25 October 2006.
New Zealand’s Electricity Needs – Tomorrow, and Today.
The Canterbury Manufacturers’ Association says that comments made by ISCR researcher Richard Meade last week regarding
New Zealand’s electricity system failed to take future requirements and basic cost drivers into consideration.
“To say that “shortages” don’t happen in a “market” when there are shortfalls in the electricity supply is not an answer
that will keep the lights on”, says Chief Executive John Walley. “Unfortunately, this ‘just-in-time’ behaviour will only
be effective for so long. After that, you either find sustainable and affordable long term solutions or you put up with
price increases, lower safety margins and power cuts”.
Mr. Walley says that New Zealand has remained in the lower end of the OECD in terms of pricing as a result of its
historical reliance upon large, cheap hydro generation as the major contributor to providing electricity. As hydro has
given way to more costly sources of energy such as oil and geo-thermal resources, prices have risen and Mr. Walley
points to providers such Contact Energy and Genesis increasing margins.
“High prices and bloated margins to are the reality of the current situation being ‘handled well by the market’. New
Zealand has been fortunate in that a solid and reliable foundation was built in the 70’s and 80’s. Since then we have
been living on past investments and it is time for system-wide transmission upgrades, and investment in significant
hydro generation. Sooner or later the Government and its electricity proxies must acknowledge this and move away from
‘band-aid solutions’ towards building a secure low cost future for electricity”.
“Without generation and transmission upgrades there will be cuts and outages in the near future. When this happens,
Governments will be punished at the ballot box.” Mr. Walley. “In the meantime, prices will continue to rise and,
increasingly, the lights will be out.”