The electricity market is not perfect “but few markets are”, according to the electricity regulator
The electricity regulator has concluded that the electricity market is not perfect, but fundamental changes are currently not warranted.
The Electricity Authority has concluded that fundamental changes to the electricity market are not warranted, despite warning that competition problems in the industry could worsen.
He also said that uncertainties surrounding several government policies were delaying investment in new power generation.
The authority found last year there was evidence that power generators wielded market power and called investments in new generation “light”.
He suggested in a new report on Wednesday that the market power of the big four generators, Meridian, Mercury, Genesis and Contact Energy, could increase as the market moves towards 100% renewable energy, and observed that it there was “a long lag” between rising electricity prices and new investment.
But he said he was encouraged by an acceleration in the pipeline of proposed investments in new renewable energy generation, including solar farms being discussed by overseas developers, and said high wholesale prices of electricity could largely be explained.
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“Structural change is currently not justified by the available evidence and may risk unintended consequences,” he concluded.
A Stuff Reader poll which has so far received around 42,000 responses indicated that only around 11% believed the country had about the right electricity market structure.
Electricity Authority chair Nicki Crauford and then chief executive James Stevenson-Wallace testify before a select committee on February 10.
This poll was in before and after Genesis, Meridian and Mercury reported that their combined profits more than doubled to $1.35 billion in the year ending June.
But the authority said it did not expect competition in the wholesale electricity market to be perfect.
“Few markets are,” he said.
More and faster investment in new generation and a focus on “monitoring and enforcement” was currently the best strategy to promote competition in the wholesale electricity market, he said. .
The uncertainty surrounding the government’s aspiration to achieve 100% renewable electricity by 2030, its gas transition plan, its New Zealand Battery Project which could see a huge pumped hydropower plant built at Lake Onslow and its energy strategy have led to investment delays, he said.
Energy Minister Megan Woods has been contacted for comment.
John Harbord, chairman of the Major Electricity Users Group, said he was “cautiously pleased” to see what appeared to be more explicit acknowledgment from the authority that market power was an issue in the industry.
He also agreed with the authority’s assessment that encouraging new entrants and new investments in power generation would be fundamentally helpful.
But he questioned whether the regulator was doing enough to address the issues he had identified.
“EA’s approach to the issue of market power is to increase its market watch function and it doesn’t seem to suggest doing anything else.”
Monitoring electricity trade was not going to reveal or get to the heart of the fight against entrenched long-term market power, Harbord said.
“They need to answer the question of what is driving the malfunction we are seeing in the market, before they fix it.”
The Resource Management Act should be reformed to make it easier to approve new power plants, Harbord said.
But he agreed generators would also have to face ‘use it or lose it’ rules that prevented them from hoarding land by sitting on resource consents for wind farms and making installments to landowners. land for long periods that prevented others from developing consented sites that they were not advancing.