Photo: RNZ / Rebekah Parsons-King
- Global supply chain shortages to drive up energy distribution costs
- Rising costs will be passed on to consumers
- Energy Competition Task Force looks for savings
- Major users hopeful for return to competitive pricing
- Industry has workaround plans in place
Rising costs threaten to blow out the $6 billion budget the national grid operator and electricity lines companies are permitted to charge customers for upgrades to their networks over the next five years.
The urgency to expand and modernise the electricity transmission network infrastructure around the world has been putting pressure on supply chains, just as New Zealand embarks on a multibillion-dollar upgrade to its infrastructure.
The Commerce Commission has allowed Transpower and local lines companies to raise prices by a maximum of nearly $6b to upgrade the transmission infrastructure from April, which will add between $10 and $25 a month to the average power bill.
But prices will continue to rise over the following four years with consumers facing ultimate rises of between $30 and $85 a month, and that would be before power generators look to recover the cost of the multi-billion dollar investments in a long pipeline of renewable generation projects.
Focus on improving competition
Electricity chief executive Sarah Gillies said the regulators were working closely with industry to help consumers better manage rising energy costs, with off-peak rates, while encouraging households to generate power from roof solar panels and sell excess power back to the grid.
"What we want to see is consumers benefit from the system and to be able to ultimately have downward pressure on prices," Gillies said.
She said consumers also needed to be more active in shopping around for the best price.
"Ninety percent of people who shop around can save money on their power bill just by switching plans or retailers, and the average saving is about $400 a year."
Gillies said the Authority was also working with the Commerce Commission to improve energy competition in the retail sector and to support new generators coming in to further pressure prices lower.
Need fit for purpose sector
The Major Electricity Users Group (MEUG) executive director Karen Boyes said domestic, commercial and industrial users needed a power generation and distribution system that was fit for purpose and delivered long-term savings at internationally competitive rates.
Boyes said the industry was combining to ensure infrastructure investments delivered long-term benefits, with rules in place to oversee spending and service standards.
"There's a lot of reasons why New Zealand is an attractive country to be in," Boyes said, adding there were a number of companies signing long-term electricity supply agreements.
However, she said New Zealand power prices needed to match international competitors, and come back to levels that are affordable for all local businesses and households."
International body raises warning
But the International Energy Agency (IEA) is warning the global energy sector is facing a worldwide price and supply chain challenge.
A recent survey shows the time to procure cables and large power transformers had almost doubled since 2021, to three and four years.
"The combination of rising component costs, extended procurement lead times, and a significant backlog of orders is contributing to higher project expenses as well as delays," IEA said in its report.
For some specialised components, such as direct current cables used for long-distance transmission lines, the wait can be five years or more, and comes with a substantial rise in costs.
IEA said prices for cables had nearly doubled since 2019, and power transformers rose by around 75 percent, reflecting the higher cost of metals such as copper, aluminium, and electrical steel.
Industry has workaround plans in place
Auckland based Vector, the country's biggest lines company, said it was working on options to reduce the impact of rising prices and supply chain disruptions.
"We constantly liaise with our suppliers to ensure we secure the necessary materials and equipment as and when needed," a Vector spokesperson said.
Transpower said it always planned and managed the time and cost required to source, manufacture and transport material and equipment from international suppliers.
"As global demand has increased, we have implemented a number of initiatives to ensure we can continue to have access to what we need so we can maintain New Zealand's transmission network and build new connections to the grid."
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