Photo: RNZ / Samuel Rillstone
Energy Minister Simon Watts says he has made clear to the four big gentailers they need to play their part and keep the lights on.
Watts met with the gentailers on Wednesday, and said the government will not accept a repeat of last winter.
He delivered an ultimatum of sorts.
"We [the government] are playing our part to unshackle the energy sector, and now the sector must deliver. Otherwise, further action will be inevitable," he said in a statement.
"During the meeting, I made clear my expectations that all gentailers play their part to keep the lights on at affordable prices and protect the risks to our energy system."
Wholesale power prices last winter spiked dramatically, mostly affecting industries. It led multiple wood and paper mill to close, but residents were largely protected because power retailers had purchased future contracts to maintain stable prices. This year, however, the additional risk and likelihood of supply shortages have already been priced in.
That, combined with increased lines charges and the continued phase-out of a fixed daily price scheme, are expected to see power price increases in the double digits.
Watts said he wanted to see the price of those long-term hedging contracts come down.
"We know that New Zealand's electricity system faces challenges - particularly when the wind isn't blowing, the sun doesn't shine, and when the lakes are low. Last winter highlighted the pressures on supply and risks that accompany a dry year - with price spikes, some industrials closing, and trust in the electricity market reaching record lows.
"We will not accept a repeat of last winter. This means we need better availability of both short and long-term hedges to ensure industrials, independent generators and retailers can protect themselves from price spikes. We also need more firming generation in our energy market that can run regardless of the weather.
"Ultimately, I want to see forward price expectations coming down, so hedge contracts return to lower price levels and more closely reflect generation costs. This would put downwards pressure on electricity prices for New Zealand households and is what we should see in a competitive market."
Climate Minister Simon Watts outlines the government's new climate emissions plan. Photo: RNZ / Nick Monro
Having said the next 120 to 150 days would be challenging, he said New Zealand would need to "work with the generation plant we have" during that time.
He said the sector's work to have a fuel stockpile as a backup was critical, and listed six initiatives the government was working on to tackle energy security and affordability.
- Exploring a Consumer Data Right (CDR) for electricity, which could give customers the right to require data holders (like retailers or metering companies) to share information
- Establishing the Gas Security Response Group to bring together government agencies, gas producers, and major users to coordinate action on security of supply and raise any further emerging barriers to gas security
- Reviewing the performance of New Zealand's electricity markets to ensure the electricity sector works in the long-term interests of consumers
- The joint Electricity Authority and Commerce Commission Taskforce, focused on driving more generation investment and strengthening competition in the energy sector for the long-term benefit of consumers
- Urgently repealing the previous government's offshore oil and gas ban to restore investment confidence and ensure New Zealand has sufficient gas to power the economy as we transition to a low-emissions future
- Removing regulatory barriers to investing in dry year security, including importing liquid natural gas (LNG)
Using contingent hydro storage as a last resort was also already available, he said, and Transpower was planning a review to ensure the trigger for using that setting was appropriate, which the minister would be encouraging to start soon.
"I'm also looking closely at the gentailers' plans, and I have asked officials to examine what generation plant has been consented but is not yet being built or being built that could be brought forward.
"In the meantime, we are keeping our focus squarely on getting the settings right for new generation to be built, and for new entrants to come into our market. These things take time, but we have a plan to deliver."
Labour has called for the government to look into energy storage and load-shifting options to reduce demand during peak times, with spokesperson Megan Woods saying the government had "dropped the ball" and was "negligent" over the issue.
Green MP Ricardo Menendez March questioning a Minister in select committee. Photo: Phil Smith
Green MP Ricardo Menéndez March said the party was "absolutely" concerned about rising power prices heading into winter, and the government needed to have the interests of communities at heart.
"What we need, again, is a government that invests in the long-term solutions including the infrastructure that we need to ensure our energy systems are resilient .... that includes for example having funds to solarise our communities, last election we campaigned on a platform of having funds to ensure that marae and hospitals and schools could have solar energy and that will make our energy systems far more resilient."
Green MP Hūhana Lyndon said battery storage "would be great if we could go there, but again it requires investment and investment should come from the Crown to help local communities develop their own solutions, ultimately. But we need to invest, and we're not, we're cutting on everything."
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