Ministry of Energy needed to pave way for $42b of investment, says Vector

Wednesday, 26 October 2022

Power companies are confronting the need for a mountain of investment on the horizon.

The chief executive of Auckland lines company Vector, Simon Mackenzie, has renewed his call for the Government to create a Ministry of Energy to help smooth the way for tens of billions of dollars of investment that the industry believes will be needed before 2030.

Mackenzie said he was not calling for a renationalisation of the electricity sector but believed more co-ordination would be required, which could also require consolidating some of the existing regulatory functions in the sector.

Currently, the Electricity Authority, the Commerce Commission, state-owned system operator Transpower and multiple ministries all have roles in the industry.

Consultant Boston Consulting Group released a report on Tuesday, which was funded by power companies including the main generators and Vector, and which estimated $42 billion would need to be invested in new generation and in electricity network upgrades in the current decade.

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That investment would be required in part to meet the extra needs created by the greater electrification of industry and transport and the phase-out of fossil-fuelled generation, it said.

But Mackenzie said regulation of the industry was currently “disjointed” with generation, retailing, the national grid, and local distribution networks managed in isolation of one another, leading to the risk of necessary changes “falling through the cracks”.

The Electricity Authority said in a separate report last week that new power plants built or committed to since 2021 would increase generation by 3 terawatt-hours a year by 2025, which was about half of the 6.2TWh/year “identified as needed in this timeframe”.

Wholesale pricing suggested “the market” only expected about two-thirds of the shortfall would be filled by other new projects that had not yet been committed to, according to its report.

The country’s largest part state-owned generator, Meridian Energy, said it intended to make seven major investments over seven years, including the construction of its over-budget $448m Harapaki wind farm in Hawke’s Bay which is due to produce its first power in June.

The company has indicated its goal is to maintain its market share in generation.

The other projects Meridian has on the drawing board are a giant battery at a planned energy park in Ruakākā that will be capable of powering 60,000 homes for two hours to help meet periods of peak demand, an associated solar farm able to power about 15,000 homes, and a wind farm at Mt Munro in the Wairarapa for which it is about to seek resource consent.

Development manager Guy Waipara said that, together, the three wind and solar power plants would add just over 1 terawatt-hour a year of generation to Meridian’s current capacity of 13TWh.

The remaining three projects had yet to be confirmed but could be wind or solar developments in either the North Island or South Island, he said.

Waipara was cautious about the call for a new Energy Ministry.

“It is difficult to be half-pregnant on a government role in electricity,” he said.

“Before you know it, it is ‘planning’ and then it is ‘procurement’ and then it has kind of taken over the market,” he said.