The NZ Power announcement proposes changes and regulation in the electricity market that are a positive move towards addressing long standing issues in our electricity market after the Bradford reforms in 1998, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive John Walley says, “In 2006 we researched and produced a report “Will it take more Blackouts before we see the light?” that considered the electricity supply issues in New Zealand. This research was sparked early in the last decade due to our growing concerns of supply stability and cost of electricity. We identified three main concerns with the current system:
1. The cost impact of the long run marginal cost model.
2. An incentive for generators to game the system.
3. A system bias to build new generation late and in small increments.
“The NZ Power proposals go a long way to addressing our concerns, it has taken a while, but better late than never.”
“The single buyer, average cost model does not have the same opportunity for gaming as it pays the generator a fair price based on the cost of supply and can ensure all low cost supply is in the market.”
“There is no doubt that prices will fall.”
“In supply terms the incentives change from small incremental increases in generation, to larger increments of generation. The single buyer operating an average costs system is not incentivised to keeping the highest cost suppliers in the market.”
“The NZ Power proposal addresses our long held concerns about the New Zealand electricity supply system. Manufacturing exporters are under severe cost and margin pressure; it would be good to see some comparative advantage against our trading partners for once.”
“It is worth noting that many large industrial users buy at close to a margin over actual cost but most small to medium users are disadvantaged by the current marginal cost model.”
“Lower domestic electricity costs mean more domestic demand for other consumption, which would be beneficial to those selling into the domestic market.”