Energy minister says focus now on winter 2026 after Transpower red flag

Wednesday, 21 May 2025

Concerns over possible electricity shortages are deepening, but also rapidly shifting from this year to next.

Energy Minister Simon Watts reiterated the Government’s concern about the security of electricity supplies in the wake of a draft report from Transpower that raises questions over the adequacy of supply next year.

Annual modelling conducted by Transpower has indicated power firms could have too little generating capacity to meet demand for electricity in the winter of 2026, considering only their existing capacity and power plant developments that are set in stone.

Its previous report last year had concluded that the so-called “winter energy margin” would not fall below the threshold set by its “reference scenario” until much later, in 2030, before improving further down the track as more renewable generation came online.

Transpower chief executive James Kilty said the key message from this year’s draft assessment was that there was a clear need for the industry to continue to invest.

“Falling below the security standard does not mean that power cuts will be likely, any more than being above the standard is a guarantee that there won’t be power cuts.”

The key change from last year was the forecast reduction in the amount of gas available for power generation, “which means we might track below one of the risk buffers”, he said.

“It does not mean there will be any supply issues, but does mean the industry needs to keep working hard to ensure thermal plant is available and fuelled and hydro storage is carefully managed going into next winter.”

The previously delayed retirement of Contact Energy’s Taranaki Combined Cycle gas-fired early next year and the possible retirement next year of one of the three Rankine coal-fired turbines at Genesis Energy’s Huntly power station have also contributed to uncertainty, sources said.

Watts told The Post the Government was concerned about the electricity security situation, which he continued to blame on the previous government’s ban on new offshore oil and gas exploration permits.

“We've got a significant amount of work underway to look at energy security. My major focus as minister has been ensuring the lights stay on this winter, and we're in a good position in regards to that.”

Transpower’s latest data shows hydro lakes refilling to relatively normal levels after a slight scare earlier in the year, although spot market power prices have at least until very recently remained markedly elevated.

Lakes levels continued to improve to reach 92% of the historical norm for the time of year at the end of last week, up from 88% a week prior, Transpower reported yesterday.

Watts said his focus was now very much on winter 2026.

“We're working closely with Transpower and the ‘gentailers’ around that, and I’m looking at that very regularly.

“We've had two dry winters driven by the impacts of climate events and when we don't have enough rain, we don't have enough water in our lakes, and we are vulnerable.”

The country’s challenges were to increase generation “across the diversity of energy sources”, but also to make sure there was capacity at Huntly if there was another ‘dry year’, he said.

The Government had expected to consider measures by the end of last year to help facilitate imports of liquefied natural gas, to boost energy supplies, including gas available to generators.

Industry sources say the power industry has failed to rally behind that idea.

Watts said there was work under way to ensure there was “an appropriate thermal stockpile” to deal with another dry year.

A gas industry group established by the Government was working to ensure gas could be “a key contributor to our electricity grid, again, in dry years”, he said.

“Outside of that, it's about removing the barriers for more investment in new generation.”

Former Labour Party policy expert David Parker renewed his call for a broader reform of the industry and an investment in pumped hydro generation following his exit departure from Parliament two weeks ago.