015, almost 600 megawatts of gas plant capacity has been decommissioned, with no new additions.
The Electricity Authority''s 2023 study, "Ensuring an Orderly Thermal Transition", found the decline in gas-powered generation will continue. By 2032, this thermal generation is projected to be just 1.4 percent of total generation, compared to 14 percent currently.
An updated announcement from the Electricity Authority in June this year says Contact Energy''s largest thermal gas unit will retire this year or next. Furthermore, Genesis Energy has announced plans to use biomass to power some of its gas turbines.
Grid-scale renewable electricity supply is expanding gradually. By 2025, there are expected to be 270 megawatts of new geothermal, 786 megawatts of additional solar, and 40 megawatts of new wind power. The combined total would add almost 10 percent to the country''s yearly electricity production.
To alleviate the energy supply shortfalls primarily attributable to low rainfall, we suggest rapidly expanding cheap solar photovoltaics (PV), specifically rooftop solar for ordinary households. Our soon-to-be-published research suggests such capacity can be expanded quickly and cheaply.
Based on the Australian experience, we estimate modest subsidies for the capital cost of installing solar rooftop systems would add the equivalent of 700 megawatts a year (2 percent of the total) to the electricity supply. This significant new supply will reduce electricity prices.
New Zealand is in the enviable position of already having abundant hydro power capacity. But with increasingly uncertain rainfall due to changing climate patterns, adding widely distributed rooftop solar would mean the country was less vulnerable to lower lake levels.
Other countries – most notably Australia, Italy, Germany, Spain and Portugal – have made much more progress than New Zealand in the expansion of photovoltaics. The European Commission has adopted policies to double rooftop solar over the next four years.
Australia''s energy market operator expects rooftop solar (which already supplies almost three times as much electricity annually as gas generators do) will become the dominant source of electricity supply over the next two decades.
This could mean shifting the management of the legacy hydro assets to provide a high-value product – stored energy – rather than the gentailers simply using hydro generation to maximise profits.
In the meantime, we encourage the energy minister to make the expansion of rooftop solar the top option for expanding the electricity supply and tackling the gentailer power that bedevils the market. He will almost certainly find it quicker, cheaper and more popular than importing gas.
Analysis - The prime minister has called it an "energy security crisis" and signalled a review of New Zealand''s electricity market as wholesale prices spike and industries suffer.
And he''s right - this year has seen pricing turmoil. August saw daily averages ranging between NZ$164.52 and $853.57 per megawatt hour (MWh). By comparison, August 2023 saw a maximum daily average price of $168.43 per MWh.
The Electricity Authority attributes this to a shortage of gas combined with low rain and inflows into our hydro lakes. The latter is a major concern. Storage levels are now around 800 gigawatt hours (GWh) less than the minimum levels in 2023, and more than 1,000GWh less than the historical mean for this time of year.
This is happening in the face of climate change, higher risk of dry years, and high projected growth in electricity demand. Electricity demand and generation scenarios released recently by the Ministry of Business, Innovation and Employment show this growth could be up to 82 percent, with a peak demand of between 9.1 and 12.5 gigawatts by 2050.
However, with greater electrification needed to decarbonise the economy, and aspirations to phase out all fossil fuels by 2030, some scenarios indicate the demand will be at least two to three times more. Of course, this means more generation capacity will be needed - 20 to 30 gigawatts above the current ten. The question is, can New Zealand do it?
About New zealand energy storage market
As the photovoltaic (PV) industry continues to evolve, advancements in New zealand energy storage market have become critical to optimizing the utilization of renewable energy sources. From innovative battery technologies to intelligent energy management systems, these solutions are transforming the way we store and distribute solar-generated electricity.
When you're looking for the latest and most efficient New zealand energy storage market for your PV project, our website offers a comprehensive selection of cutting-edge products designed to meet your specific requirements. Whether you're a renewable energy developer, utility company, or commercial enterprise looking to reduce your carbon footprint, we have the solutions to help you harness the full potential of solar energy.
By interacting with our online customer service, you'll gain a deep understanding of the various New zealand energy storage market featured in our extensive catalog, such as high-efficiency storage batteries and intelligent energy management systems, and how they work together to provide a stable and reliable power supply for your PV projects.
Related Contents
