By Marcos Pelenur, Chief Executive Officer, Energy Efficiency and Conservation Authority
As electricity prices continue to climb and demand on the grid grows, one of the most effective ways to create a cleaner, cheaper and more resilient energy system may not be building more infrastructure at all, but using the electricity we already generate more intelligently.
New Zealanders are used to thinking about electricity in terms of supply and transmission: more generation, more poles and wires, more infrastructure … and more cost. But building infrastructure for peak demand is expensive, and consumers ultimately pay for upgrading networks and added generation through higher power bills.
According to Stats NZ, the cost of electricity increased 11.3 per cent in the 12 months to September 2025, and Consumer NZ predicts it will rise by about another five per cent in 2026, with increased line charges.
Not all cost is inevitable, though. Transpower estimates that every gigawatt of avoided growth in peak electricity demand will save consumers approximately $1.5 billion in avoided new generation and network upgrades, and improved network utilisation.
That’s why one of the most powerful tools for creating a cleaner, cheaper, and more reliable energy system is not another power station or more poles and wires; it is using electricity more flexibly to make the best use of what we already have.
Our modelling has estimated between 1700 and 1900 megawatts – equivalent to around 25 per cent of peak national demand – could be shifted away from peaks, potentially avoiding up to $3 billion in generation and network investment.
It is not just lowering the need for spending on poles and wires that saves money; our modelling shows that an even bigger gain is reducing the need for expensive peaking generation.
In 2023, peaking generators delivered 922 gigawatt-hours of power. Our modelling shows flexibility could deliver that same quantity at an average cost of $77 per megawatt-hour, or an annual cost of $71 million – an estimated $116 million cheaper than operating gas peakers.
Harnessing flexibility doesn’t mean that new generation and transmission infrastructure won’t be needed; it means adding another tool for making energy more affordable, resilient and efficient. But to unlock this multi-billion-dollar potential, households and businesses need to be rewarded for helping the electricity system operate more efficiently.
And renters, low-income households and people in older homes should also be able to participate and benefit – not just those who can buy expensive tech.
A gradual but real shift
BCG estimates that a smarter, more flexible electricity system requires two gigawatts of demand-side flexibility by 2030 to manage increasing peak demand. The country is electrifying transport and industry while aiming to reduce emissions and improve energy security. At the same time, energy demand from newer activities, such as hyperscale data centres, is expected to grow.
17,000 battery-electric and plug-in hybrid-electric vehicles entered the fleet in 2025, accounting for 7.5 per cent of sales. Increased fuel costs have had a noticeable impact on electric vehicle (EV) sales, which are currently almost 20 per cent of new sales, or double the figure from the same period in 2025.
Sitting alongside this, our energy end use database shows businesses’ consumption of fossil fuels trended down from around 55 per cent in 2019 to 51 per cent in 2024, while electricity’s share of the business fuel mix increased by four percentage points from 34 per cent to 38 per cent.
The gradual shift towards electricity use in transport and industry reflects a move to a more stable and potentially lower-cost energy source.
While the traditional response is to reinforce the network to cope with demand peaks that may occur for only a few hours a year, typically on winter evenings, flexibility can be a powerful and affordable alternative.
Flexible electricity use – sometimes called ‘demand flexibility’ or ‘demand response’ – simply means shifting when we use power to better match when electricity is abundant and cheap, and/or towards times when our electricity networks have the capacity to carry it.
It doesn’t mean going without. It means using smart technology, pricing signals and better system design so that – where possible, without affecting lifestyles or productivity – EVs charge overnight, hot water cylinders heat when there is surplus renewable generation, and industrial processes take advantage of smart energy storage and coordination to smooth electricity demand.
Best of all, through automation, which we are trialling now in households around the country, this potential can be deployed without electricity users even noticing. Households will be warm or cool when they need to be, and taps will run hot. And business productivity can continue as normal – or enjoy a productivity boost from lower energy costs.
Security, affordability and momentum
There are three pressing reasons why we need to scale flexible electricity use quickly.
The first is security: currently we import about $10 billion of petrol, diesel, and aviation fuel each year – representing about 40 per cent of our total primary energy supply. At the same time, the indigenous gas supply that we use to roast our coffee and bake our bread is tightening, and the pace of decline has been much faster than expected.
The second is affordability. We know renewables produce lower-cost energy, but they are also intermittent and don’t always deliver peak supply at times of peak demand. More flexibility can help on both counts. It can time-shift demand so it better matches lower-cost renewable supply, and it can reduce the need for upgrades to poles and wires driven by increases in peak demand.
The third reason is international momentum: we’re seeing flexibility scaling in the United Kingdom, parts of Europe, the United States and Australia, giving us the opportunity to be a fast follower – learning what works and avoiding others’ mistakes.
For example, New South Wales’s Peak Demand Reduction Scheme provides financial incentives to households and businesses to reduce energy consumption during periods of high demand, which, for them, is summer afternoons and evenings.
The NSW Government expects the scheme to save households and businesses around $1.2 billion on their bills between 2022 and 2040.
Aotearoa New Zealand can find what works in its unique energy system.
Harnessing existing technology
The technology to do this already exists. Most New Zealand homes already have assets capable of flexible operation: electric hot water cylinders are the most common, but also heat pumps, EVs, smart appliances, solar and batteries, pool pumps and spa pools.
Our FlexTalk trial with the Electricity Engineers’ Association is receiving data from about 150 households that have had home energy management systems and smart controls retrofitted to their heat pumps, hot water cylinders and, in some cases, solar panels.
We’re building on that data by partnering with six lines companies on six local pilots of flexible electricity use, which will generate data from hundreds more households. We’re also in the early stages of two trials testing how two-way EV chargers can provide flexible energy storage for households and businesses using batteries in EVs.
Initial Flextalk data indicates many households could readily save more than 10 per cent on their electricity bills, without solar. With rooftop solar, early data indicates savings on electricity bills can be 55–60 per cent.
We’ll be publishing results from those trials starting this year, building evidence of what works in New Zealand and how we can get the settings right to get the most value for energy consumers, and the country at large.
Industry is increasingly moving to smart coordination and storage of electricity behind-the-meter – as well as self-generating electrons on site from solar panels. Energy Efficiency & Conservation Authority is supporting demonstrations of ‘behind the meter’ battery storage on commercial and industrial sites by allocating $5 million to cover up to 40 per cent of eligible project costs, building the evidence needed to support investment cases for other businesses.
The missing ingredient is often not technology, but incentives and coordination.
Many consumers have little visibility of when electricity is cheapest to produce and supply. Retail plans can be confusing, and participation in flexibility is often limited to larger commercial players – it isn’t widespread even among large businesses. That needs to change.
A smart energy future
Time-of-use pricing, smart tariffs and automated demand-response systems can make flexible behaviour simple and financially worthwhile – helping people save money on bills without them needing to change in behaviour.
Community-scale programmes, smart hot water control and low-cost automation connected to community batteries can help ensure flexibility delivers lower costs for everyone, not just early adopters.
As renewable generation grows, flexibility becomes even more valuable because renewable output varies across the day and season.
When it comes to giving New Zealanders access to affordable and reliable energy, not every solution needs to involve pouring concrete or building another large asset.
Sometimes the smartest energy resource is simply using power at a better time.