By Alexandra Cain
The energy sector in Aotearoa New Zealand is set for a shake-up as it responds to the government’s recent electricity market review. Some of the outcomes from the review include a formal procurement process to develop a liquefied natural gas import facility and better transparency across the gas market.
The Aotearoa New Zealand Government aims to increase energy production by supporting investments in companies partly owned by the Crown. It’s also focused on strengthening the Electricity Authority to enhance its ability to manage the electricity market effectively.
Looking ahead, new rules will be introduced to help the market become more efficient, along with more advanced assessments of the security of electricity supply from Transpower. This is intended to prevent the re-emergence of issues related to a lack of backup energy supply during dry years.
‘Two of the major work streams that have come from the electricity market review are energy security, and growing stronger markets to drive more competition and transparency,’ says Scott Thompson, Partner, MinterEllisonRuddWatts.
The review is, in part, a response to the changing climate’s impacts on the energy sector, which has long been skewed to renewable sources.
‘We’ve had a highly renewable electricity system for a long time. Typical average renewable electricity production is about 85 per cent on any given day, driven by hydro,’ explains Thompson.
In 2024, a really dry winter, gas shortages and low wind during peak energy demand led to the most expensive spot prices in the world – about triple what they would ordinarily be. That led to renewed calls for other mechanisms to firm New Zealand’s national energy capacity.
‘When climatic variances arise, those calls grow louder,’ says Thompson.
The discussion has become even more robust as New Zealand has started adding more intermittent renewable energy sources like solar and wind into the mix. At the moment, while new, independent energy developers want to enter the market, it’s hard for them to compete because they don’t have the balance sheets of the big ‘gentailers’ – retail energy generators. This is far from the only handbrake to a shake-up of the energy sector.
A healthy pipeline of projects on Transpower’s generation and development list creates an enormous opportunity for developers, investors, and contractors. But as New Zealand has limited resources and an already challenged supply chain, parties need to carefully consider their development and delivery timelines to manage any constraints.
‘There are discussions to put the right regulatory settings in place, but it’s going to be interesting to see how constrained we are on the delivery side to develop these projects,’ says Thompson.
Nevertheless, experts suggest the review isn’t going to fundamentally change the structure of the Kiwi electricity market or introduce further regulation.
‘The review gives the industry confidence in the regulatory parameters in the electricity market and, therefore, confidence in investing in the very significant generation pipelines the operators have,’ says Chris Nicholson, Managing Director, Head of Power, Utilities and Infrastructure, UBS Australia.
‘What is interesting out of that review was government statements around supporting the gentailers to fund electricity security and accelerate the shift to renewables,’ Nicholson adds.
Gentailers investing in digital infrastructure
Meanwhile, at the coalface, a commitment to reducing the use of fossil fuels while increasing use of renewables is behind Contact Energy’s digitisation push. Its vision is to lead the residential energy transition to renewables and encourage customers to shift to off-peak energy use.
‘We’ve invested heavily in our digital platforms over the past five years, with 80 per cent of our interactions through digital channels, such as the website and mobile app,’ says Contact Energy Chief Retail Officer Carolyn Luey.
Contact Energy has also invested in its data platform so that it has access to rich consumer information, with further initiatives planned for the future, such as greater use of predictive analytics.
‘If we can predict that someone can save money by changing their behaviour, then we’ll be able to trigger them through our communication channels in the future to nudge them in the right direction,’ says Luey.
Artificial intelligence (AI) will also lead to efficiency opportunities. ‘We are focused on deploying AI, but we’re not fully there yet,’ says Luey. ‘There are lots of opportunities to help our customers on that energy transition and use AI to have the right engagements at the right time, through the right channels.’
Contact Energy has just launched its five-year strategy, with a focus on encouraging good environmental outcomes.
‘Our vision is to lead the energy transition at home and really empower customers to shift the energy use to off-peak. We’re working through the propositions to enable them to do that,’ says Luey.
Programmes like Contact Energy’s virtual power plant initiative are leading examples of how dynamic scheduling can support environmental goals. Virtual power plants connect assets like electric vehicle (EV) batteries into a system to help support the electricity grid.
‘Our goal is to assess the benefits of controlling when these EVs are charged, which can create value for both consumers and Contact Energy,’ says Luey.
A pilot for the virtual power plant is now complete and the business is waiting for the broader ecosystem to catch up before it can roll out its virtual power plant technology more widely.
‘We encountered difficulties creating a seamless customer experience due to the varying specifications and connection methods of different EV manufacturers. Through the pilot, we have gained valuable insights into the ideal customer experience and the challenges we face. Our next step is to determine the right timing for a full launch, ensuring the ecosystem is sufficiently developed to support a scalable solution,’ says Luey.
Another gentailer, Meridian Energy, has also announced a tech upgrade.
‘The $30-million programme is shifting us from legacy stacks to a modern, modular platform,’ says Lisa Hannifin, Meridian’s Chief Customer Officer. ‘Importantly, it allows us to innovate and offer great new products for customers.’