The Government says it is prepared to support funding requests for critical electricity infrastructure from the power companies it is a majority shareholder in.
Finance Minister Nicola Willis announced this morning that the Government was "prepared to support capital funding requests for strategic and commercially rational investments that support energy security".
The announcement comes after a review of New Zealand's electricity sector by Frontier Economics, in the wake of shortages leading to increased wholesale prices.
The review found the Crown’s Mixed Ownership Model (MOM) companies – Genesis, Mercury, and Meridian - faced constraints in their ability to invest in larger generation projects, over a "perception that the Government would not provide equity injections to support those investments".
“We wish to correct that perception," Willis said today.
"The Government is committed to maintaining its legally mandated 51% stake in the MOM companies, and we accept we would need to participate in any equity raise required for major new investments. We are more than willing to do this, if the proposals stack-up.”
The energy package announced today focused on investing in security of supply and building better markets to make things more affordable.
The security of supply investment included launching a formal procurement process for a liquified natural import facility, exploring how whole-of-government contracts could help underwrite projects, and removing barriers to accelerate the delivery of renewable energy through Electrify NZ by speeding up consenting and enabling offshore renewable energy.
Building better markets would involve the Government developing options to mitigate policy risk for investors in new energy projects, strengthening the Electricity Authority to make it a more powerful and decisive regulator, tasking electricity distribution businesses to collaborate, standardise processes and make smarter investment decisions, establish a stronger gas information framework, and develop new rules to ensure the lack of dry year back-up supply does not re-emerge.
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'We need reliable backup options'
Energy Minister Simon Watts said New Zealand was "on the cusp of a renewable electricity boom", but there was "one major barrier standing in our way".
"We need reliable backup options to generate electricity during our driest years, when we can’t rely on hydro lakes or wind to meet demand."
He said in the past, natural gas has filled that gap – but a declining supply of gas had made it "expensive and unreliable".
He said the Frontier review had found the market "failed" to invest in backup fuel and generation needed during "dry years".
"This uncertainty is what is keeping power prices up and placing unacceptable pressure on Kiwi households, businesses and industries alike."
“When we have dry years, like what we experienced in 2024, it can take the economy up to 25 years to recover from inflated electricity prices. That’s why the Government is acting now.”
Watts said MBIE would release a request for information today, inviting the energy sector to tell the Government how it could "work in partnership with industry to kickstart new projects that will help boost New Zealand’s energy supply".
He said the Government would also step in to invest in energy security through a procurement process for liquefied natural gas, kicking off next week, with Cabinet considering the results.
"By bolstering domestic gas supplies, LNG can help manage the impacts of dry years and keep the wider energy system up and running."
Strengthening the Electricity Authority included giving a "sharper stick" to crack down on bad behaviour and boost competition in the sector.
“This will be bolstered by a more sophisticated risk monitoring role for Transpower with better forecasting of security of supply risks; new rules to ensure power companies deliver the back-up supply we need; and greater efficiency across New Zealand’s electricity distribution businesses to avoid unnecessary costs being passed on to consumers in their power bills,” Watts said.
Watts said the package announced today built on the work already underway to boost the market's competition and ensure the country had "abundant and affordable" energy.
“The energy system plays a significant role in the economic wellbeing of Kiwi businesses, industries and households. If we can bring wholesale electricity prices down by just 2%, New Zealand’s economy could be over $3 billion larger than it would otherwise be in 10 years’ time.
“This would allow businesses to grow, invest more, and create jobs, while helping to ease the cost-of-living pressures New Zealand households are facing.
“With our plan in place, we can make this a reality. New Zealand’s future will be powered by renewables with back-up supply when we need it most and a well-regulated electricity market that is working to deliver for Kiwis.”
'Weak, short-sighted response' - Opposition
Labour's energy spokesperson, Megan Woods, said today's announcement was a "weak, short-sighted response".
She said it failed to "confront the reality of our broken energy system".
“Instead of delivering real solutions to lower power bills, the Government has chosen to tinker at the edges and protect the status quo.
"The Coalition failed and couldn’t find a set of measures they could agree on, so New Zealand households and businesses are going to be saddled with high energy prices for longer."
Green Party Co-Leader Marama Davidson said today's announcement did "nothing to guarantee lower energy bills for struggling households and businesses".
“While the devil will be in the detail, these purported ‘reforms’ appear to only entrench the dominance of the gentailers and deepen our reliance on fossil fuels - a risky, expensive and increasingly uncertain source of energy."
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